Qtel gets the nod to buy rest of Wataniya for Dh8 billion

DOHA // Qatar Telecom (Qtel) has won approval from Kuwait's market regulator to buy a 47.5 per cent stake in Wataniya for US$2.2 billion (Dh8.08bn).

This is the biggest move yet in Qtel's new strategy to ward off threats from new rivals in the telecommunications industry. The former state monopoly, which already owns 52.5 per cent of Wataniya, will pay 2.6 Kuwaiti dinars per share in a tender offer.

The offer price is a 22.6 per cent premium to the Kuwaiti operator's share price prior to Qtel announcing its offer plans.

"Wataniya has enjoyed significant growth over the course of the last few years," said the Qtel Group chairman Sheikh Abdullah Bin Mohammed bin Saud Al Thani.

"However, in line with the increasing maturity of the markets in which it operates, the company's investment profile is changing.

"Increased competition and pressures on the industry from new entrants as well as incumbents will most likely erode value over time and require increasingly dynamic responses," he said.

Qtel has been raising stakes in its subsidiaries recently. In June it agreed to double its stake in Iraq's second-biggest operator Asiacell to 60 per cent for $1.47bn as it seeks to exploit rising demand for broadband. Qtel bought its existing Wataniya stake in 2007 for about $3.7bn.

Kuwait Investment Authority (KIA), the state's sovereign wealth fund, has a 23.5 per cent stake in Wataniya and the remaining shares are publicly held.

The fund is yet to decide whether to tender its Wataniya stake to the offer, a source familiar with the matter said.

"The KIA stake is going to be key as the fund owns a similar stake in other telcos in Kuwait, including Zain," a second source said. Neither source wished to be identified.

"If they sell Wataniya, does that mean they will be willing sellers of the rest? We will have to wait and see."

Qtel is being advised by Barclays Capital and the investment banking arm of National Bank of Kuwait on the Wataniya buy. The consulting firm Protiviti had done a "fairness opinion" review on the Qtel offer for Wataniya, the first source said.

Wataniya, Kuwait's second-biggest operator, whose chief executive resigned in June, has operations in Kuwait, Tunisia, Algeria, the Palestinian Territories, Saudi Arabia and the Maldives.

It reported a 49 per cent drop in second-quarter profit, hit by foreign exchange losses from its Algeria unit and increased domestic competition.

Qtel also owns a majority stake in Omani operator Nawras. Its second-quarter profit fell 11.3 per cent hurt by foreign exchange losses.

* Reuters

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