By Matt Smith

Etisalat could resurrect talks to sell its Sudanese telecom arm Canar to Kuwait's Zain, as both sides remain keen on a deal despite a breakdown in negotiations earlier this year, a source close to the matter said.

Zain Sudan is the African country's No.1 mobile company. Buying Canar - the top fixed-line carrier - would be in line with Zain's broader strategy, as outlined by chief executive Scott Gegenheimer in October, of moving beyond mobile to provide bundled services to corporates and individuals.

Etisalat took an impairment of 459 million dirhams ($125 million) against Canar in 2012 and may be eager to sell what is a peripheral investment for the United Arab Emirates' firm.

"The deal fell apart at the last moment," the source said, declining to be identified because the talks were not public.

Negotiations collapsed around the start of 2013, the source said, with Etisalat thought to have backed out because it believed other parties might consider buying Canar and so hoped to get a better price for its subsidiary.

Zain remains interested in acquiring Canar, while Etisalat was still a likely seller, the source said, describing a deal as "a win-win situation" for both parties.

Etisalat did not respond to requests for comment and Zain declined to comment.

Zain's 11.95 million subscribers gave it a 44 percent share of Sudan's mobile market and $470 million of revenue in the nine months to September 30. Canar had 316,770 subscribers as of March 31, data from the country's telecom regulator shows.

Etisalat does not provide financial information on Canar, but its consortium paid 45 million euros for Sudan's second fixed-line license in 2004 and the UAE firm later paid around $276 million to up its stake to 89 percent from 37 percent.

This was part of Etisalat's rapid expansion last decade as it sought to offset the loss of its domestic monopoly, but few of its estimated $12.6 billion of foreign investments have paid off and in recent years it withdrew from India and sold most of its stake in Indonesia's PT XL Axiata (EXCL.JK).

In November, Etisalat agreed to buy a controlling stake in Maroc Telecom for $5.7 billion, but analysts see little point in the UAE firm retaining interests in minor players such as Canar, especially after the Sudanese pound fell by about half against the dollar following South Sudan's succession in 2011.

Canar hoped to obtain a mobile license, its chief executive told Reuters in 2008, but never did so and just 1 percent of Sudanese had a fixed-line telephone connection at the end of 2012, according to Etisalat's annual report.

Canar's network covers 31 percent of Sudan's population.

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