Following the sale of its African assets to Bharti Airtel, Zain is predominately based in the Middle East and has a largely complementary footprint to Etisalat. Etisalat is UAE’s second largest operator and will add Bahrain, Jordan, Kuwait, Lebanon and Morocco to its existing operations if the deal goes through. Etisalat’s interest will be focussed in the high-growth markets of Sudan and Iraq where Zain has a strong presence. In Sudan, Etisalat has a presence through CDMA operator Canar but has failed to secure a GSM licence.
“One common trend that we have seen recently in the Middle East is that operators offer services that appeal to the ‘Arab World’ rather than solely to their specific markets,” said Kerem Arsal, analyst for Africa and Middle East at Pyramid Research. “Zain is a very strong player in the Middle East and obtaining control of its assets would mean a huge boost to the acquirer’s footprint. It would also give access to leadership in multiple Middle Eastern markets.”
It is in Saudi Arabia that the two companies have separate operations and could experience an issue. If the sale goes through it is expected Zain’s 25% stake in Saudi Arabia will be sold because Etisalat owns 26% in the country’s second largest operator, Mobily.
“Without the Saudi market, Etisalat may lose some appetite in the deal or severely cut its average price per subscriber, which stands very high at present. Entering a saturated market as the latest entrant in the manner that Zain did is not an easy task, but with 83% growth in subscribers in one year and turning to positive EBITDA, the kingdom is definitely becoming a serious revenue source,” said Arsal.
