Kuwait Zain says investment to weigh on profit growth

KUWAIT, May 12 (Reuters) - An ambitious investment plan will weigh on profit growth at Kuwait's Mobile Telecommunication Co (ZAIN.KW: Quote, Profile, Research, Stock Buzz), its chief executive said, as the group vies for a chunk of one of the biggest markets in the Middle East, Iran.

Saad al-Barrak said he expects second-quarter net profit to be close to the 75.7 million dinars ($261.3 million) it made in the first-quarter, but cost of investments will weigh on this year's bottom line.

"(In 2009) it is hard to increase the net profit due to our huge investments," he told reporters on the sidelines of a conference on Tuesday.

On Monday, Kuwait's biggest mobile operator said it was in talks with Iran for the country's third mobile licence. Zain was invited to bid after the licence was stripped from Emirates Telecommunication Corp ETEL.AD (Etisalat). [ID:nDAH131243]

Barrak sees big potential in the Islamic Republic and Zain is willing to spend "reasonably enough" for the third mobile licence.

"There is no doubt that the chance is big (in Iran)...but the issue is not easy, we have to negotiate about the terms," he said. "We cannot say at this stage...because pricing is subject to negotiating."

Zain's shares rose 2.6 percent on Tuesday in the wake of the Iran news on hopes the company would win.

The firm, which operates in 23 countries in the Middle East and Africa, will sign a deal next week with Palestine Telecommunication Company (Paltel), for a stake in the operator, he said, declining to elaborate.

In January, Zain said it was in advanced talks to become a strategic partner in the Palestinian operator.

The firm is also still in talks to acquire a stake in Syriatel, but no deal is seen to be signed this year, Barrak said.

"This year is tough from the financial aspect, and its challenges are very big and that's why we have to focus on our current operations and their development," he said.

Last week, Zain posted a 3.3 percent rise in net profit for first quarter and said it might miss its 2009 target of 30 percent net profit growth because of the global financial downturn.

Zain, in which Kuwait's sovereign wealth fund is the biggest shareholder, has been spending billions of dollars to expand abroad as competition heats up at home, where VIVA, an affiliate of Saudi Telecom 7010.SE, has started operations.

(Reporting by Eman Goma; Editing by Thomas Atkins and Sharon Lindores)

($1=.2897 Kuwaiti Dinar)