Middle East telco market ripe for consolidation

The telecom sector in Middle East and North Africa is heading for further mergers and acquisitions, according to panel of CEOs

Tags: Arab Advisors GroupEtisalat International - UAEJordanMergers and acquisitionsSaudi Telecom CompanyZain - Saudi Arabia
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Middle East telco market ripe for consolidation Saad Al Barrak, former CEO of Zain Group, remains convinced of the need for M&A, despite seeing his former empire get dismantled following Bharti Airtel’s purchase of Zain’s African operations. (ITU)
By  Roger Field Published  June 9, 2010

The region's telecoms sector is set for further consolidation and the number of operators in the region is likely to fall dramatically, according to a panel of CEOs of leading operators including Zain Saudi Arabia, STC and Etisalat.

Speaking at the Arab Advisors Convergence Conference in Amman this week, Saad Al Barrak, CEO of Zain Saudi Arabia and former CEO of Zain Group, said that with about 50 operators in the region's 22 countries, M&A "is a must".

"I think 50 operators in the Arab world must reduce to six or seven," he said. "But hopefully the acquisitions will not be made by companies that are mainly government owned, because that is against the history of natural economic development.

"You need good quality shareholders and I don't think governments are good shareholders to start with," he said.

Ghassan Hasbani, CEO of international markets, STC, agreed that consolidation was likely in the wider region, including India, but said that it probably remained a few years away owing to the strong profits being enjoyed by many of the region's operators.

"Market consolation in the Middle East is still probably a few years away, the reason being that operators are still enjoying good margins, paying good dividends and haven't reached a point where this type of market consolation is absolutely necessary," he said.

Ghassan also cast doubt on the level of consolidation predicted by Saad Al Barrak, pointing out that the Middle East region may be too small to allow for major consolidation, especially given that many of the larger operators already have assets in other countries.

He added that the situation was further complicated by recent interest in the Middle East and Africa from Indian operators.

"Today we cannot ignore the fact that players from outside the region are actually looking at the region and also trying to compete in the same territory as the regional operators have been competing. Think of Bharti in Africa, and MTN looking at some of Orascom's assets, and we also have seen some interest from other operators in other assets in this part of the world as well.

"We will be seeing more cross-market consolidation and fewer operators" he said. "We saw it with the equipment vendors, and now this is coming to operators as well."

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