Shares of Kuwait’s biggest telecoms firm, Zain, fell almost 9% on Thursday after the company’s CEO, Saad al-Barrak, said there was no deal yet to sell Zain’s African operations to Vivendi. It had earlier been reported on this site that Vivendi had made an offer for Zain’s African operations.
Zain stock, the most heavily traded on Kuwait’s main index, fell 8.9%, its largest one-day loss since March 31, to close at 1.02 dinars, bringing its losses for the week to around 18%. The Kuwait index closed down 1.6%.
Zain’s CEO told Reuters on Wednesday that the company, the Gulf Arab region’s third-largest telecom firm by market value, was in early talks over a stake sale in its African operations but there was nothing definite yet. He also denied a newspaper report that the company had reached a deal to sell the unit to French entertainment group Vivendi for $12 billion.
“After the statement made yesterday by Saad al-Barrak of Zain the stock witnessed heavy selling,” said Fadi al-Zaghri, a broker at NBK Capital. “The stock has been rallying for the past month based on rumors that Zain is interested to sell its African operations to Vivendi.” The stock fell this week after France Telecom said it was not considering, for now, a bid for Zain’s assets. Vivendi today confirmed that it is indeed in talks with Zain to acquire a majority stake in Zain’s telecommunications activities in Africa. “However at this stage there is no certainty that the discussions currently in progress will lead to a successful outcome,” Vivendi said in a statement.
Zain said last week it was working with Swiss bank UBS and other consultants to review its strategy. Barrak said the firm was awaiting the outcome of the review before deciding whether or not to go ahead with a stake sale. “If the Zain sale goes through, its share price should shoot up, but it made a very strong move from 0.8 dinars to 1.24 dinars on rumors of this stake sale,” Ammar Hajeyah, Global Investment House manager of asset management for the Gulf region, said.
Zain has spent more than $12 billion in Africa since 2005, including nearly $3 billion in Nigeria, and said it planned to spend up to $2 billion more on the continent this year. It currently operates in 17 African countries. It was not immediately clear which operations Zain might consider selling. “If they are keeping the majority control with them and they are giving the minority stake to somebody else, I think that will be a better strategy,” said Jithesh Gopi, head of research at Bahrain’s SICO Investment Bank. “Probably they are looking at some other assets and they want to cash in the gains.” The telecommunications operator Zain, whose biggest shareholder is Kuwait’s sovereign wealth fund, has spent heavily on expansion and operates in 23 countries in the Middle East and Africa.
Source(s):
Bloomberg News
