* Qtel offers to pay $2.2 bln for 47.5 pct stake
* Kuwait sovereign fund owns 23.5 pct stake in Wataniya
* Offer price of 2.6 dinars at 18 pct premium
* Kuwait sovereign fund yet to decide on share sale -source
(Recasts, adds details, background)
By Regan Doherty and Dinesh Nair
DOHA/DUBAI, Aug 16 Qatar Telecom
(Qtel) is offering $2.2 billion to buy the remaining 47.5
percent stake it does not already own in Kuwaiti telecom company
Wataniya as the state-owned operator eyes acquisitions
to ward off threats from rivals.
The former state monopoly, which already owns 52.5 percent
of Wataniya, will pay 2.6 dinars per share, an 18 percent
premium to Wataniya's last traded price, through a tender offer
open to shareholders.
Qtel has been raising stakes in its subsidiaries, taking
advantage of the gas-rich Gulf state's healthy financial
position at a time when other large telecom firms are shying
away from deals.
The company has received approval for the transaction from
the Gulf state's market regulator, Capital Markets Authority
(CMA), it said in a statement on Thursday.
Shares in Qtel rose 0.5 percent at 0815 GMT and are up 12
"Increased competition and pressures on the industry from
new entrants as well as incumbents will most likely erode value
over time and require increasingly dynamic responses," Qtel
Chairman Sheikh Abdullah Bin Mohammed Bin Saud al-Thani said.
In June, Qtel agreed to double its stake in Iraq's No. 2
operator Asiacell to 60 percent for $1.47 billion, seeking to
exploit rising demand for broadband.
Qtel also owns a majority stake in Omani telecom operator
Nawras. It bought its existing Wataniya stake in 2007
for about $3.7 billion.
Before they were halted when Qtel submitted its initial
offer, Wataniya shares were trading at around 2008 levels, below
some analysts' targets, weighed by political turbulence that has
dragged the Kuwait bourse to an eight-year low.
Investors were failing to take account of revenue growth
prospects, high cash flow and low debt, analysts said, giving
Qtel the chance to be the first full owner of a listed Gulf
telecoms operator - possibly at a knockdown price.
The next major hurdle for Qtel is gaining the assent of
Kuwait Investment Authority, the Gulf state's sovereign wealth
fund, which has a 23.5 percent stake in Wataniya.
The fund is yet to decide whether to tender its Wataniya
stake to the offer, a source familiar with the matter said.
"The KIA stake is going to be key as the fund owns a similar
stake in other telcos in Kuwait, including Zain," a
second source said, adding: "if they sell Wataniya, does that
mean they will be willing sellers of the rest? We will have to
wait and see."
In 2010, when UAE telecom company Etisalat bid
around $12 billion to take control of Kuwait's Zain, the
sovereign fund was not willing to sell its holding, the source
said, declining to be identified as the matter is not public.
Etisalat eventually pulled its bid, citing several reasons
including a divided Zain board.
Kuwait's No. 2 telecom operator has operations in Kuwait,
Tunisia, Algeria, the Palestinian Territories, Saudi Arabia and
the Maldives. Its main draws are its Algeria and Tunisia units,
accounting for about 85 percent of customers and 60 percent of
Wataniya reported a 49 percent drop in second-quarter
profit, hit by foreign exchange losses from its Algeria unit and
increased domestic competition.
Qtel is being advised by Barclays Capital and the
investment banking arm of National Bank of Kuwait on
the Wataniya buy, a banking source told Reuters in June.
($1 = 0.2828 Kuwaiti dinars)
(Reporting by Regan Doherty and Dinesh Nair; Editing by David
French and Helen Massy-Beresford)