Lesley Stones
10 July 2009
Johannesburg — CELLULAR operator Zain has once again been goaded into denying relentless press speculation in Africa and the Middle East that it has sold its pan-African networks to Vivendi.
Shares in the Kuwait-listed operator fell almost 9% yesterday after its CE Saad al-Barrak said there was no deal. Zain has lost about 18% of its value this week, showing how the speculation had pumped up its price.
Al-Barrak confirmed to Reuters that Zain was in early talks about selling a stake in its African operations, but said there was nothing definite yet. He denied reports that it had struck a $12bn deal with the French media and telecoms group Vivendi.
After the denial the stock saw heavy selling, said Fadi al-Zaghri, a broker at NBK Capital. "The stock has been rallying for the past month based on rumours that Zain is interested in selling its African operations to Vivendi."
A week earlier Zain was forced to issue a statement saying it had appointed the Swiss bank UBS to review its strategy. That statement was made after a Kuwaiti paper reported that Zain planned to shed its African activities.
Al-Barrak said Zain would wait for the outcome of the review before deciding whether or not to sell a stake in its African ventures, and the review should be complete by the end of August.
The interview with Al-Barrak implied that Zain would not sell the division entirely, but Reuters said it was not clear which operations Zain may consider selling. If it kept the majority control and sold a minority stake to somebody else, that would be a better strategy, said Jithesh Gopi, head of research at Bahrain's SICO Investment Bank. "They are probably looking at some other assets and they want to cash in the gains."
Analysts believe other companies possibly interested in Zain Africa are Vodafone and China Mobile. France Telecom's CEO Didier Lombard has already denied any interest in the operations.
MTN originally bid for the core of Zain's African networks four years ago when they were owned by Celtel, but was outbid by Zain.
Acquisition-hungry MTN may be interested in a belatedly absorbing those networks, but is currently locked in exclusive merger discussions with the Indian operator Bharti. Zain's operations in 16 African countries account for 65% of its customers but just 10% of the profits, and it suffered a first quarter net loss of $4,9m this year.
Analysts think the speculated fee of $12bn is too high and estimate the networks are worth $8bn to $9bn. So rumours that Vivendi is seriously interested have depressed its share price. With Reuters
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