Mobily snaps up local internet provider

Saudi mobile phone operator to pay $21.3mn for Zajil to up revenues from corporate clients.

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By  Souhail Karam Published  July 5, 2008

Saudi Arabia's Etihad Etisalat (Mobily) said on Saturday it will buy a local internet and data communication provider for 80 million riyals ($21.3 million) to generate more revenues from corporate clients.

Saudi Arabia's second-largest mobile phone operator has won approval of the country's telecom watchdog to buy 96 percent of Zajil International Telecommunications Co's capital, Mobily said in a statement posted on the bourse website.

This is Mobily's second acquisition in less than a year. It has agreed in September to buy local data provider Bayanat Al-Oula for $400 million.

The Zajil deal will enable Mobily to "provide integrated and highly-efficient telecom solutions", it said. It did not give further financial details.

Mobily has been seeking to make an aggressive entry into the data and internet segment since it lost a bid to win a fixed-line telecom licence about a year ago.

It launched last year wireless internet broadband services to compete with state-controlled Saudi Telecom Co, which holds both fixed and mobile phone licences.

Mobily's Chief Executive Khaled Al-Kaf said Zajil is a profitable company.

"Zajil is active in the corporate field... This deal will help us penetrate the business sector regionally and locally, by catering for the needs of medium and large enterprises," he told newswire Reuters.

"It is complementing our future plans after we launched broadband. That is why we bought Bayanat... It should provide good ground for the launch of more services," he added.

Bayanat is one of two firms licensed to deploy a WiMax wireless internet access network in the kingdom.

With the Saudi mobile penetration already at above 100 percent, Mobily is trying to tap broadband and data services to maintain profit growth, as the local market gets ready for the start this year of a third mobile phone operator led by Kuwait's Mobile Telecommunications Co.

Saudi Arabia's internet and data market is expected to witness more competition with the imminent arrival of three new fixed-line operators this year.

The three operators are led by Bahrain Telecommunications Co (Batelco), Hong Kong's PCCW and US Verizon Communications.

They, and Mobily, were among 10 applicants that have bid for the licences for licences to end Saudi Telecom's monopoly.

Mobily's shares are down 27.55 percent this year to last week's close, underperforming the main index, which is down more than 14 percent. The telecom sector has fallen 27.3 percent this year.

Emirates Telecommunications Corp (Etisalat) is Mobily's main shareholder. (Reuters)

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