Zain Saudi Reviews Options for 7,500 Telecom Towers

  • CEO Kabbani sees telecoms benefiting from diversification push
  • Company `confident' in arbitration over dispute with Mobily

Zain Saudi Arabia is considering several options for its thousands of telecommunications towers, Chief Executive Officer Hassan Kabbani said.

All scenarios are possible, including selling them for cash and leasing them back, or working with competitors to create one company to manage the towers, Kabbani said. Zain Saudi owns about 7,500 towers in the kingdom, the world’s largest oil exporter, though not all of them can be sold or shared, he said.

"We are testing the water and seeing what we can get for our asset," Kabbani said in an interview in Riyadh on Tuesday. Proceeds from a potential sale could be used to reduce debt or improve operations, he said, declining to comment on whether bidders had been shortlisted.

The third-largest telecommunication provider in Saudi Arabia is one of several seeking to sell towers as network quality becomes similar across different operators. Etihad Etisalat Co., known as Mobily, is also considering a sale, which could fetch as much as $2 billion, people with knowledge of the matter said. Saudi news website Maaal reported in February that "high-level negotiations" were happening to create a company to own the towers of all three telecommunication providers in the kingdom, including Saudi Telecom Co.

Saudi Arabia’s telecommunications industry will be less affected than others by the economic slowdown brought on by lower oil prices as the companies stand to benefit from the government’s diversification plans, Kabbani said.

He also sees opportunities for growth in digital services, partly because of a lack of entertainment in the kingdom. Saudi Arabia enforces gender segregation by religious police and there are no public cinemas.

To meet demand, Zain Saudi is investing in network expansion and new stores, he said.

Zain Saudi, which is 37 percent owned by Kuwait’s Zain Group, began operations in 2008 after buying its license for more than $6 billion and predicting it would break even in three years. The company, formally known as Mobile Telecommunications Co. of Saudi Arabia, narrowed its annual loss to 972 million riyals ($259 million) last year from 1.27 billion riyals. Kabbani expects losses will continue to decline.

"I would say that we are not far from reaching the end of the tunnel," he said.

The shares gained 5.1 percent at 1:18 p.m. in Riyadh, bringing the advance for the year to 7.5 percent. That compares with a decline of 6.1 percent this year for Saudi Arabia’s benchmark stock index.

Zain Saudi expects a decision by the end of the year from an arbitration panel reviewing a dispute with Mobily that dates back to a 2008 services agreement, said Andrew White, the company’s chief strategy and business development officer. Mobily claims Zain Saudi owes it 2.2 billion riyals, while Zain Saudi claims it owes 13 million riyals.

"We are fully confident in our position," White said.

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