Qatar Telecom (Qtel) received approval from Kuwait's market regulator to buy a 47.5 percent stake in telco Wataniya for $2.2 billion, the biggest move yet in the firm's new strategy to ward off threats from new rivals.
The former state monopoly, which already owns 52.5 percent of Wataniya, will pay 2.6 dinars per share in a tender offer which values the holding at 622.4 million dinars ($2.2 billion).
The offer price is a 22.6 percent premium to the Kuwaiti telco's share price prior to Qtel announcing its offer plans.
"Wataniya has enjoyed significant growth over the course of the last few years. However, in line with the increasing maturity of the markets in which it operates, the company's investment profile is changing," Qtel Group chairman Sheikh Abdullah Bin Mohammed Bin Saud al-Thani said in the statement.
"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 has been raising stakes in its subsidiaries recently. In June it agreed to double its stake in Iraq's No. 2 operator Asiacell to 60 percent for $1.47 billion as it seeks to exploit rising demand for broadband.
Qtel bought its existing Wataniya stake in 2007 for about $3.7 billion. Kuwait Investment Authority, the Gulf state's sovereign wealth fund, has a 23.5 percent stake in Wataniya and the remaining shares are publicly held.
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.
"If they sell Wataniya, does that mean they will be willing sellers of the rest? We will have to wait and see," the source said.
Qtel is being advised by Barclays Capital and the investment banking arm of National Bank of Kuwait on the Watanita buy.
Consulting firm Protiviti had done a "fairness opinion" review on the Qtel offer for Wataniya, the first source said.
Kuwait's No. 2 telecom operator, whose chief executive resigned in June, has operations in Kuwait, Tunisia, Algeria, the Palestinian Territories, Saudi Arabia and the Maldives.
Wataniya reported a 49 percent drop in second-quarter profit, hit by foreign exchange losses from its Algeria unit and increased domestic competition.
Qtel also owns a majority stake in Omani telco Nawras . Its second-quarter profit fell 11.3 percent hurt by foreign exchange losses at its Indonesian and Algerian units and weaker profits in Kuwait and Oman. - Reuters