Double A Side: Zain Africa Speculation Watch: Episode 8 + Iran 3rd Mobile Licence Saga Update

Vivendi's Lévy: no comment on Zain Africa rumours
Picture: ⓒ 2008 The IBTimes Company

Intrepid reporters from Reuters can often be relied upon to grab telecoms big hitters on the sidelines of conferences and other events. Reuters people seem to be well trained in the dark art of thrusting a mic at the luminaries and bagging a headline-worthy quote.

Last month, for example, the ambitions of Russian cellco MTS were revealed to a Reuters scribe on the sidelines of the of the St Petersburg Economic Forum.

This week, however, the news service has done quite so well. A Reuters reporter sprang on Jean-Bernard Lévy, Chairman of French media and telecoms conglomerate Vivendi, who was present yesterday at a forum in Aix-en-Provence, France. Regular readers of this blog, particularly those gripped by the drama of Zain Africa Speculation Watch the mini-series should be able to guess which question was asked. The answer? Not too illuminating.

Levy declined on Saturday to say whether his company is interested in acquiring the African operations of Kuwaiti telecoms group Zain. "I have no comment to make on this," was Lévy's reply.

So we are none the wiser - unless you're the kind of conspiracy theorist who infers something significant from such a minimal response.

I was one of those for whom the notion of Zain selling its African operations popped up out of nowhere. I remembered colleagues returning from a pan-African telecoms sector conference and reporting that Chris Gabriel, CEO of Zain's African unit had spoken in terms of having a war chest for further acquisitions. Much had also been made of Zain's stated ambition of being a major global player and of the strategic important of Africa in that context.

Zain Africa Speculation Watch kicked off on on 12th June, almost as soon as I had started to hear rumours. Another reason this was all rather surprising was that only days before that, there had been suggestions that Zain might be looking to acquire a significant asset on the African continent -France Telecom's stake in market-leading Egyptian cellco Mobinil. Readers interested in that part of the world cannot have failed to notice the long wrangle that has gone on between France Telecom and the other major shareholder in Mobinil, Orascom Telecom, itself a Cairo-headquartered company.

This tussle seems to have been initiated when the two sides found themselves at variance over strategy for Mobinil. According to Alastair Sharp, the Egyptians were keen to invest more heavily than the French wished to, disagreeing over Mobinil's budget and expenditure, marketing strategy and start up of 3G services. Since kicking off in April, this has become quite a heated business, with famously outspoken Orascom Telecom Chairman Naguib Sawiris accusing France Telecom of being "in the business of value destruction".

Sneaking onto the end of today's musings - by virtue of being Zain-related - is the matter of Iran's third national mobile licence. In common with Zain Africa Speculation Watch and the Sawiris-France Telecom battle, this is another fairly long-running story to which it is probably not unfair to apply the label 'saga'.

The saga started with the UAE's Etisalat and local partners winning the valuable Iranian concession, which comes with a useful period of exlusivity regarding the provision of 3G services. This later went sour and by mid-May, I was noting here that Zain appeared to be waiting in the wings to pick up the licence and get into the large, growing and still helpfully under-penetrated Iranian mobile market.

This is now looking unlikely.

On Friday, TeleGeography was picking up reports from an Iranian newspaper which indicated that a new tender will be held to find a strategic investor to launch the country’s third national mobile network. Iran’s telecoms minister Mohammad Soleimani was quoted as saying that Zain had been offered the third operating licence in May, but had "not fulfilled obligations".

A Cellular News take on the same story talks in terms of confusion about whether Zain had not only been "offered" this licence but had also actually secured it, mentioning reports from mid-May about the Kuwaiti company having been "awarded" the concession.

The article continues, however, by noting that Zain said it had only been invited to renew its negotiations as the leader of the consortium that came second in the original bid process. As the article states, "if Zain was formally awarded the license, then it has kept very quiet about it."

For seasoned Iran watchers, this is all a bit déjà vu. As the Cellular News piece reminds us, there was also controversy over the country's second national mobile licence. This had been snapped up by a company 51% owned by Turkcell in 2004, but the deal fell foul of a clamp down on foreign investments by conservative forces in Iran. The Turkish cellco was accused of having links with Israel - clearly a complete no-no. After a year of wrangling, the licence was reissued to South Africa's MTN, which was happy with a minority stake in the new operator.

