UAE operator Etisalat has finally abandoned plans to acquire a controlling stake in Kuwait’s Zain claiming the US$12 billion deal was “no longer viable.” In a statement issued over the weekend, Etisalat cited the “the results of the extensive due diligence” and “current political unrest in the region” as reasons for walking away from the deal. Changes to Kuwait’s M&A laws were also cited. Etisalat made a conditional binding offer for 46 percent of Zain’s shares in November 2010, but disagreements between Zain shareholders over whether to support the deal led to several deadlines being missed. From the Zain side, the deal was being pushed by the Kharafi family, one of the Kuwaiti firm’s largest shareholders. However, the Kharafis announced earlier this month that they were withdrawing their support, which effectively meant the deal could not move further forward.

One of the major sticking points for the Zain shareholders that opposed the deal was the need for Zain to sell its Saudi mobile arm, Zain KSA, a key regulatory requirement due to Etisalat already having its own Saudi mobile business. Ironically, however, that issue appeared to be settled last week following reports that Zain had agreed to sell its 25 percent stake in Zain Saudi Arabia to a consortium comprising Bahrain operator Batelco and Kingdom Holding (a firm controlled by Saudi billionaire Prince Alwaleed bin Talal). While that deal appeared to temporarily revive the prospects of the Zain/Etisalat merger going ahead, it is now unclear if Zain will still want to sell such a prized asset now that it doesn’t need to.