A senior official at Iraq-based mobile operator Korek Telecom has accused Etisalat of “playing them along” in takeover talks for three years before deciding to buy a stake in Kuwait’s Zain.

“It is clear that Etisalat were talking to both of us at the same time,” the official says.

The deal between the two was intended to expand Korek’s network to the rest of Iraq. But the two parties were unable to agree on operations, management and price. Korek has instead set aside $900m to invest in infrastructure for the next two years and is working with Sweden’s Ericsson and Finnish-German Nokia Siemens Networks. It will announce its commercial services in Baghdad on 11 November.

Zain’s new shareholder 
Etisalat 51%
Kuwait Investment Authority 24%
Free Float 25%
Source: HSBC

Etisalat has in recent years led an aggressive expansion policy. Its takeover of Kuwait-based Zain is expected to close on 15 January next year.

Zain’s second largest shareholder, the Kharafi Group accepted Etisalat’s offer of KWD1.7 ($6.1) a share for a 46 per cent stake in the company. The deal is valued at around $12bn and the full amount is due to be paid in cash.

The UAE government owns 60 per cent of Etisalat, although it will not be providing any financial aid for the takeover.

Etisalat is expected to begin the due diligence process next week. Once the deal is finalised, it will be the largest in the Gulf since petrochemicals major Saudi Basic Industries Coporation acquired the US’ GE Plastics for $11.6bn in 2007.

Etisalat will be forced to sell the Saudi Arabian unit of Zain as it already owns a share in Mobily, another operator in the country. Zain Saudi chairman Prince Hussam al-Saud announced the imminent sale of the unit at the World Economic Forum in Marrakesh, Morocco last week.

Etisalat was unable to comment on its talks with Korek at the time of going to press.