Omantel Offers to Buy $960 Million Stake in Kuwait's Zain

  • Zain shareholder Al-Khair currently studying Omantel offer
  • Omantel may get management control of Zain, analyst says

Oman Telecommunication Co. is offering to buy a stake valued at as much as $960 million in Mobile Telecommunications Co., two months after it acquired a minority holding in the Kuwaiti phone operator.

State-controlled Omantel, the Gulf nation’s biggest phone company, signed a non-binding letter of intent to purchase 12 percent of Zain, as Mobile Telecommunications is known, from Al-Khair National for Stocks & Real Estate, according to a statement. Al-Khair, controlled by the Al-Kharafi Group, is currently evaluating the offer. It didn’t provide financial details.

Omantel in August signed an accord to acquire 9.84 percent of Zain for $846 million, paying a 33 percent premium to the closing prices before the offer was made public. The company said the deal will allow it to gain exposure to nine markets with a total population of 175 million. Credit Suisse Group AG and Freshfields Bruckhaus Deringer LLP were advisers on the deal.

"The strategic nature of investment and additional board representations could warrant slight premium for the new stake," said Joice Mathew, the head of equity research at United Securities in Muscat. Omantel’s CEO Talal Al Mamari currently sits on Zain board.

With the Al-Kharafi exit, "there is a small chance that Omantel could gain management control of Zain, especially as the Kuwait Investment Authority, the largest shareholder, generally remains as a financial investor," he said.

Zain is competing with Abu Dhabi-based Etisalat, Saudi Telecom Co. and Sudatel Telecom Group for the third mobile license in Oman. A decision on a winning bidder is expected on November 30, Al Arabiya TV reported last month.

Zain shares closed 3.5 percent lower in Kuwait trading on Monday, erasing gains of as much as 3.6 percent, with volumes close to five-times its three-month average. The stock has advanced 30 percent this year. Omantel closed 1.8 percent higher in Muscat.

    Before it's here, it's on the Bloomberg Terminal.