Muscat: Oman Telecommunications Company’s (Omantel) 22 per cent stake in Zain will boost the Omani economy and accelerate the digitisation process through the synergy created by the deal.
Omantel became the second highest shareholder in Zain by acquiring a 22 per cent stake in the company through a transaction valued at $2.19 billion. The deal will give Omantel an opportunity to leverage Zain’s vast knowledge in digitisation and operations in 10 countries.
Omantel also announced the nomination of four new members to the Board of Directors at Zain, including the appointment of Talal Said Marhoon Al Mamari, Chief Executive Officer of Omantel, as a Non-Executive Director on September 19, 2017. Omantel will have a majority on Zain’s board with five of the eight seats.
“We are confident that this transaction will create value. We believe in this investment; it will create an overall value in the Omani economy,” he said.
“The knowledge transfer is going to be huge. Our aim is to transform into a digital organisation and look for consolidation opportunities. We are doing both in Omantel 3.0 (transformation strategy). We think it is very important to transform Omantel into a digital organisation. We have benefitted from establishing an ICT (information and communications technology) division at Omantel, Oman Data Park and Momken, but this is just the beginning,” Al Mamari said. “We found that Zain ticks all the boxes for us. There is no overlapping market between Omantel and Zain. Also, Omantel is an integrated company; we have fixed assets, wholesale and mobile businesses. Zain only deals in mobiles.”
“We welcome the nomination of the four new members to Zain’s Board of Directors. We look forward to working closely with the management teams and our fellow board members, with the aim of bringing our two complementary businesses together and creating a new digital telecom powerhouse in the region. The new group has a balanced and diversified portfolio of growth and cash generative assets across nine markets. Bringing these assets together will generate synergies across wholesale, procurement and knowledge sharing, along with increased collective exposure to high growth potential markets,” he stated.
On November 12, 2017, Omantel won the bid to acquire 12.1 per cent of the issued share capital in Zain, making Omantel the second largest shareholder in Zain with 21.9 per cent stake. The total equity value is $2.19 billion (OMR845 million) and includes the previously announced acquisition on August 24, 2017, of 9.84 per cent of the total fully paid and issued share capital.
The new group will be the third largest telecom group in the Middle East and North Africa, with over 52 million customers.
“Zain has a sincere and experienced management. In Sudan, its growth rate is 40 per cent. The data penetration is only 37 per cent. There is a huge opportunity for growth in that market even with the current challenges. Zain is a diversified company having a seasoned and professional management,” Al Mamari noted.
This transaction propels Omantel and Zain into a new era, bringing together a unique portfolio of leading telecom operations with balanced assets for profitability and growth. The transaction will bring economies of scale and sizeable synergies, making the new group more agile and efficient. Synergies will come from integrating the wholesale network with Zain’s, merging operations such as procurement, cooperating across commercial activities and through shared investments in research and development. Omantel is targeting run rate synergies of over $80 million per annum.
Omantel will consolidate Zain’s financial statements and present combined financial results for the fourth quarter of 2017, as well as for the whole year, in the next quarter.
Omantel will finance this transaction with a combination of long-term and bridge loan facilities. The bridge loan facility will subsequently be recapitalised through bond-type instruments.
The global telecom industry is being shaped by huge changes in consumer behaviour, as a result of the rise in data use and the demand for digitisation. The new group is a new regional telecom powerhouse capable of leading digital transformation across the Middle East and North Africa to match consumer demands. It brings knowledge and experience in the digital space allowing Omantel to realise its ambitions through diversification and international expansion. Omantel will gain access to the growth markets having a total population of 175 million people.
Omantel expects the transaction to yield immediate synergies. For example, Omantel’s wholesale business is one of the world’s leaders in submarine cables and the first in Gulf Cooperation Council (GCC) region to land and operate undersea cable in Europe. It will provide Zain with direct access to its extensive wholesale infrastructure, which will reduce the cost of incoming and outgoing traffic and ensure faster internet delivery.
Omantel wil gain access to a fast-growing and lucrative portfolio of diversified products and services that includes data monetisation, enterprise B2B, fixed broadband, fibre-to-the-home and smart city initiatives. The acquisition will provide Omantel with significant growth drivers for these products and services, and fits in perfectly with its Corporate Strategy 3.0, which is focused on bringing further value to Oman.
Omantel will be represented by five board members. Omantel intends to be an active shareholder and capitalise on the strategic benefits of cooperation. Omantel and Zain will put in place structures to secure a successful integration of the two groups and ensure timely synergy delivery.
Credit Suisse acted as exclusive financial adviser and Freshfields Bruckhaus Deringer LLP as legal adviser to Omantel.