Karachi, 27th June, 2013 -
Pakistan mobile operator Warid Telecom has been put up for sale by its Abu Dhabi
owners and it is said to have drawn interest from China Mobile and Etisalat,
according to various sources.
The Abu Dhabi Group, a conglomerate led by a ruling family member in the
oil-rich emirate, is seeking to sell all 100-per cent of shares in Warid
Telecom, two sources revealed speaking on condition of anonymity.
The third source, however, said the company would also be prepared to sell a
smaller controlling stake.
Pakistan's mobile telecommunications sector has five operators and is ripe for
consolidation after a period when a troubled economy, with increasingly high
levels of market penetration and stiff competition has forced companies' margins
lower.
The sellers have mandated US investment bank Lazard and British lender Standard
Chartered as advisers for the process, the sources said. One estimated a sale
could fetch about $1 billion. Walid Irshaid, the chief executive of Pakistan
Telecommunications (PTCL), a unit of United Arab Emirates-based Etisalat, said
the company is weighing a potential bid.
"We are interested to see if it makes sense for us, but it's not only us. Warid
is an existing operator that has been here for many years and so we're saying
'let's look at the prospects,'" he said.
"There are too many players in Pakistan. Margins have eroded for everybody and
the market must consolidate - we're all operating under low margins and low ARPU
(average revenue per user) and that isn't long-term sustainable."
Warid Telecom declined to comment. China Mobile, which has increased its
subscriber base by nearly three-quarters since 2010-11 and operates under the
Zong brand, was not immediately for comment.
ETISALAT
According to a source placed within Warid Pakistan this deal has been on the
table for months and has almost come to a close in favour of Etisalat.
"They want to keep it in the family, and are somehow related or very closely
knit to Etisalat. The deal is over 51 percent of the company not 100 percent as
rumored. China Mobile may be interested but it ends there for them”
Employees allegedly believe that the deal is in the best interest of the company
since business has been suffering.
Etisalat bought 26 per cent shareholding along with management control of PTCL
in June 2005 for US$2.6 billion.
There was an issue of $800 million that Etisalat had held back due to a dispute
over property ownership, drawing attention from the finance minister and prime
minister of the time.
SHRINKAGE
Warid launched its cellular services in Pakistan in May 2005 and had 12.54
million subscribers at the end of March of this year, down from 17.39 million in
2010-11, making the company the country's smallest operator.
Pakistan's total subscriber base rose 12.2 per cent to 122.1 million over the
same period, meaning Warid's market share fell to 10.3 per cent from 16 per
cent.
The other operators in Pakistan are Oslo-based Telenor and Orascom Telecom,
which operates under the name Mobilink and is the sector leader.
Neither was immediately available for comment.
PTCL's mobile business is under the Ufone brand, while it has a 95 per cent
share of the country's fixed line subscribers.
"The board (Warid Telecom) has been looking for a business partner to add value
to Warid," a second source familiar with the matter said, adding China Mobile
and Etisalat had both expressed interest in acquiring the company.
In 2007, Singapore Telcommunications bought a 30-per cent stake in Warid for
about $758 million. That stake purchase gave Warid Telecom an enterprise value
of about $2.5 billion.
SingTel sold back that stake in January for $150 million and a right to receive
7.5 per cent of the net proceeds from any future sale, public offering or merger
of Warid.
The Abu Dhabi conglomerate also agreed to sell Warid Telecom's Uganda business
to Bharti Airtel in April without revealing the financial details of the
transaction.
Bharti recently agreed to buy the remaining 30 per cent in Warid Telecom
Bangladesh after taking a 70 per cent stake in that business in 2010.
The Abu Dhabi Group, led by ruling family member Sheikh Nahayan Mabarak al-Nahayan,
invests in emerging markets and also has large investments in Pakistan including
Bank Alfalah Ltd, Al Razi Healthcare and Wateen Telecom.