STC to acquire 35% stake in Oger Telecom

KSA incumbent eyes lucrative Turkish and South African markets with latest deal

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By  Roger Field Published  January 22, 2008

Saudi Telecom, the region's largest telco by capital value, has agreed to buy a 35% stake in Oger Telecom for some $2.6 billion, in a bid to expand its presence beyond the Middle East.

Saudi Telecom will buy the stake in Oger Telecom, which runs fixed line, mobile and internet services in Turkey and South Africa, from the company's controlling shareholder, Saudi Oger.

Oger Telecom is one of the largest telecom operators in the region with revenues of some $6.9 billion in 2006 and a subscriber base of around 35 million people. The company also operates as an ISP providing dial-up, ADSL, leased line and virtual private network services in Saudi Arabia, Lebanon and Jordan, through its subsidiary, Cyberia.

"Saudi Oger has made great strides in its telecom activities since its initial investment in Cell C and subsequent acquisition of a controlling interest in Türk Telekom," said Mohammed Hariri, chairman of Oger and senior vice president of Saudi Oger. "This transaction represents a major step in the development of Oger Telecom and confirms the benefits of Saudi Oger's telecoms strategy."

While telecom analysts played down rumours that Saudi Telecom might be aiming to take a controlling interest in Oger Telecom, the deal indicates a growing interest from Saudi Telecom to expand its business beyond the region. It also agreed to buy a 25% stake in Malaysia's largest mobile operator, Maxis, in June 2007.

Saudi Telecom also follows in the footsteps of other Middle East telcos including Etisalat and Zain, which are increasingly looking at acquisitions in overseas markets with lower penetration rates and greater potential than most Gulf countries.

The Turkish fixed-line market is the largest in the region with approximately 19 million access lines controlled by Türk Telekom. In addition, the Turkish market has experienced rapid growth in broadband penetration with DSL adoption reaching over 4.5 million subscribers, up from 250,000 subscribers at the end of 2004. The mobile markets in Turkey and South Africa have also grown significantly during the past two years, with subscription increasing by 19% and 17%, respectively.

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