Two sagas, then, that I enjoying watching. Happily, a little news about both was breaking at around the same time. Hence this Double A Side update from DTW.

Double A Side? Use of that term betrays the fact that I'm old enough to have been brought up on vinyl. Having turned over a chunk of Sunday to writing this, perhaps I'll slap something mellow on the turntable and just leave the sagas to one side for now.

Double A Side: Zain Africa Speculation Watch: Episode 8 + Iran 3rd Mobile Licence Saga Update

Somalia: while daring operators turn a profit, it's the bad news that tends to reach us

Somalia - often in the news, but, sadly, this rarely seems to be for positive reasons.

Just this week, heavy fighting in Mogadishu has caused at least twenty deaths, with fierce clashes between Government forces and an Al-Qaeda-linked rebel group battling to oust the country's President. Meanwhile, Minority Rights Group International (an organisation which campaigns worldwide to protect disadvantaged minorities and indigenous peoples) has stated that Somalia remains the world's most dangerous country for minority groups.

Amidst the chaos of the civil war which has gripped the country since 1991, Somalia has sometimes gained strong praise for the surprisingly good condition of its telecommunications infrastructure. For example, Industry-watcher Paul Budde, with whom I once had the pleasure of working to create an Oceania region telecoms sector conference in Sydney, wrote in 2005 that although Somalia had "no government" and was "lawless and war-torn" with "no banking system, no national telecoms operator, no court system" and with nobody paying taxes, the country nevertheless had a thriving telecoms business.

Paul wrote about how when national operator Telecom Somalia collapsed, their employees continued to work, setting up a de facto privatised company in 1994. Paul also described his amazement at learning about how this entity and two other mobile operators later voluntarily agreed to introduce operational separation and combined to set up a separate infrastructure to be used by all three of them. He also wrote about how despite the lack of a banking and court system people pay their bills, "and even the war lords don’t interfere as they all have a vested interest in good telecoms." Paul was also surprised at broadband speeds available in the Mogadishu area and the speed with which customers could have a landline installed.

Three years later, an African Press Agency report also described telecommunications as one of the rare business successes in the strife-torn country. This report asserted that it is easier to set up a telecoms business in Somalia than in some other African countries because there is no need to get a license and there is no state-run monopoly hindering new competitors from entering the market.

As things currently stands, the mobile market is, according to the World Cellular Information Service from Informa Telecoms & Media, contested by no less than six telecoms operators, all of which have deployed GSM networks. These are (in order of estimated market share):

1. Telecom Somalia - 37.87%
2. Hormuud Telecom Somalia - 18.74%
3. Telsom - 13.71%
4. Somafone - 13.27%
5. NationLink Telecom - 9.90%
6. Golis Telecom Somalia - 6.52%
   

My understanding is that because of the way de facto control of the country is fragmented, these operators do not all cover precisely the same areas. As a nation state, Somalia exists largely in a de jure capacity. A weak but largely recognised central government authority, the Transitional Federal Government is just the latest in a series of ineffectual, externally recognized governing authorities. In reality, control of the north of the country resides in the regional authorities. Of these, Puntland, Northland State, Maakhir, Galmudug, acknowledge the authority of the TFG and maintain their declaration of autonomy within a federated Somalia, while Central, Southern Somalia and Kismayo are in the control of the Islamic Courts Union and insurgent group al-Shabab. Baidoa is currently the seat of the TFG, and Somalia's commercial centre. On the other hand, the Somaliland region in the north, with its capital in Hargeisa, has declared independence and does not recognise the TFG as governing authority. Its self-declared independence is unrecognised internationally due in part to opposition from the TFG and other countries, such as neighbouring Ethiopia, which fear ensuing secessionist movements.

This fragmentation of the country is reflected in the coverage areas of the operators, most of which offer a range of fixed-line services in addition to their mobility propositions. Golis Telecom Somalia, for example, operates in North East Somalia, offering fixed and mobile services in both Puntland and the self-declared independent state of Somaliland. Hormuud Telecom Somalia, meanwhile, describes itself as the leading telecommunication services provider in Southern Somalia.

