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Wednesday, 3 February 2010

CEO of Kuwait's Zain Steps Down

The chief executive officer of Kuwait's Mobile Telecommunications Co., or Zain, has resigned, raising questions about the future of the third-largest Arab telecommunications company by market value.

"Saad Al Barrak has handed in his resignation to the chairman of the board and the chairman will present the resignation to board members to look into the matter," Zain said in a statement to Kuwait's bourse Web site, confirming a report by Dubai-based Al Arabiya television earlier Wednesday. The company didn't give a reason for his resignation. Mr. Barrak, who took the helm at the third-largest Arab telecommunications operator by market value in 2002, couldn't be reached for comment.

The resignation of Mr. Barrak, who is also Zain's deputy chairman, raises questions over the direction of the company's future strategy, particularly since a major shareholder is pushing to sell a controlling stake in the company to foreign investors.

"His resignation will have a temporary negative impact on the company because he turned Zain into a global player and he has clearly left his mark on the company," said Naser Al Nafisi, general manager of Kuwait's Al Joman Center For Economic Consultancy.

Mr. Barrak led the company's aggressive acquisition spree, pushing for the purchase of Netherlands-based Celtel for $3.4 billion in 2005 to enter sub-Saharan Africa, as part of plans to turn Zain into a top-10 global mobile operator by 2011.

He negotiated for hefty licenses in countries such as Saudi Arabia, where Zain paid $6.1 billion to operate the third mobile company in the world's biggest oil exporter. Mr. Barrak will retain his position as chief executive officer of Zain Saudi Arabia, in which Zain holds a 25% stake, the Saudi company's chairman told Al Arabiya Wednesday.

Zain, which started as a telecom company in Kuwait in 1983, currently operates in 23 countries, serving more than 70 million customers.

Kuwait's Kharafi Group, which is leading a consortium to sell a 46% stake in the operator, said in January the sale may take more time to finalize due to the region's current economic and financial circumstances.

Badr Al Kharafi, vice-chairman of Kharafi Group, said in September a group of Indian and Malaysian investors plan to buy a 46% stake in Zain for about $13.7 billion and the deal would take about four months to conclude.

Mr. Kharafi said at the time the club of buyers included India's state-run telecom companies Bharat Sanchar Nigam Ltd., or BSNL, and Mahanagar Telephone Nigam Ltd., or MTNL, and Malaysian billionaire Syed Mokhtar Al Bukhary. But Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. haven't confirmed their participation in the deal, further casting doubt about its viability.

The stake-sale talks put a hold on Zain's negotiations to sell its Africa assets, excluding Sudan and Morocco, and a strategic review the company was undertaking with consultants.

"I see the resignation as a result of the different agendas between the shareholders and the management. He wanted to continue to build and grow the company," said Simon Simonian, a telecom analyst at Shuaa Capital. "I think the major shareholder wanted to cash in and decided to sell Africa, but didn't get a good price. And then the major shareholder decided on his own to pursue the sale of a stake in the company," Mr. Simonian added.

Zain posted a worse-than-expected 53% drop in third-quarter net profit due to currency fluctuations and higher financing costs.

In Kuwait, Zain competes with National Mobile Telecommunications Co., or Wataniya Telecom, which is majority owned by state-controlled Qatar Telecom, and Kuwait Telecom Co., or Viva, in which Saudi Telecom Co has a stake.END

Bahrains' Gulf Finance House faces funding crunch

Gulf Finance House GFHB.BH, one of the leading investment firms in Bahrain, has been hit hard by a property market crash across large parts of the region.


Experts say the firm needs to restructure its debt, raise cash through asset sales or receive some outside assistance if it is to avoid funding difficulties in the second quarter.

On Tuesday GFH said it had asked lenders to defer payment of $100 million of a $300 million loan due next week, and ratings agency Standard & Poor's slashed its rating by six notches.

Kuwait posts 25 billion dollar surplus in first nine months

OPEC member Kuwait posted a preliminary budget surplus of 25.2 billion dollars in the first nine months of the current fiscal year on higher oil income, the finance ministry said on Wednesday.

The ministry said on its website that revenues until the end of December reached 45 billion dollars, 60 percent above the 28.1 billion dollars projected for the whole 2009-2010 fiscal year, which ends on March 31.

That income is, however, far below the 64.4 billion dollars earned in the first nine months of the previous fiscal year when oil prices shot above 147 dollars a barrel.

Spending during the nine months was 19.8 billion dollars, just 46.9 percent of projected spending for the whole year of 42.1 billion dollars, the ministry figures showed.

