Thursday, Oct 27, 2011

(This story was originally published Wednesday.)

-- Zain Saudi Arabia looking to wipe out accumulated losses

-- Will also be seeking fresh cash to support expansion plans

-- Rights issue likely

RIYADH (Zawya Dow Jones)--Mobile Telecommunications Co. Saudi Arabia (7030.SA), known as Zain Saudi Arabia, said Wednesday its board has recommended a new capital reorganization plan as it looks to wipe out accumulated losses and eventually raise fresh cash to support its expansion plans.

Under the new proposal, Zain will reduce its paid-up capital from 14 billion Saudi riyals ($3.73 billion) to SAR4.8 billion, it said in an emailed statement.

The firm will later raise the new paid-up capital to SAR10.8 billion through a rights issue, it said.

"The Rights Issue will consist of raising fresh equity and the capitalization of subordinated shareholder loans to the company," Zain Saudi said.

"The fresh equity will ... be used to reduce bank debt, enhance the quality and performance of the existing network as well as to expand the company's recently launched 4G LTE hi-speed internet network," the company said.

The new proposal is subject to regulatory approvals and replaces two previous offers by the firm, which did not specify when shareholders will meet to discuss the new plan.

The company, which is 25% owned by Kuwait's Mobile Telecommunications Co. (ZAIN.KW), began operations in Saudi Arabia in March 2008. It said earlier this month that its third-quarter loss narrowed 11% to SAR484 million from SAR544 million a year earlier as it added more subscribers.

The firm's current and non-current liabilities stood at SAR21.8 billion Saudi riyals as of Sept. 30.

Earlier in October, Zain KSA said it plans to appoint Khaled bin Suleiman Al Omar as its new chief executive officer and managing director, following the resignation of Saad Al Barrak. It didn't give a reason for the resignation of Al Barrak, the former CEO, who had been with Zain since 2002.

But Al Barrak's departure follows soon after the failure of a joint bid for 25% of Zain KSA by Kingdom Holding (4280.SA) and Bahrain's Batelco. The deal, estimated to be worth as much as $1.2 billion, failed due to disagreements with Zain KSA's lenders, according to Zain KSA chairman Prince Hussam bin Saud.

The failure to strike an agreement over Zain KSA is the latest in string of "almost deals" within the region's telecommunications sector. Back in March, U.A.E.-based Emirates Telecommunications Corp. (ETISALAT.AD), or Etisalat, the region's biggest telecom provider by market value, ditched a near-$12 billion plan to buy 46% of Kuwaiti rival Zain.

Analysts had previously said that sale of a stake in Zain KSA would be complicated by issues such as management fee structure, debt guarantees currently provided by Zain Group, shareholder subordinated loans to Zain KSA as well as other contingent liabilities of Zain KSA.

The firm's chairman Prince Hussam bin Saud said that after the joint bid failed, Zain Group is no longer considering selling its stake in the Saudi firm, which will focus instead on speeding up its capital restructuring plan.

-By Summer Said, Dow Jones Newswires; +966-546-842373; summer.said@dowjones.com

(END) Dow Jones Newswires

27-10-11 0357GMT