Strikingly absent from the list of six cellcos/telcos above are any big names. No multinational telecoms group has the stomach for operating in an unregulated free-for-all and in a country whose security situation continues to be so parlous. I daresay this will not change for as long as Somalia continues to be wracked with conflict and continues to suffer from the absence of settled and fully legitimate government.

So, despite the fact that some daring, entrepreneurial operators are making a profit from providing life-improving services in this troubled country, it seems that for now, even in the context of telecoms sector news, it will largely be bad news that filters through to the outside world.

One recent example of this concerns pirate activity off the Somali coast delaying installation for SEACOM, one of three undersea cables set to deliver vast improvements to the capacity of East Africa's telecoms and Internet infrastructure. Anything which delays these improvements coming on line is highly regrettable because, as a recent Reuters report points out, while the three subsea cables and many on-land infrastructure projects are helping to boost communications, sub-Saharan Africa continues to be hampered by excessive prices for broadband and mobile services. The report features comments from Mohsen Khalil, World Bank Group Director for Global ICT who says that the typical monthly mobile bill was still USD 10-12 in Africa, while in Southeast Asia many operators run profitable operations with average bills of USD5 or less.

Another incident whose impact will be felt much less widely, but is nonetheless extremely horrible, took place in an area controlled by the insurgent group al-Shabab. According to a recent Cellular News report, a court under the control of al-Shabab has ordered four young men suspected of stealing guns and mobile phones each to have a hand and a leg amputated.

Because of the mobile handset angle, this pops up as a Somalia-related item for various telecoms sector news sources. Regrettably, it feels like stories of this kind continue to outnumber more positive items. Communications services undoubtedly improve lives in developing countries, but the good work of people in our sector will continue to be hampered anywhere where ongoing conflict prevents the establishment of the legitimate and internationally recognised rule of law.

Somalia: while daring operators turn a profit, it's the bad news that tends to reach us

Mobile applications used to alleviate poverty in Africa and Asia

Earlier this week, global not-for-profit organisation the Grameen Foundation announced the launch of a suite of mobile applications developed with Google and cellco MTN Uganda. The applications deliver highly useful services and information that were not previously available to Uganda’s poor and disadvantaged communities.

The Grameen Foundation's role is to help the world's poorest people to gain access to financial services and technology solutions through the provision of financing, management strategies and technology to the local organisations that serve them. The Foundation also spearheads technology initiatives that create new microbusiness opportunities for the poor, provide telecommunications access for the world's rural poor, and improve their access to health and agriculture information and other services.

I learned of the launch via the Kiwanja.net blog maintained by Ken Banks, the founder of FrontlineSMS, a free large-scale messaging solution for NGOs and non-profit organisations working in the developing world. Having had the pleasure of meeting Ken once (albeit too briefly) and having sung his praises more than once here, it was interesting to learn that he was also involved in the early stages of the Grameen Foundation's Ugandan initiative, spending a month on the ground studying a mixture of geography, culture, challenges, data availability and technologies in and around Kampala.

If, like me, you find Ken's work - and the work of the many, many organisations now using FrontlineSMS - to be fascinating and inspiring, I'd encourage you to read his review of an exciting twelve months since the release of the application's most recent version in June 2008.

I can also suggest an interesting read for those of you who like a dash of Hollywood glamour with your telecoms news and your accounts of how mobile technology improves lives in developing countries. This comes in the form of a press release from the University of Canberra (Australia), whose researchers are working with the Maddox Jolie-Pitt Foundation, an organisation founded by tabloid favourites Angelina Jolie and Brad Pitt. The researchers are trialling a deployment of FrontLine SMS for Cambodian farmers which is aimed at helping to improve the lives of some of the poorest people in the country. The system can be used to alert villagers about disease outbreaks, and to provide other important health and agricultural information. An example of the latter is helping farmers access the price of maize or soybeans on demand, so they are in a stronger position to negotiate the sale of their crop.

