Zain to buy Etisalat’s stake in Sudan’s Canar telecom

DUBAI / Reuters

Kuwaiti telecom firm Zain has agreed to buy Abu Dhabi-listed Etisalat’s 92.3 percent stake in Sudanese fixed line operator Canar for AED 349.6 million ($95.2 mn).
The deal would strengthen Zain’s grip on Sudan’s telecom sector where it is already the top mobile operator by subscribers and has long sought to add a fixed-line licence.
It is subject to approval from the Sudanese authorities, an Etisalat statement said on Monday. Sudan accounted for 19 percent of Zain’s revenue and 26 percent of its subscribers in 2015. Although its Sudan operations have suffered foreign exchange losses following the plunge in the value of the Sudanese pound, the local currency has stabilised recently.
The pound’s woes also make it difficult for Zain to repatriate profits, leading it to invest in local real estate as a hedge against inflation as well as raising the unit’s capital expenditure.
Zain Sudan, which launched 4G services last month, reported a 77 percent rise in 2015 profit to 1.04 billion Sudanese pounds.

BUSINESS RATIONALE
In recent years, telecom operators in the Middle East and Africa have sought to hold mobile and fixed voice and Internet licences so that they can provide these services in bundled packages to consumers and businesses.
This helps retain customers while business services usually generate higher margins than consumer mobile tariffs, which have slumped due to competition from other operators and rival services such as Internet-based messaging and calls.
Etisalat took a stake in Canar in 2004 and three years later spent 584 million dirhams to more than doubled its holding.
In 2012 it took an impairment of 459 million dirhams on Canar due to local inflation, currency fluctuations and difficult economic and political conditions.
Zain Sudan had a 42 percent mobile market share in 2015, Zain’s financial results show.
Mobile penetration in Sudan was 72 percent in 2014, according to the International Telecommunication Union, placing the country 165th globally and indicating substantial growth potential.