Middle East telcos in M&A spotlight

Middle East telecoms take centre stage in the coming week as a consolidation phase looks set to begin, but weak third-quarter earnings from major Gulf Arab banks could be a drag on stocks.
-- Middle East debt markets thawing
A rare M&A play, which followed a flurry of debt issuances in late September, and talk of at least two upcoming initial public offerings, has buoyed investor hopes that the region's dormant mergers and acquisitions market is returning to life.
The focus is on telecoms, where Emirates Telecommunication Corp, the Gulf's second largest operator, unveiled in late September a $12 billion bid to buy 46 percent of Kuwait's Zain, the No 3 Gulf telecoms firm.
That deal is expected to result in the sale of Zain's Saudi unit, a juicy target for those eyeing the Gulf's largest market.
In Egypt, Orascom Telecom plans to merge its assets with Russia's Vimpelcom, though it is not clear if this will end a row with Algiers over Orascom's Algerian Djezzy unit.
One major telecommunications deal is already in the bag - France Telecom's acquisition of a 40-percent stake in Morocco's Meditel. Meanwhile, a new license is up for grabs in the relatively less saturated Syrian market, so investor appetite for all things telecom could hit a high in coming weeks.
Markets will also get a slew of earnings as the third quarter reporting period begins in the Middle East with mixed results expected from Saudi Arabia and Qatar, which start off the season.
Gulf markets have gradually recovered from the shock of the Dubai debt crisis in November and Saudi banks largely reported a rise in earnings last quarter.
However, Gulf central banks are watching capital levels at banks very closely as many lenders had to repeatedly book provisions against bad loans after the collapse of Lehman Brothers in late 2008 froze debt markets and hit stocks.
Regional stocks, particularly petrochemicals stocks in the world's biggest oil exporter, Saudi Arabia, could also continue to track the rally in global commodities prices if these are sustained. With interest rates still at record lows, the global hunt for yields has kept the spotlight trained on emerging markets.