Back in Uganda, meanwhile, the suite of five mobile services announced this week are provided using Google SMS Search technology and the MTN network. They are:

• Farmer’s Friend - a searchable database with both agricultural advice and targeted weather forecasts
• Health Tips - which provides sexual and reproductive health information
• Clinic Finder - which helps locate nearby health clinics and their services
• Google Trader, which matches buyers and sellers of agricultural produce and commodities as well as other products

Uganda, where mobile market penetration stands at 33.63% (as of June 2009) according to WCIS, has yet to see the deployment of 3G mobile broadband networks, and is also a market in which the majority of handsets in circulation are presumably more basic models. With this in mind, then, these services are SMS-based and designed to work with low-end devices, thereby reaching the broadest possible audience.

Despite the mobile market growing strongly in Uganda, the low penetration rate (vs. a world average of 63.05%) is evidence that SIM cards and handsets remain beyond the reach of many in terms of affordability.

This need not mean, however, that services of this kind - or indeed access to basic mobile voice - cannot be accessed by those not able to buy a phone of their own. Uganda is, after all, one of the countries most strongly associated with the the Village Phone concept, which involves prospective subscribers taking small loans to purchase a phone and SIM card. These users then provide services to their neighbours in rural areas, for which a fee is charged. This way, a Village Phone entrepreneur repays the original loan and then has an ongoing, sustainable income stream. The entrepreneur's customers, meanwhile, experience an improvement in their own living standards as a result of having access to communications services.

As you might expect, then, the Grameen Foundation's press release this week makes it clear that the new SMS-based services can be accessed by existing Village Phone Operators, thereby leveraging an established means of connecting the poorest people with useful services.

Much of what I have read and heard about life-improving services in developing countries has stressed that the telecoms operators, at least, do not regard their involvement in projects like this as an act of charity. On the contrary, the oft-articulated argument is that this is good business - if these services boost the productivity of rural people and assist in lifting them out of extreme poverty, this creates a prospective new customer segment for MNOs where none previously existed. This spirit is evident in comments made by Noel Meier, CEO of MTN Uganda, who said that his company "hoping to reach people in rural and disadvantaged communities while we build up a new line of business for the company."

Having dedicated much time here of late to gossip about M&A activity, it's been good today to look away from the boardrooms and towards the users of the services provided by telcos in developing countries. I remain hopeful that the profit motive can be successfully reconciled with the alleviation of poverty and misery. Stories like the ones recounted today keep that hope alive.

Mobile applications used to alleviate poverty in Africa and Asia

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MTN-Bharti deal - What are the potential obstacles?

MTN Irancell: does the South African group's presence in U.S.-sanctioned countries threaten the mooted merger with Bharti Airtel of India?

By some measure the the most durable story in these parts is playing out in the dramatic form of Zain Africa Speculation Watch the mini-series. I just can't leave it alone.

It is by no means the only show in town, however. Also quite compelling is the merger being considered by Indian cellco Bharti Airtel and pan-African mobile group MTN. However the talks are progressing, it seems that the former party will not find it too challenging to raise the necessary cash. If a recent headline in India's Economic Times is to be believed, several banks are in "a race" to offer part of the USD 4 billion apparently needed to fund the merger. Writing on Monday, Mohit Bhalla believes that JP Morgan, BNP Paribas, HSBC and Barclays are all keen to do business.

According to a Reuters article on Tuesday, however, some financial institutions may find one aspect of the mooted merger to be something of a challenge.

It seems that while a big Q1 jump in subscriber numbers for MTN Irancell (in which MTN holds a 49% stake) is good news for the pan-MEA group, the company's involvement in Iran is "potentially troublesome for U.S. banks eyeing a role in the South African telco's planned USD 20 billion-plus merger."

The Reuters article notes that MTN's annual report says 13% of its 2008 revenues came from Iran, Sudan and Syria, three states where the U.S. Treasury's Office of Foreign Assets Control (OFAC) "sets tough restrictions on U.S. firms, effectively banning them from most direct and indirect dealings due to U.S. sanctions."

While these markets are important for MTN, they can be challenging places to do business. In Iran, for example, some reports have suggested that MTN Irancell's revenues may have been quite badly affected by recent Government action in the wake of the disputed election result and ensuing unrest. A week-old Economic Times article cites unnamed analysts as suggesting that MTN "stood to lose at least a month's revenue in Iran" due to "blockage of mobile network signals in the wake of the ongoing strife there."

