Telecom companies in the Middle East take centre stage in the upcoming week as a consolidation phase is expected to start, but weak earnings in the third quarter from major Arab banks in the gulf could drag the stocks down. A rare M&A play, which followed a flurry of debt issuances in late September, and a buzz of at least two IPO upcomings, has maintained the hopes in investors that the dormant acquisitions and mergers market in the region is returning back to life.
The major focus is on the telecom industry, where Emirates Telecommunication Corp (ETEL.AD), the second largest mobile operator in the Gulf, announced late in September about a $12 billion bid for buying 46% stake in Kuwait’s Zain (ZAIN.KW), the third largest telecom provider in the region. Zain’s Saudi unit is expected to be on sale in the deal, which indeed is a lucrative target for those who are eyeing the Gulf’s largest market.
In Egypt, Orascom Telecom (ORTE.CA) is planning on the merger of its assets with Vimpelcom (VIP.N), a Russian provider; though there is uncertainty as to whether this will end a row with Algiers over Algerian Djezzy unit of Orascom. Head of investments at Schroders Middle East, Rami Sidani, said that, “Clearly, companies with low-cost positions and the ability to leverage their balance sheets will be the main beneficiaries of this consolidation.” He continued, “The next question is around Orascom Telecom … we’re waiting to see if it’s going to be acquired by another operator or if it will remain the same or be dismantled.”
One major deal in the telecommunications industry has already been struck; France Telecom (FRA.PA) acquired 40 percent stake in Moroccan company, Meditel. Meanwhile, a new license is up for grabs in the Syrian market which is less saturated relative to others, so the growing investor appetite for telecom industry and related sectors doesn’t seem to stop and is expected to touch new highs in the near future.
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Credit: Business Today