DOHA – Qatar Telecom (Qtel) is offering $2.2 billion to buy the remaining 47.5 percent stake it does not own in Kuwaiti telecom company Wataniya. Qtel, which already owns 52.5 percent of Wataniya, will pay 2.6 dinars per share, an 18 percent premium to Wataniya's last traded price, through a tender offer open to shareholders. Qtel has been raising stakes in its subsidiaries, taking advantage of the gas-rich Gulf state's healthy financial position at a time when other large telecom firms are shying away from deals. The company has received approval for the transaction from the Gulf state's market regulator, Capital Markets Authority (CMA), it said in a statement Thursday. “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," Qtel Chairman Sheikh Abdullah Bin Mohammed Bin Saud Al-Thani said. In June, Qtel agreed to double its stake in Iraq's No. 2 operator Asiacell to 60 percent for $1.47 billion, seeking to exploit rising demand for broadband. Qtel also owns a majority stake in Omani telecom operator Nawras. It bought its existing Wataniya stake in 2007 for about $3.7 billion. Before they were halted when Qtel submitted its initial offer, Wataniya shares were trading at around 2008 levels, below some analysts' targets, weighed by political turbulence that has dragged the Kuwait bourse to an eight-year low. Investors were failing to take account of revenue growth prospects, high cash flow and low debt, analysts said, giving Qtel the chance to be the first full owner of a listed Gulf telecoms operator - possibly at a knockdown price. The next major hurdle for Qtel is gaining the assent of Kuwait Investment Authority, the Gulf state's sovereign wealth fund, which has a 23.5 percent stake in Wataniya. 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, adding: “if they sell Wataniya, does that mean they will be willing sellers of the rest? We will have to wait and see." In 2010, when UAE Telecom Company Etisalat bid around $12 billion to take control of Kuwait's Zain, the sovereign fund was not willing to sell its holding, the source said, declining to be identified as the matter is not public. Etisalat eventually pulled its bid, citing several reasons including a divided Zain board. Wataniya reported a 49 percent drop in second-quarter profit, hit by foreign exchange losses from its Algeria unit and increased domestic competition. The main draws are the Algerian and Tunisian units, accounting for about 85 percent of customers and 60 percent of revenue. Qtel is being advised by Barclays Capital and the investment banking arm of National Bank of Kuwait on the Wataniya buy, a banking source told Reuters in June. – Reuters