This suggestion was rubbished by MTN's group spokeswoman Nozipho January-Bardill according to Reuters. One week ago Ms. January-Bardill stated that the "MTN network is running in Iran and there is nothing wrong with it."

This comment about about MTN's network being unaffected notwithstanding, I do have the sense that to some degree it continues to be difficult for Iranians to communicate with associates within and beyond their country. I can offer one personal anecdote.

A Dubai-based Iranian contact of mine is currently visiting his home country and has advised me that he expects communication to be affected during his stay. He says that I may not be able to connect with his UAE mobile phone and that email communication could be affected if he experiences difficulties with Internet access.

The latter problem could certainly arise, if a recent Wall Street Journal article is to be believed. The WSJ piece contends that Government "infiltration of Iranian online traffic could explain why the government has allowed the Internet to continue to function - and also why it has been running at such slow speeds in the days since the results of the presidential vote spurred unrest." By way of evidence, the article states that "users in the country report the Internet having slowed to less than a tenth of normal speeds", explaining that "deep packet inspection delays the transmission of online data unless it is offset by a huge increase in processing power, according to Internet experts."

According to the Economic Times, MTN has declined to say anything negative about the current situation in Iran. The Indian newspaper also canvassed the views of analysts, whose collective feeling seems to be that MTN is "expected to continue its silent approach." Frost & Sullivan's Lindsey McDonald is quoted as saying that "MTN will want to keep the Government happy since Iran is one of its biggest markets, and they would rather lose market share than be kicked out altogether."

"That's the company's style," agrees Dennis Smit, Managing Director of South African research house BMI-T. "It doesn't get involved in local politics," he said. "That's why it can enter such high-risk countries."

In the sense of these countries being too high-risk for U.S. banks eyeing the MTN-Bharti Airtel merger, opinion seems to be divided.

Tuesday's Reuters article mentions that a U.S. Treasury official had "declined to comment on the MTN-Bharti advisory work by U.S. banks, but said there was some room within OFAC rules for U.S. companies to deal cautiously with situations involving deals with foreign firms that have subsidiaries in the sanctioned areas - as long as they are not facilitating transactions with the sanctioned countries."

"U.S. persons are not necessarily prohibited from dealing with third-country firms that do business in sanctioned countries, although they should approach such dealings carefully," said the official, who was not authorised to speak publicly about OFAC's enforcement of sanctions.

The Reuters article indicates that for investment banks with advisory or underwriting fees at stake, that interpretation has created two schools of thought. The first is a more liberal view of the sanctions, "which appear to have some wiggle-room" with regard to deals that are 'third-country' as opposed to dealing directly with a company whose headquarters are in a sanctioned country. The second view is more conservative and might lead to bankers and lawyers steering clear of a Bharti-MTN type deal "on the premise that facilitating such a transaction toes too close to OFAC, even though the merger indirectly involves the sanctioned areas."

It remains to be seen which view will prevail in this case and to what extent a cautious approach by U.S. banks could negatively affect the chances of the merger going ahead.

In South Africa, where MTN is headquartered, there also seems to be some divergence of views about the desirability of the group linking up with the giant Indian cellco.

One suggestion is that this week's resignation by MTN Finance Director Rob Nisbet may have resulted from his not favouring the proposed tie-up with Bharti Airtel.

A former rival of MTN's, however, seems to be feeling much more positive, according to another recent Economic Times article. Former Vodacom CEO Alan Knott-Craig told the newspaper that "the deal will create a lot of value for the shareholders of both the companies" and that "it is the best time for Bharti to do the deal." According to Knott-Craig, "three years ago, Bharti would not have brought anything to the table [but] that story is now different. The deal will allow Bharti and MTN to learn from each other." A nice endorsement.

The exclusivity agreement currently locking Bharti Airtel and MTN out of discussions with other prospective bedfellows expires at the end of this month. With Zain's African operations possibly on sale (see DTW posts passim) and possibly of interest to either of these two parties, I have to assume that this mooted mega-merger will play out one way or another before too long. Keep watching.

