Dubai : The acquisition price of 1.70 Kuwaiti dinars (Dh22.16) per share that the UAE's Emirates Telecommunications Corporation, or etisalat, has offered to acquire a 46 per cent stake in Zain offers "great value" to the UAE telecoms firm's shareholders, etisalat's chairman said yesterday.
Mohammad Hassan Omran said he is confident etisalat can obtain the required funding to finance the acquisition, valued at about $11.8 billion. "We have received several attractive proposals from banks that would enable us to finance the transaction," he said in a statement to Gulf News.
Omran said his company is still in the early stages of the deal, on which the due diligence process is yet to commence. Omran said it "will take a number of weeks".
Etisalat has focused over the past few years on increasing revenues from the international market, as competition increases from Emirates Integrated Telecommunications Company, or du, in its home market.
"The acquisition would be consistent with our strategy to expand beyond our mature core markets into growth markets," Omran said.
Revenue
Etisalat reported a 7.1 per cent drop in third quarter net profit and a 9.3 per cent reduction in revenues, a majority of which still come from the UAE market.
"We believe this points to intensifying competition in the domestic market," said Irfan Ellam, vice-president of equity research at Al Mal Capital.
Although the buying price for Zain of 1.70 dinars per share has been deemed high by some analysts, Omran said the "deal represents great value to our shareholders". He added: "However, we intend to confirm this value through detailed due diligence. We will not proceed unless such valuation is confirmed."
Ellam said: "Strategically, the deal would make sense. At the end of it, the likelihood of it going through will be determined by price." He has an "outperform" rating on etisalat's shares.
Omran said any possible Zain stake acquisition shouldn't affect dividend payments. "There should not be any negative impact on the dividend payment. We do not want to jeopardize the dividend payment by acquiring Zain," he said.
Since Zain also operates in Saudi Arabia, where etisalat already has a stake in another telecoms services provider, competition rules may come into play, analysts have said.
Omran said he is confident regulatory approvals will be obtained, "including a solution to the overlapping operations of etisalat and Zain in Saudi Arabia".
He added that there are deliberations at a very senior level.
Etisalat shares rose 0.9 per cent to Dh11.70 on the Abu Dhabi Securities Exchange yesterday, in line with the market index.
