Zain enters into agreement to merge Jordan operation with Palestinian operator Paltel

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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. Paltel is a publicly-listed entity on the Palestinian Stock Exchange and Abu Dhabi Securities Exchange. 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. This mobile operation will also join Zain’s renowned ‘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 program.

“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,” said Dr. Saad Al-Barrak, Chief Executive Officer of Zain. “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.”

Paltel, with a base of 1.5 million active mobile customers and over 363,000 fixed line customers, as well as approx 78,000 ADSL customers as of March 31, 2009, has, since its establishment, demonstrated strong growth, resilience and an enviable track record in fixed and mobile voice, data and value added services. Zain Jordan, with over 2.35 million active mobile customers, has pioneered award-winning 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.

“This partnership with a foreign strategic operator such as Zain represents a strong endorsement of the Palestinian economy and its capital market. This development will restore investor confidence in Palestine and is a proof point that the telecom sector is still buoyant and growth oriented. It also marks a new chapter in our business operations as we prepare for the upcoming market liberalization in the mobile telecommunications sector in Palestine,” said Mr Sabih Al-Masri, Chairman of Paltel. “We are very pleased that we have now established a strong partnership with Zain, enabling us to leverage its unique products and services, and enjoy synergies with Zain’s operations in the areas of branding, joint procurement and purchasing power, human resources and more efficient access to debt and equity capital markets. With access to the One Network, mobile banking and other services, we will be in a position to enhance the customer offering and experience to millions of Palestinians both at home in the West Bank and Gaza and abroad in countries where Zain operates.”

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, and introducing initiatives to improve expense management and consolidate business operations to realize operational synergies.  In return, Zain will be able to leverage the extensive experience of the 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 Q2, 2009 subject to the approvals of Telecommunications and Securities market regulators in applicable jurisdictions. Zain’s financial advisor was Global Investment House, whilst Paltel was advised by EFG Hermes.