MTN-Bharti deal - What are the potential obstacles?

How far will the merger of Romania's 3rd and 5th-placed cellcos shake up the country's mobile market?

In mid-May, as part of a longer piece about M&A activity potentially changing the competitive landscape in Central and Eastern Europe, I noted that Greek telecoms group Cosmote had reportedly reached an agreement with Oger Telecom regarding the takeover of Romanian CDMA mobile operator Zapp.

According to James Middleton of telecoms.com writing today, this deal now seems to have been concluded, with Cosmote buying Zapp under a share purchase agreement worth EUR 61 million. The Greek firm will also assume Zapp’s debt and other liabilities worth in the region of EUR 146 million.

The country's mobile market, the penetration rate of which currently stands at 135.13% according to WCIS, will therefore be contested by four cellcos once Cosmote's Romanian operation is merged with its new acquisition.

Why was Zapp an attractive purchase for Cosmote? After all, the acquired company has just 242,000 of the country's 28.7 million mobile subs, according to WCIS figures. Further, the CDMA network operator has been experiencing a steady decline in its customer base since June 2007, when its number of subs peaked at around 546,000.

As I said in May, the answer lies in the fact that although Zapp had already got into third generation service provision via the deployment of a existing CDMA EV-DO network, the company decided last year to use UMTS/HSDPA technology for its 2100 Mhz network as opposed to CDMA2000. This solves a pressing problem for Cosmote Romania, which was the lone cellco with no 3G proposition.

"This opens up a new cycle of development and a widening of the customer base for Cosmote in Romania, given that the company is acquiring both a third generation license and infrastructure," Cosmote group CEO Michalis Tsamaz said in a statement issued last week.

Alkman Granitsas, writing for Dow Jones Newswires today, rounds up some analyst responses to to deal. Brokerage HSBC Pantelakis Securities, for example, stated that the company had paid "full price" for the acquisition, paying a multiple of 3.4 times 2008 enterprise value-to-sales.

"The main rationale behind the acquisition was (Zapp's) 3G licence with the network currently covering 23 Romanian cities," said HSBC. "Cosmote Romania was the only mobile operator in the country not owning a 3G licence; hence we believe that OTE had to pay a rather full price to effectively acquire such a licence so as to be able to compete more effectively in this highly competitive market."

Certainly, Cosmote must be hoping that the addition of 3G services to its portfolio will sharpen its competitive edge in a market where the Vodafone and Orange branded cellcos have been much more successful to date, with 33.95% and 35.34% market share respectively. Their Greek-owned rival lags some way behind with 22.90% of mobile subs. Zapp aside, only latecomer RCS&RDS has built a smaller share of the market - just 6.97% when the WCIS folks last crunched the numbers.

Perhaps more serious for Cosmote, and presumably partly attributable to its lack of a 3G offering, is the degree to which is under-performs in terms of ARPU. Monthly ARPU for Vodafone and Orange as of 2Q 2008 was EUR 10.30 and EUR 10.33 respectively, according to the most recent Central & Eastern Europe Mobile Market Analysis and Forecasts report from Informa Telecoms & Media. The same report indicates that Cosmote Romania's ARPU for the same period stood at just EUR 4.9. Cosmote was also doing much worse than its rivals in terms of ARPU decay, it's 2Q 2008 numbers being down a hefty 25.8% vs. the figure recorded a year earlier. While its two main competitors had also seen ARPU decline, this was at nothing like such a rapid rate.

It will be interesting to review the updated figures a year from now and see if the Zapp acquisition has represented good value for money for Cosmote.

How far will the merger of Romania's 3rd and 5th-placed cellcos shake up the country's mobile market?

Zain Africa Speculation Watch: Episode 7

Dr Bahabri of HiTS Telecom: 'highly leveraged' Zain has been in talks with Vodafone, China Mobile - (photo from Comm.ae)

It's a matter of policy here at DevelopingTelecomsWatch not to write anything actively inflammatory. Controversy is not the watchword. There's no harm, however, in merely repeating contentious statements made by others. Is there?

