Dubai: Etisalat ended talks to buy a majority stake in Zain, Kuwait's largest telecom operator, citing political unrest and disagreement among shareholders.

"The current political unrest in the region" and "non-unanimous agreement among Zain shareholders" mean the offer is "no longer viable", the Abu Dhabi-based company said in an e-mailed statement yesterday.

Etisalat offered $12 billion (Dh44.1 billion) in September to buy most of Zain. The collapse of the deal comes after two months of unrest across the Middle East and North Africa that has toppled Egyptian and Tunisian presidents, created civil war in Libya and prompted clashes in Yemen and Bahrain, countries bordering Saudi Arabia.

"It's a pity, it would have created an Arabic company on the world telecom stage," said Irfan Ellam, an analyst at Al Mal Capital PJSC in Dubai.

"It looks as if Zain no longer wants to be bought, it looks like they want to remain independent," he said in a phone interview yesterday.

Etisalat's offer was contingent on the sale of Zain's 25 per cent stake in Zain Saudi Arabia. Offers from Bahrain Telecommunications Co, known as Batelco, and Saudi billionaire Prince Al Waleed Bin Talal's Kingdom Holding Co. were rejected by Zain last month.

In their latest non-binding offer, Kingdom and Batelco agreed to pay $950 million in cash. In addition, Zain Saudi would repay $250 million of debt to Zain Group after ownership is transferred and the unit has been restructured, Zain said March 16. Batelco is "confident" it can raise as much as $1.2 billion of debt to finance the bid, Chief Executive Officer Peter George Kaliaropoulos said in an e-mailed statement yesterday.

If Zain Saudi is sold, Zain Group will rid itself of a cash-strained asset and "be left with a nice cash-generative company with a decent footprint in the Middle East," Ellam said. "The assets would be of interest to acquirers. Etisalat could come back, France Telecom has ambitions in the region, Kingdom Holding could decide at a later stage that it wants to expand in telecom," he said.

Negotiations

Etisalat's bid was focused on talks with Kharafi-owned Al Khair National for Stocks & Real Estate Co., Zain's second biggest shareholder after the Kuwaiti sovereign wealth fund. The deal was opposed by Shaikh Khalifa Ali Al Sabah, whose Al Fawares Holding Co. owns a 4.5 per cent Zain stake. Kuwait's commercial court in December allowed etisalat to proceed with due diligence, denying Al Fawares' bid to halt the transaction.

Al Khair said on March 1 its commitment to sell a controlling stake to etisalat had expired after etisalat missed a second deadline in its acquisition attempt. A day later, etisalat reiterated its interest in Zain.

Discussions "have ended" with Al Khair, etisalat said in its statement yesterday.

Etisalat, which had offered 1.7 Kuwaiti dinars (Dh22) a share, also cited Kuwait's "upcoming mandatory offer rules" for the deal's collapse.

The Capital Markets Law, which took effect this month, means any acquirer seeking more than 30 per cent of a listed Kuwaiti company must make the same offer to all remaining shareholders.