KUWAIT – Zain has raised its stake in loss-making unit Zain Saudi, the Kuwaiti telecoms operator said Tuesday, oversubscribing to the affiliate's $1.6 billion rights issue following a tepid response from other shareholders. That raised Zain's stake in Saudi Arabia's No. 3 operator to 37 percent from 25 percent, marking a reversal in strategy for the Kuwait firm whose attempt to sell its entire holding failed last year. But the rights issue does not give Zain Saudi - yet to make a quarterly profit since launching services in 2008 – enough financial firepower to challenge richer rivals for market share or significantly cut onerous finance costs, analysts said. "The parent will probably be more focused on Zain Saudi," said Nishit Lakhotia, telecoms analyst at Securities & Investment Co in Bahrain. "That would be positive for Zain Saudi, but for Zain group it could be a different story due to the continuing losses." Both companies were not immediately available for comment. Zain Saudi, whose debts stood at SR22.9 billion ($6.11 billion) on March 31, will not be able to boost operating capabilities significantly in the wake of the share sale. Almost half - SR2.55 billion – came from converting loans from founding shareholders into equity, while SR750 million will repay part of a SR9.75-billion Islamic facility and SR1.43 billion will go on reducing current liabilities. That leaves SR1.15 billion for capital expenditure, which will be deployed building 1,300 new network sites and upgrading infrastructure, according to the issue prospectus. – Reuters
