Zain, Batelco hit snag in Saudi bid

Bahrain Telecommunications’ joint $950m bid for a stake in telco Zain Saudi has hit a snag over management rights, a source familiar with the matter said on Sunday.

Kuwaiti group Zain agreed to sell the 25 per cent stake to Batelco and Saudi billionaire Prince Alwaleed bin Talal’s Kingdom Holdings in March.

Batelco wants the right to manage Zain Saudi if the deal goes through or will lower its bid, the source told Reuters.

“If Batelco insists on getting the management contract and the Saudis refuse, it (the deal) will fall because Batelco will then come back to Zain Kuwait with a reviewed and lower offer ... which will not be accepted at all by Zain Kuwait,” the source said, speaking on condition of anonymity.

Batelco chief executive Peter Kaliaropoulos would not comment.

Zain Saudi pays about 4 per cent of its annual revenue to Kuwaiti Zain for management, the source said.

Loss-making Zain Saudi’s revenue more than doubled in 2010 to SR826m ($220m), while its operational loss narrowed to SR179m.

“Batelco wants to enjoy the same privileges that Zain Kuwait enjoys. But Zain Saudi does not see why it should grant Batelco such rights when it can manage the firm on its own,” the source said.

Zain Saudi paid a hefty $6b for its licence and has borrowed heavily to protect its market share from cash-rich rivals like state-controlled Saudi Telecom Co and Mobily, which is affiliated to UEA’s etisalat.

Last month, Prince Alwaleed said he expected the deal to be completed two months after the due diligence process, which began in April, was over. He said it would take about 45 days.

“If Batelco drops out of the deal, Kingdom might want to proceed as an investor and it will not be required to operate the firm, because Zain Saudi can take on the management,” the source added

The Zain Saudi stake sale was an offshoot of UAE telecom operator etisalat’s failed $12b bid for Zain. While that deal fell apart in March, the sale of Zain Saudi proceeded.

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