The huge surplus is expected to be lower at the end of the fiscal year due to end-of-year accounting adjustments when pledged expenditure not included so far will be added to the closing statements.

Oil income up to the end of December came to 42.4 billion dollars or 75.9 percent above budget projections for the whole year of 24.1 billion dollars. Oil revenues constituted 94.3 percent of total income.

The figure is far below the 61 billion dollars of oil income in the same period of the previous fiscal year.

Kuwait, the fourth largest OPEC producer, has projected a deficit of 13.8 billion dollars for the current fiscal year after calculating oil income at a conservative price of 35 dollars a barrel.

Oil prices have ranged between 70 and 80 dollars for most of the year.

Kuwait has projected shortfalls in the past 10 fiscal years but eventually ended with a massive surplus in all of them.

The Gulf state finished last fiscal year with a surplus of 9.6 billion dollars despite making a one-off payment of 19 billion dollars to the state pension fund.

This would be Kuwait's 11th straight year of budget surplus. In the past 10 years, it has accumulated around 123 billion dollars of budget surplus, based on available official data.

The emirate has been investing its savings abroad through the Kuwait Investment Authority, the sovereign wealth fund whose assets are estimated at around 230 billion dollars.

Kuwait says it sits on 10 percent of global crude reserves and pumps around 2.2 million barrels per day. It has a citizen population of 1.1 million, and 2.34 million foreign residents.END

No Imminent Upturn In Dubai Real Estate

Dubai's real estate market showed little signs of any imminent upturn in fortunes as it remained sluggish during the final quarter of 2009, with lease rates continuing to fall, CB Richard Ellis said.

According to the Dubai Land Department statistics, total transactions fell 17.7 percent to 520 in the fourth quarter from the year-ago period, the brokerage said.

According to CB Richard Ellis, lease rates for Dubai's residential units may see a small contraction through 2010 as a substantial volume of new homes reach their final stage of construction.

Abu Dhabi Stocks Rise for 6th Day on Bank Results; ADCB Gains

Abu Dhabi shares advanced for a sixth day, as earnings from banks boosted investor confidence, oil traded above $77 a barrel and emerging markets rose.

Abu Dhabi Commercial Bank PJSC increased for a fifth day, its longest winning streak since Sep. 13. The chief executive officer of the U.A.E.’s third-biggest bank told Emirates Business 24/7 that ADCB will avoid investments abroad this year. National Bank of Abu Dhabi PJSC gained the most in almost two months. Abu Dhabi’s ADX General Index added 1.2 percent to 2,723.96. The measure has increased 4.8 percent in the past six days, its longest winning streak since Sep. 10. The DFM General Index advanced 0.7 percent.

“Abu Dhabi banks provisioned for some bad debts and there is a feeling that the worst is behind us,” said Yazan Abdeen, a fund manager at ING Investment Management (Dubai) Ltd. “However, I think the bad debt through direct and indirect exposure in real-estate are still hidden.”

Etisalat acquires Atlantique

Etisalat on Monday sadi it paid $75 million (Dh276 million) to complete the acquisition of Atlantique Telecom, a company with majority ownership of operators in seven West African countries.

Etisalat has been steadily increasing its share in Atlantique since acquiring a 50 per cent stake in the company in 2005 along with management rights for 10 years. The latest purchase gave the UAE operator the remaining 18 per cent of shares in Atlantique, which operates in countries including Ivory Coast, Gabon and Niger. The company has not disclosed the values of previous acquisitions.

The announcement comes on the same day the company reported filing an application with Indian authorities to raise its stake in its Indian subsidiary Etisalat DB from 45 per cent to 50 per cent.

Mubadala euro bonds given top credit rating

Mubadala Development, the strategic investment arm of the Abu Dhabi Government, yesterday received top marks from credit ratings agencies on a new short-term borrowing programme.

Moody’s Investors Service, which last year put the ratings of Mubadala and other Abu Dhabi firms on watch for a possible downgrade because of uncertainty about government support, gave the programme a “Prime-1” rating, its highest for short-term borrowers.

Fitch Ratings and Standard & Poor’s also gave it their highest ratings: “F1 plus” and “A1 plus”, respectively.

Saudi banks need to do their bit for recovery

The public clamour against banks and bankers is growing to a cacophony. In the West, the poor creatures are so vilified in the media that, at smart dinner parties in New York or London, bankers pretend to be estate agents, or lawyers, or even (sharp intake of breath) journalists, to escape the opprobrium that goes with their profession.

Bankers used to be just boring. Now they are the butts of abuse from Boston to Belgrade.

