The Saudi Arabian unit of Kuwaiti mobile operator Zain has approved a capital restructuring programme that includes a $1.6bn rights issue to fund future growth.

The money will be used to strengthen the operator and upgrade its networks and increase its product offerings. It will also go towards reducing its bank debt, which currently stands at $5bn.

The company is to undergo a reduction of its capital from $3.73bn to $1.28bn. The $1.6bn rights issue, subject to the consent of the Capital Market Authority in Saudi Arabia, will increase the paid-capital to $2.88bn.

“This capital restructuring and rights issue will strengthen the financial position and ensure the long-term viability of the company,” says Nabeel bin Salamah, chief executive officer of Zain Group. “The combination of a new management team, an ambitious investment plan and  a new financial structure will have a positive impact on the performance of the company.”

Zain Saudi Arabia was the subject of a failed acquisition by Bahrain’s Batelco and Saudi Arabia’s Kingdom Holding Company in October.