Saudi Telecom, Mobily consider cell tower merger scheme

3 Feb 2011

Saudi Telecom Company (STC) and Mobily, Saudi Arabia’s two largest mobile phone operators by subscribers are considering selling off a large stake in a projected USD2.5 billion merged cell tower business, Reuters reports, citing three people familiar with the matter. State-owned market leader STC owns and operates around 11,000 towers, whilst second placed operator Mobily has around 3,500. It is believed that the two companies intend to merge their collective assets, before selling off a large stake in the combined business to an outside investor.

An unnamed source familiar with the matter told Reuters: ‘Talks for the merger are on, but this is subject to negotiations and terms and conditions put forth by both companies’. By spinning off their cell tower holdings into an independent business the two operators may be able to attract rival carriers as tenants, and boost earnings. The unnamed source continued: ‘Mobily and Saudi Telecom are not likely to sell more than 51% in the new telecoms infrastructure firm’, although another source disputed that observation, claiming that a 49% stake sale would be more likely.

Reuters reports that companies in the running for a slice of the combined cell tower business include: GTL Infrastructure, India’s largest independent tower company, which has 32,463 towers, and may lodge a bid in association with Abu Dhabi investment fund Mubadala; Ericsson in collaboration with Saudi private equity firm Abraaj Capital; and SREI Infrastructure, the parent of Indian group Quippo, which has been tipped to join forces with Zamil Group. Neither STC or Mobily have commented on the reports thus far, whilst industry insiders have suggested that any kind of infrastructure merger may have to also include third cellco Zain Saudi Arabia, in order to preserve a level playing field within the wireless sector.