Zain is being sued for $4.5 billion over its 2007 acquisition of an Iraqi telecom operator, the Kuwaiti firm said in a bourse statement yesterday.
Zain bought Iraqna for $1.2bn from Orascom Telecom in December 2007 after the Egyptian firm dropped out of the running for a long-term mobile licence in Iraq.
The Kuwaiti firm then merged its Iraqi unit, Atheer, with Iraqna and renamed the entity Zain Iraq, which today is the country's biggest operator by subscribers.
Zain said in the statement that a company it declined to identify filed a lawsuit last August. It claims Zain's takeover had stopped the firm from buying Iraqna, causing it losses of $4.5bn.
"Zain Iraq believes its position in the case is strong as the claimant company has failed until now to produce any evidence to back its claim," Zain said in the statement, adding it has now revealed some details of the court case after seeking legal advice.
The anonymous company is also suing Zain and Iraq's telecom regulator, the Communications and Media Commission, jointly for a further $1bn.
An Iraqi court in January ruled that all of Zain Iraq's revenues from its subscriber base transferred to the company as a result of the Iraqna acquisition should be placed under a legal guardian and in an Iraqi bank until the case is resolved, the statement said, adding the Kuwaiti company unsuccessfully appealed this decision.
Iraqna had about three million subscribers at the time of Zain's acquisition and the statement did not explain whether the money to be placed under the legal guardian's jurisdiction would be back-dated to 2007 or how such a sum could be calculated.
Zain Iraq had 15.9m customers as of 2013-end, generating an annual profit of $360.9m.
Orascom and Kurdistan-based Korek agreed to set up a $2.2bn joint venture after Korek, which later became a unit of France's Orange, acquired a $1.25bn, 15-year national telecom licence.
The Egyptian firm would have owned 70 per cent of the venture and Korek 30pc, allowing the latter to use Orascom unit Iraqna's infrastructure.
The partnership was not formalised and Korek entered talks to buy Iraqna outright, taking over the unit's assets until 2007-end.
Rivals would be allowed to bid for Iraqna if a sale could not be agreed by then, reports said at the time, yet Zain agreed to buy Iraqna before the deadline.