The idea to establish a Jordanian-Palestinian
confederation was shelved long ago as part of a political solution, but it appears that a Kuwaiti company has adopted the idea and believes it will be able to achieve business-related advantages by founding a cellular communications company uniting both markets.
The move was made possible after Palestinian telecommunications company Paltel, the biggest private firm in the Palestinian Authority, was acquired last week by the Zain mobile operator of Kuwait.
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For Zain this means continuing its expansion in the mobile phone market in the Middle East and Africa. The Kuwaiti company is currently active in 24 different markets.
Following the move, the Kuwaiti company announced that it would be merging its businesses in the Palestinian market and in the Jordanian market, where it controls a leading cellular phone company.
Zain CEO Saad al-Barrak was quoted by the al-Eqtisadiah newspaper as saying about the new deal that "such a merger, with immediate opportunities for a synergy between two leading operators in Jordan and Palestine, will create significant value for the shareholders."
In order to finance the deal, the Kuwaiti company raised some $4.5 billion in September 2008, but the payment for the ownership of Paltel was conducted through shares rather than through cash.
As part of the deal, Zain transferred the ownership over its Jordanian subsidiary company to Paltel in return for 56.5% of the ownership over the Palestinians communications company. Paltel's shareholders will have 41.4% of the new company which will be given the rights to operate mobile communication networks in Jordan and the Palestinian Authority. It should be noted that Paltel's shares are traded in the Palestinian stock exchange as well as in Abu Dhabi's stock market.
Paltel won a monopoly over the communications market in the Palestinian Authority, but last year another Kuwaiti company – Wataniya – was granted a franchise to operate another communications network. According to plans, the new operator will begin its activities in the territories in the coming year.
Doron Peskin is head of research at Info-Prod Research (Middle East) Ltd
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