In an official signing ceremony held in Amman, Jordan, Mobile Telecommunications Company KSC (Zain) and Palestinian Telecommunications Company Plc (Paltel) have entered into an agreement for a share-for-share exchange, which will see Zain take a majority interest in Paltel with an equity shareholding of 56.53% in exchange for Paltel owning 100% of Zain Jordan. The merger will set the current Paltel shareholders equity position in both Paltel and its newly acquired subsidiary, Zain Jordan, at 41.43%.
Through this transaction, Palestine will become the 24th territory in which Zain will have a commercial footprint. The mobile operation in Palestine currently known as Jawwal will be rebranded to Zain by the end of 2009. It will also join Zain's One Network platform, taking to 19 the number of countries that benefit from One Network's many advantageous roaming offerings.
The combination of both Zain Jordan and Paltel will produce a business group which will generate over US$1 billion of revenues, US$450m in EBITDA and US$300 million in net income in 2009 alone. Additionally it will result in significant synergies and efficiencies in CAPEX and OPEX spend and purchasing power, all of which will improve the profitability position of the group in line with Zain's newly implemented Drive11 transformation programme.
Paltel has a base of 1.5 million active mobile customers and over 363,000 fixed line customers, as well as approximately 78,000 ADSL customers as of March 31, while Zain Jordan, with over 2.35 million active mobile customers, has pioneered voice, mobile broadband and data services in the Jordanian market. Working together, both operators "will be in a position to bring innovative services with wide-market appeal to Jordanians and Palestinians alike, strengthening the already entrenched positions of both operators in their respective markets."
Zain's commitment to the region is summed up by CEO Dr Saad Al-Barrak: "A merger of this nature, with immediate opportunities for synergies between the two leading operators in Jordan and Palestine, will create substantial value for shareholders and enable us to create a strong operating platform for our businesses in the Levant and beyond...We have enduring faith in the Palestinian economy and are totally committed to future development of its telecom sector. This deal will play an instrumental role in supporting our 2011 ambitions of being a top-ten global mobile operator."
Under the framework of a strategic management agreement and branding/intellectual property agreement, Zain will bring its experience in managing international operations to Paltel, aligning the Paltel operations with Zain's global ACE strategy, incorporating its unique value propositions such as One Network, mobile-banking services and Zain Create, Zain's new digital entertainment portal. Zain will also introduce initiatives to improve expense management and consolidate business operations to realise operational synergies.
In return, Zain will be able to leverage the extensive experience of Paltel's management and staff in managing an integrated telecommunications operator spanning fixed line, wireless, ISP services, call centre services and operations outsourcing.
The transaction will close in Q209 subject to the approvals of Telecommunications and Securities market regulators in applicable jurisdictions. Zain's financial advisor was Global Investment House, while Paltel was advised by EFG Hermes.
Zain has supplied a list of favourable strategic factors which have influenced it in this new decision:
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exposure to the Palestinian market in West Bank and Gaza Strip with a combined population of 4 million;
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exposure to the Palestinian Diaspora in Middle East markets in which Zain operates;
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over 40% of the population is under the age of 14 in the Palestinian Territories;
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mobile penetration for Palestinian operators runs at around 44%;
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for FY08 Paltel achieved over US$400 million in annual revenues, US$182 million EBITDA and US$125 million of net income;
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strong corporate identity with direct involvement in the development of economic activity towards nation building and community development in Palestine; and
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crucially, and as mentioned above, the merger will generate over US$1 billion of revenues, US$450m in EBITDA and US$300 million in net income in 2009 alone.
* Zain's ACE strategy seeks to extract superior value from existing assets through three main thrusts: accelerating its growth in Africa; consolidating existing assets; and expanding into adjacent markets. Through implementation of the ACE strategy, Zain's goals by the year 2011 are to attain US$ 6billion EBITDA, exceed 150 million customers, and become one of the top ten leading telecom companies in the world.
** Paltel (Palestinian Telecommunication Company PSC) is an integrated telecom operator offering fixed, mobile, Internet and data services throughout the Palestinian Territories. Paltel is publicly listed on the Palestinian Stock Exchange (PSE) and the Abu Dhabi Securities Exchange (ADX). It owns majority equity ownership in Paltel (fixed line operator), Jawwal (mobile operator), Reach (call centre services), Palmedia (information and media services provider), Hulul (business solutions provider), Ayla (consulting services provider) and Hadara (ISP services). Paltel also owns equity in Vtel Holdings, a Dubai-based multinational telecommunications company with interests in the Middle East, Asia and Europe. As at 31 March 2009, Paltel had 1.5 million mobile customers, 363,000 fixed line customers and 78,000 ADSL customers. Paltel held an exclusivity position today in the Palestinian Territories; however a second licence has been awarded to Wataniya Telecom and competition is therefore anticipated in the next few months.
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