We do things differently in the Middle East. Here, banks in the western sense (institutions that charge you to allow them to use your money) are a relatively new idea. They are distinct from, but related to, merchant finance, which has existed as long as the region has been a commercial centre. And they were modelled on western templates, often taken over by post-colonial governments.

Buy-out groups circle Dubai asset sale

Istithmar, the investment arm of the troubled Dubai World conglomerate, has put Inchcape Shipping Services, the port and shipping agent, up for sale with a $600m-$700m price tag in a deal that has already drawn interest from several private equity groups.

Advent International, Cinven, Charterhouse, Montagu, TPG and Kohlberg Kravis Roberts are among the private equity groups working on potential bids for ISS, which has its headquarters in Chafford Hundred, east of London.

Istithmar bought ISS for $285m at the start of its leverage-fuelled buying spree between 2006 and 2008. It is now selling many of the assets it bought to help Dubai World restructure its $22bn of debt.


The United States wants to "depoliticize" the proposed Nabucco pipeline project, and might welcome Russia’s participation in the pipeline, Washington’s Eurasian energy envoy, Richard Morningstar, recently announced. The Kremlin, however, is likely to interpret this outwardly magnanimous gesture as a sign of Nabucco’s weakness, some experts say.

Speaking at a late January forum sponsored by the Washington, DC,-based Center for American Progress, Morningstar indicated that the United States would not necessarily object if Europeans ultimately chose to build the Russian-backed Nord Stream or South Stream pipelines. Morningstar’s appearance at the forum was billed as the first comprehensive exposition of the Obama administration’s Caspian energy strategy. While continuing to back the same basic principles as the Bush and Clinton administrations, it was clear from the talk that the Obama administration has much more modest goals regarding Caspian energy than its predecessors.

Morningstar said Washington had three primary energy objectives in the region: to help to develop new oil and natural gas deposits; to support European energy security by making sure EU states have access to energy from a variety of sources; and to promote the economic development of the countries of the Caucasus and Central Asia by developing as many markets as possible for their hydrocarbon resources. "All we want to see is that the countries of the Caucasus and Central Asia be able to make their own decisions, as they see their own interests, with respect to the production and export of their resources," he said.

Austria's OMV in talks with UAE for gas projects

Austrian oil company OMV (OMVV.VI) is in preliminary talks with state run Abu Dhabi National Oil Company to undertake gas projects in the United Arab Emirates, an OMV executive said on Tuesday.

The UAE has the world's fifth-largest gas reserves but has been slow to develop them and gas supply has lagged demand from power plants and industry. The Gulf Arab state is looking at exploiting unconventional reserves as it aims to boost domestic supply, and OMV is among companies competing for future deals.

"We have a number of project ideas," OMV's Klaus Angerer, director of business development in the Middle East, told reporters on the sidelines of an energy conference.

Moody's downgrades Kuwait's Gulf Bank ratings

Rating agency Moody's Investors Service on Tuesday downgraded a number of ratings for Kuwait's Gulf Bank citing "significant challenges" still facing the emirate's second largest lender.

The bank incurred heavy losses in late 2008 from derivatives deals and the government stepped in to support it.

Moody's downgraded the bank's financial strength rating to D- from D+ and its long term global local currency and foreign currency deposit ratings to Baa2 from A3. All ratings will now carry a stable outlook, the agency said.

SCENARIOS-Dubai World asset sale nears, debt talks plod

State-owned conglomerate Dubai World DBWLD.UL, which is restructuring some $22 billion in debt repayments, has yet to arrive at a formal standstill agreement with its creditors.

The company rocked global markets on Nov. 25 with plans to request a delay on repaying $26 billion in debt linked to its main propery units Nakheel and Limitless World.

Dubai World -- which staved off default on a $4.1 billion Islamic bond linked to Nakheel after a last-minute bailout from Abu Dhabi -- is working on a more specific restructuring plan, having already initiated moves to downsize at Group level.

Kuwait Approves Capital Market Regulator Bill

Kuwait’s parliament approved a capital markets bill allowing the creation of the emirate’s first stock market regulator.

The law, approved by 48 lawmakers and opposed by one in the second and final round of voting today, stipulates the establishment of an independent capital market authority comprised of five members who will be appointed by a decree of the emir, according to a copy of the bill.

The bill will bring more transparency to the Kuwait Stock Exchange, which has lacked regulation and affected small investors, lawmakers said.

The authority’s responsibilities would include regulating bourse activity “so that it is fair, competent, competitive and transparent,” according to the bill. It will also supervise public and private subscriptions, and regulate and supervise acquisitions and mergers.END