Indebted telecoms operator Zain Saudi will ask shareholders to approve cutting its capital by 66 per cent to alleviate mounting losses, it said in a statement on Wednesday.

This is the third time the board has announced such a plan, but the capital restructuring was sidelined by now-aborted deals to sell stakes in both Zain Saudi and parent Zain.

Zain Saudi has not set a date for a shareholders' meeting to discuss cutting its share capital to SR4.8 billion ($1.28 billion) from SR14 billion.

This will alleviate accumulated losses of SR9.2 billion, or 66 percent of its paid-up capital. Bourse rules say listed firms must cut their capital if losses exceed 75 per cent.

The board wants to then issue SR6 billion of new shares.

'The rights issue will consist of raising fresh equity and the capitalisation of subordinated shareholder loans to the company,' Zain Saudi said in a statement.

The new equity will be used to to reduce bank debt and enhance the operator's network, it added.

Commenting on the Capital Restructuring, Nabeel Bin Salamah, Zain Group CEO said, “Zain Saudi stands on the threshold of an exciting new dawn in the Saudi Arabian mobile telecom sector and this capital restructuring and rights issue will strengthen the financial position and ensure the long-term viability of the company.'

The relationship between Zain Saudi and Zain Group will be stronger and the opportunities to achieve genuine synergies will become apparent with a new management team,' he remarked.

'Zain Saudi will be transformed, allowing the company to deliver the very latest network technology and exciting broadband product offerings to all our customers,' he added.

Zain Saudi has liabilities nearing SR21 billion, according to its first-quarter results. These include loans from founding shareholders of SR3.8 billion and a SR9.75 billion Islamic facility that can be rolled over until August 2012.-Reuters and TradeArabia News Service