Mobile Telecommunications Company Saudi Arabia (Zain KSA), a leading mobile telecoms operator in the kingdom, announced plans to increase its capital by SR4.38 billion ($1.168 billion) through a rights issue.

The capital raised from the issue will fund the next phase of the company's growth strategy and is expected to accelerate its continued growth in Saudi Arabia.

The company's strategy to date has seen it secure more than 7 million customers and generate revenue of approximately SR1.4 billion in the second quarter of 2010, with the business achieving positive EBITDA less than two years after the launch of commercial operations, said a statement.

Before the rights issue is carried out, the company proposes to recommend to shareholders that they approve at an extraordinary general assembly the reduction of the company's current share capital from 1.4 billion shares of SR10 each to 732,843,885 shares by the cancellation of 667,156,115 shares, it said.

The rationale for implementing the capital reduction is to eliminate Zain KSA’s accumulated losses and potentially increase the trading price of its shares above par. This should facilitate the issuance of new shares through the proposed rights issue. Whilst shareholders will hold fewer shares immediately following the capital reduction, the overall market value of their investment in the company at that time should not be affected, it said.

The company proposes to hold an extraordinary general meeting in due course to approve the rights issue. The shareholders registered in Tadawul at the close of trading on the date of the extraordinary general assembly convened to approve the rights issue will have the right to subscribe for new shares in cash in the amount of SR2,246,537,180, pro-rata to their shareholding in Zain KSA at that time, and the founding shareholders of Zain KSA will have the right to subscribe for new shares pro-rata to their shareholding in Zain KSA at that time either in cash or by capitalising part or all of the principal amount of their shareholder loans (if any) previously provided to Zain KSA in the amount of SR2,136,950,000.

The majority of such loans were provided on the incorporation of Zain KSA to fund, among other things, the initial costs of the company's licence.

The convening of the extraordinary general assembly to approve the rights issue is conditional upon Zain KSA obtaining the required approvals from the Capital Market Authority, Ministry of Commerce and Industry, third party lenders and other interested parties. 

The indicative timetable for the Capital Reduction and the Rights Issue is to be agreed between the Company and the CMA.

Dr Saad Al Barrak, CEO of Zain KSA, commented: “In less than two years, we have built a viable and highly successful mobile operator that is delivering a mobile experience of international standards to our customers in Saudi Arabia. Given the growth potential of the Saudi telecommunications market and our plans to capture a growing share of this opportunity, we intend to seek shareholder approval to raise additional capital to fund the next phase of our growth strategy.”

Calyon Saudi Fransi Limited and Al Rajhi Capital Company  have been appointed to advise the Company on the Capital Reduction and the Rights Issue. - TradeArabia News Service