One man seemingly unafraid of rattling cages is Dr Sultan A. Bahabri, Chairman of HiTS Telecom, the self-styled 'new opportunity communications company' that has invested in Brazil, Spain, Saudi Arabia and in several African markets.

Late last week, Bahabri spoke with the telecoms sector's very own man of mystery 'the Informer', offering his hard-hitting opinions on a range of issues. One of these was the recently much-discussed question of whether pan-MEA mobile player Zain is really going to flog its supposedly strategically vital African assets to some lucky punter.

Bahabri alleges that last year Zain was in serious talks with both Vodafone and China Mobile, claiming that the Kuwait/Bahrain-headquartered group is "highly leveraged and that leverage is going to be heavy on their shoulders for years to come."

The HiTS Telecom Chairman went on to make some fairly critical remarks about the manner in which Zain entered the Saudi Arabian market two years ago. The price paid for the country's third licence to operate was a whopping USD 6 billion, at a time when mobile market penetration was close to 80%. As Gavin Patterson of Informa Telecoms & Media wrote in his recently-penned Zain Group Q4 2008 update, mobile penetration in Saudi Arabia had passed the 100% mark by the time the third operator launched services. Patterson also saves us the bother of working out the cost of the licence per inhabitant of Saudi Arabia - USD 226: the world's most expensive on a per capita basis.

According to the Informer, Bahabri claims that his company also bid just over USD 4 billion in the Saudi Arabian auction, but that he could not have justified the bigger sum which Zain ended up spending.

Zain's management have not failed to notice sceptical remarks about their Saudi operation. In February last year, the firm's Chief Communications Officer Ibrahim Adel was interviewed by Mobile Communications International magazine, acknowledging that the move had been dismissed by some as one which that simply did not justify the expense. Adel noted that some observers had dubbed his firm's actions as a case of "crazy Kuwaitis, spending crazy money".

Adel argued, however, that the licence win was essential: "Saudi is a key strategic market for us. We couldn’t not be there."

Keep that word in mind: strategic - and fast-forward to the more recent critical remarks made by Dr Bahabri of HiTS Telecom. In last week's no-holds-barred chat with the Informer, Bahabri joked that "when you can’t think of a reason to justify that sort of spend, you just call it 'strategic'" - using the word as a barb, it seems to me. Many operators, he went on to add, have "a very dangerous combination of ego and cash. That leads to many mistakes."

Tough talk. Does it invite others to watch HiTS Telecoms closely and speak in similarly strong language should Dr Bahabri's organisation ever make moves which leave it open to criticism?

Returning to Dr Bahabri's suggestion that "highly leveraged" Zain was in talks with potential purchasers of parts of its business as far back as one year ago, fresh rumours were circulated yesterday that a sale of some sort is now on the cards - Bloomberg's Ambereen Choudhury writes that the telco has asked Swiss bank UBS AG to consider a possible sale of its African division, which it values at about USD 10 billion. The source? "Three people familiar with the plans."

These mysterious people told Choudhury that UBS "will oversee a review that may lead to a sale of all or part of the unit" and that "Zain is yet to decide on a sale, which would exclude its Sudanese operations."

In previous episodes of Zain Africa Speculation Watch we have considered the merits of various suitors that could step forward should Zain indeed decide that a sale is the best way forward. Of these, I noted that French telecoms and media conglomerate Vivendi has been dismissed by some analysts as being unlikely to be able to raise the necessary funds for an acquisition as significant as Zain's African unit.

Bloomberg's Choudhury, however, takes the time to consider a Vivendi bid and his unnamed sources allege that the company has actually approached Zain in recent months for exploratory talks about the latter's African division. According to Choudhury, Vivendi, which owns 53 percent of Maroc Telecom, has said it wants to revisit the idea of expanding its presence in emerging markets, having scrapped previous discussions about buying a stake in Dubai-based Oger Telecom in 2007.

Of the rumours feeding into Zain Africa Speculation Watch the mini-series, Ambereen Choudhury's are about the most specific. I have no idea, however, if they are the most reliable or credible. So, again I invite you to watch this space. Don't touch that dial. No flipping. etc. etc.

Zain Africa Speculation Watch: Episode 7