The announcement by UAE-based telecommunications company Etisalat at the weekend that it is selling its 92.3% shareholding in Sudan's Canar to Zain rests on likely regulatory approval according to an industry analyst.

In an announcement of the deal, Serkan Okandan, Chief Financial Officer at Etisalat, noted that the Share Purchase Agreement signed by the telcos remains subject to approval by regulators in Sudan.

However, once completed, the deal will see Etisalat receive cash totalling AED 349.6 million (implying a price per share of AED 17.504), the companies have explained.

"The transaction remains subject to certain conditions, including the approval of the Sudanese National Telecommunications Corporation and the Sudanese competition authorities."

Dobek Pater, Managing Director at Africa Analysis, says regulatory approval is almost guaranteed for the transaction.

"The national regulatory authorities can always halt an acquisition move if they deem it not be good for the market, for example by reducing competition. However, in this instance, I think the acquisition will be approved. With the acquisition of Canar, Zain will form a strong competitor to Sudatel across mobile and fixed operations. One reason for small potential lack of approval could be the fact that Zain may become a very strong and dominant player in the market, being much larger than Sudatel mobile and also Sudatel fixed line operations. The acquisition will place Zain in a strong position to pursue convergence going forward and will allow it to expand more strongly into the business market."

Significant market implications

Pater also told ITWeb Africa that the agreement represents a noteworthy development for Sudan's telecommunications sector. "The competitive market landscape will change, with Zain becoming an even stronger competitor to Sudatel across the mobile and fixed line space, and in a stronger position than MTN."

The announcement of the agreement to sell Etisalat's shares in Canar to Zain follows a scheduled meeting by Etisalat's Board of Directors last week, along with the publication of first-quarter net profit results that showed a decline of 8% from last year.

Pater said, "Etisalat would be selling its stake in Canar for one of two reasons, or both. The first being a financial reason if the operation is not generating sufficient returns for the company, or secondly if it has decided to focus on the home market and other markets in the region, including Nigeria where it has stronger and larger operations."

For its part, Zain group has acknowledged that foreign currency losses in Sudan and Iraq have impacted its consolidated results for the three months ended 31 March 2016.

"In local currency (SDG) terms, the operator's revenues grew by 9% Y-o-Y to reach SDG 1.2 billion (USD 187 million, up 6% in USD terms) for the first quarter of 2016. EBITDA increased by 13% to reach SDG 486 million (USD 76 million, up 11% in USD terms) while net income decreased 28% to reach SDG 195 million (USD 30 million, down 30% in USD terms)," stated Zain in a summary post of their operations in Sudan.