Omantel agrees to buy additional Zain stake

Analysts question value of the deal, making Muscat-based operator Zain's second-largest shareholder

Omantel's revenues during the first nine months of 2018 increased to Dh14.3bn. Bloomberg

Omantel, the largest mob­ile operator in the sultanate, has agreed to buy a further 12.1 per cent stake in the regional telco Zain for 520 million Omani riyals (Dh4.96 billion), making it the second-largest shareholder in the Kuwait operator.

The Muscat telco said it will acquire the shares from Kuwait’s Al Khair National, a Kharafi Group, after the parties signed a non-binding MoU this month.

The price paid by Omantel equates to 781 Kuwaiti fils per share, 30 per cent higher than the price paid by the telco when it acquired its initial 9.8 per cent stake in Zain in August, a transaction viewed as expensive at the time.

“We find it difficult to justify Omantel’s offer price for Zain Group, especially when bearing in mind the latter’s rather challenging geographic exposure, with ­Kuwait [a no-growth ­market], Iraq, and Sudan ­being the main contributors to its value,” said Omar Maher, an analyst with EFG Hermes.

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“Given that the valuation looks expensive and since investors are still struggling to understand the rationale behind the whole deal, we believe the market is likely to react negatively and expect further pressure on Omantel’s share price.”

Omantel’s shares closed 3.3 per cent lower at 1.16 rials yesterday, their lowest level in two months. Zain’s shares were up 0.6 per cent.

Omantel’s stake acquisition in Zain is its first significant foray beyond the sultanate.The Omani operator 10 years ago acquired Pakistani ISP Worldcall, but offloaded the investment this year.