What’s Up With Zain?! « Alpha Dinar- talking Gulf finance

Zain followed an ambitious gorwth strategy in the last decade to become on the ten biggest telcom companies in the world. They acquired contracts and companies throughout the Middle East and Africa. Then came the global financial crisis. Debt started to be a big problem, and certain shareholders needed some cash. These conditions altered Zain’s strategy, and the company become a recurring subject in the news with regards to either sale of assets or sales of a stake in the company. Zain Africa was first sold, shrinking the company’s size by a half. Then Etisalat proposed buying 46% of Zain, and now Zain Saudi might be sold.
The question I have is why is Zain selling its Saudi associate? Intially, when Etislat offered to buy Zain, the company had to dump its Saudi operations due to Etisalat’s presence in Saudi through Mobily. But the Etisalat deal didn’t go through. They issued a statement stating that under the next CMA rules, such an acquisition is not feasable. So why sell Zain Saudi? Where will future growth come from? The remaining operations of Zain are in (barring Saudi) Kuwait, Bahrain, Lebanon, Jordan, Iraq, and Sudan. The first four countries are small markets with high mobile penetration rates, yielding low growth rates. Although the last two countries offer large telecom markets and promising growth, the political instability in both countries create many uncertainties. Saudi Arabia is a very promising market that will create lucrative growth opportunities for Zain.

It seems that Zain are liquidating its assets and paying out dividends to its investors, rather than paying out dividends from its operations. I would be seller of the stock in the longterm, as the concerns of lack of growth overweight the dividend payouts.