Iraq and Sudan are the crown jewels of Zain's business that Etisalat would stand to gain the most from if its offer to purchase the Kuwaiti operator for US$10.5 billion (Dh38.56bn) is approved. While Zain has a strong market presence within Kuwait, Jordan and Bahrain, its greatest opportunities lie in Iraq and Sudan, two territories that have large populations but low mobile penetration, said Bashar Arafeh, the chief commercial officer.
"Zain is still a growth story," said Mr Arafeh. "These are two very large markets. You cannot compare, even in population. [For example], Bahrain is very small but in Iraq, we're growing three to four million customers in a year." Etisalat, the UAE's largest telecommunications operator, offered to buy a 46 per cent stake in Zain for $10.5bn last week. If successful, the offer would give Etisalat control of Zain because a 10 per cent share is owned by the Kuwaiti treasury.
The deal, which is subject to approval by Zain's shareholders, would give Etisalat access to the operator's 33 million subscriber base across seven countries in the Middle East and Africa. Industry analysts said Etisalat would need to sell off Zain's Saudi Arabian business to appease telecoms regulators in the kingdom. Yesterday, Qatar Telecom (Qtel) said it viewed buying the Saudi unit as "something to be considered" as it studies growth opportunities in the Middle East, Asia and North Africa. That was a marked turnaround in Qtel's reported position, which appeared to pour cold water on such a move.
Speaking at the Telecoms World Middle East conference yesterday in Dubai, Mr Arafeh talked about the possibilities represented by Iraq and Sudan. "Growth in those markets is enormous, over double digits," Mr Arafeh said. "In Iraq, we have 12 million customers and in Sudan, close to that as well. Top line growth is doing remarkably well." Mr Arafeh declined to comment on negotiations between Etisalat and Zain, saying it was a shareholder issue and not privy to the operator's management. Representatives from Etisalat also declined to comment.
"The future is bright [for Zain] and everything we are seeing and hearing is because Zain has been a successful brand," Mr Arafeh said. "The more successful you are, the more people watch you." Etisalat has been aggressively looking to expand its operations further abroad to diversify its revenue base and offset a loss of sales encountered after du entered the UAE market in 2007. If its bid for control is successful, it would also assume control over Zain's subsidiaries in Bahrain, Kuwait and Jordan, markets that have provided the operator with steady revenues but whose growth has slowed because of increased competition and high mobile penetration.
Zain's strategy in these markets has been to offer subscribers a "creative" portfolio of mobile options such as multimedia and broadband packages. "Different markets need different strategies," said Mr Arafeh. "If you are spending $100 on voice, how can I make you spend that same $100 on voice and another $30 in data. We saw how this has happened in Kuwait, where 60 per cent of revenue now comes from mobile broadband. If all our operators reach that level, we're in great shape."
Meanwhile, Peter Kaliaropoulos, the chief executive of the Batelco Group, reaffirmed comments he made on Monday to The National that the company was studying plans to acquire Zain's Saudi operations. Etisalat already has a 27 per cent stake in Mobily, the second-largest mobile phone company in the kingdom, and would not be allowed to own another operator. "Would Zain Saudi Arabia fit into Batelco's strategy? The answer is yes, but the fundamentals and price have to be right," Mr Kaliaropoulos said.
He said Zain Saudi Arabia had been a "success story" for the operator given how high mobile phone penetration was in the country. Zain Saudi Arabia has about 15 per cent of the mobile phone market with more than four million subscribers.
