Zain Saudi takes fifth extension on murabaha
KSA operator hopes grace period will allow new terms to be negotiated for Islamic loan
Zain Saudi yesterday extended its $2.4bn murabaha (Shariah-compliant loan) for a further 21 days, Reuters reported.
This will be the fifth such extension the loss-making Zain Zuwait affiliate has sought since making the cost-plus-profit arrangement with Banque Saudi Fransi in July 2009. The facility was originally due to mature in July 2011.
"The company announces that it has been granted an approval from the lenders to extend the maturity date of the syndicated murabaha facility until 19 December 2012 and could also be extended further," Zain said, adding that the deferment would allow time for the parties to reach agreement on a new long-term payment plan.
"People are worried that Zain Saudi can't renegotiate its existing debt with the banks that have supported the company from the beginning," said Marc Hammoud, a telecoms analyst with Deutsche Bank.
"If the company is going to extend the loan for another five years, which is what we expect it wants to do, how is it going to pay this back when its operations are deteriorating?"
Zain Saudi has found net profit elusive since launching operations in 2008 in a market where rivals Mobily and STC have won almost 90% of the kingdom's mobile subscribers. Its Q3 2012 losses widened by 2% compared with the same period last year while the three-quarter period to September showed a revenue drop of 6% and a cost hike of 2%, while its subscriber base has shrunk by 11%.
To comply with Saudi bourse rules on market capitalisation, in July Zain Saudi was forced to restructure its capital. When other stakeholders showed little interest, the company turned to Zain Kuwait, which increased its stake in its KSA affiliate from 25% to 37%.
"The subscriber base is shrinking and the company can't get into the broadband, corporate and post-paid segments, which are the three main growth areas for STC and Mobily," said Hammoud. "I don't think we'll see a great improvement in the short term."