Kuwait’s Zain hunts North Africa M&A

Mergers, Acquisitions and Financial Results

Kuwaiti telecommunications giant Zain Group is scouting out acquisition opportunities in North Africa, its CEO told Arabian Business.

The group, one of the largest telcos in the region with a presence in eight countries, is looking for deals including management contracts, as well as equity buys in companies in adjacent industries, Scott Gegenheimer said.

“We are looking for acquisitions, both large mobile operators and also in adjacent markets,” he said. “I think maybe over the next 18 months to two years, you’ll see much more in the adjacent markets, looking at ISPs, data centre providers, fibre plays and content. On the larger acquisitions we want to stay in the MENA region. North Africa is interesting for us, but the area that is challenging is valuations.”

Gegenheimer added that Zain does not have a price bracket allocated for acquisitions, but that any buys have to be “realistic” in terms of cost.

One territory in North Africa that Zain is actively targeting is Morocco. The telco currently holds a sizeable shareholding in inwi, the kingdom’s third largest mobile operator, and is keen to expand upon this. "We think it's a very well run company, we'd love to increase our stake," Gegenheimer said.

Elsewhere in North Africa, Gegenheimer said that Zain would also be interested in management contracts in Libya, after failing in a bidding process for one with one of the country’s operators last year. “If they want to do a management contract we’d be more than happy to move in and do it,” he added.

Egypt is could also be on Zain’s radar, although Gegenheimer suggested that the market may be too mature, as it is already served by three domestic operators.

“Egypt is a very interesting country. It’s a very large population and strong ties to the MENA region. It’s interesting, but they’ve got three strong players there, and they’re talking about a fourth licence there with Egypt telecom, but it’s hard to say what will happen there in the future,” he said.

Zain, which in its most recent financial quarter posted near flat profit growth to KD51m ($180.6m), is also seeking to expand more into adjacent services as a way of boosting earnings. Like many industry players around the world, the company has been impacted by the emergence of free online telephony products such as Skype, as well as increasing competition in a number of markets.

“We’re a mobile consumer company today. A very large percentage is purely the consumer side. We need to move into the enterprise and the ICT sector, and become an integrated service provider. It’s one of the reasons that when we talk about the M&A, we’re looking at those data centres and fibre plays. We think most of the growth is going to come from that area,” Gegenheimer added.