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Mobile giants will dominate


Two operators look ideally positioned to benefit from the difficult financial markets: Saudi Telecom and the UAE's Etisalat.


Eight governments are planning to auction new mobile phone licences in 2009. Algeria, Bahrain, Iran, Iraq, Jordan, Lebanon, Morocco and Tunisia have all been planning to auction new mobile phone licences for years.


Given the competition to attract bidders they now face, some must wish they had sold them earlier.


Thanks to the global economic slowdown, few international telecoms firms have the resources to bid for new licences. Even in a good year, operators would struggle to absorb so many licences in such a short period of time. However, 2009 will be a terrible year, and some of the operators that expanded during the boom will themselves be overstretched.


The $6.1bn bid that enabled Kuwaiti operator Zain to win Saudi Arabia's third mobile phone licence in March 2007 is likely to remain the region's largest telecoms deal for a long time to come.


Zain's ability to finance future blockbuster deals is uncertain. It held a $4.5bn rights issue in early September, soon after paying a sizeable cash dividend to shareholders, and now says that future deals will be paid for with shares rather than cash. But governments tend to prefer cash when selling new licences.


Most other operators already have high levels of debt and limited freedom to raise much more.


However, two operators look ideally positioned to benefit from the difficult financial markets. Saudi Telecom and the UAE's Etisalat have relatively low debt and more than $3bn in cash each in the bank. If they wanted to, they could probably afford to buy the licences of all eight countries.


For them, the best thing about this crisis is that their weaker rivals can no longer afford to bid up the price of new licences. These two big companies are about to become a lot bigger.


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