Due diligence has now been granted for Bahrain Telecommunications Company (Batelco) to purchase a 25% stake in rival Zain Saudi in partnership with Kingdom Holding in a deal which, once complete, will see the Bahraini company take the helm of the Saudi mobile venture.

"The management contract will be with Batelco, as we will have operating responsibility as per regulatory license requirements," Peter Kaliaropoulos, chief executive, Batelco, told Reuters.

The board of Kuwait’s Zain was required to sell its 25% stake in its Saudi Arabian subsidiary in order for a proposed takeover deal by UAE’s Etisalat to be successful, due to competition regulations. And, although the latter deal eventually collapsed, the US$950 million jointly offered by Batelco and Kingdom Holding for Zain’s shares in Zain Saudi - which was accepted by the Kuwaiti telco in April - has remained firm.

Due diligence for the process has now been announced on the Saudi Arabia Stock Exchange, and the transaction is to be completed by the end of September 2011.

Ahmed Halawani, executive director for private equity at Kingdom Holding, said his company may, working with its new partner, seek more telecommunications opportunities in the Middle East. “We are going to use this asset and our alliance with Batelco to expand in this industry on a regional basis,” he told Bloomberg. “Most of our future investments in this industry will be alongside Batelco.”

Kingdom Holding, owned by Saudi billionaire Prince Alwaleed bin Talal, teamed up with Batelco after the two companies initial separate bids to purchase the Kuwaiti shareholding of Zain Saudi were dismissed in February.

Zain Saudi’s mobile service started in August 2008, in competition with Saudi Telecom Company (STC) and the Etisalat-owned venture Mobily. Although it is thought to have debts of around $3.8 billion, the Saudi Arabia mobile market is considered by analysts to be ‘vibrant’, particularly with the growth of broadband and value added services such as IPTV and mobile TV.

Batelco already holds a 15% stake in fixed line operator Saudi Atheeb, while Zain Saudi does not hold a license to run a fixed line.