Bahrain's leading telecoms operator Batelco, whose attempt to buy a stake in Zain Saudi failed last year, aims to make at least one acquisition in 2012 to offset falling domestic revenue, its chief executive told Reuters.

The former monopoly has reported declining profits in six of the past seven quarters, caused by stiffening competition from rival domestic mobile operators.

There are also about 10 Internet providers to service Bahrain's estimated 1.3 million people, in what many analysts describe as the most competitive Gulf market.

'The key is to increase scale,' said Mohamed Isa Al-Khalifa, Batelco group chief executive, who took the helm in August last year.

'We are coming from a very small market and can only do so much in our own market. We want to grow our international operations and compensate for any potential loss in revenue in our home market.'

Al-Khalifa said Batelco's target was to make at least one acquisition in 2012.
'We are working on some, but I can't promise anything.'

In February, Batelco agreed to sell its 43 percent stake in Indian affiliate S Tel for $175 million, a move which should free up some cash for a potential deal.

The company teamed up with Kingdom Holding for a 25-percent stake purchase in Zain Saudi last year but the deal failed due to disagreements with the indebted Saudi telco's banks.

Batelco owns Jordanian telecoms operator Umniah. It also has 27 percent of Yemeni mobile operator Sabafon, minority stakes in internet providers in Kuwait and Saudi Arabia and is also active in Egypt.

Yet Bahrain accounted for about 62 percent of group earnings last year, while domestic profit fell 21 percent in 2011 from a year earlier.

'We are focusing on the Mena region - we have built a cluster around Bahrain and would like to grow this cluster,' said Al-Khalifa.

Batelco, with a market value of around $1.7 billion, has cash and bank balances of $286 million, according to its 2011 annual report, and the firm could leverage its balance sheet to $1 billion or more for acquisitions, Al-Khalifa said.

The stake sale to Batelco's Indian partner is slated to be completed in the fourth quarter, and Al-Khalifa brushed off analysts' concerns this could be delayed.

Shares in Saudi Arabia affiliate Etihad Atheeb resumed trade in late March, ending a 10-month suspension, after the fixed line operator launched a $310 million rights issue.

A recent research note from Bahrain's Securities & Investment Co (Sico) warned it may need further capital. 'I think Atheeb can support itself going forward,' said Al-Khalifa.  - Reuters