to sell a controlling stake in Warid Telecom in a deal that would create the largest mobile phone operator in the country.
The company would not reveal the size of the stake or the value of the prospective deal, but said it was looking to offload a sizeable shareholding along with management control. In July 2007, the Abu Dhabi Group sold a 30 per cent stake in Warid Telecom's Pakistani network for US$758 million (Dh2.78 billion) in a deal that valued the whole company at $2.9bn.
Sources close to the investment group suggested Warid's value had shrunk by between 30 and 40 per cent, meaning the company is worth about $1.8bn. It has also recently sold a 51 per cent stake in its two largest African networks to India's Essar, and 70 per cent of its Bangladeshi network to Bharti Airtel. The Abu Dhabi Group, the largest shareholder of Warid Telecom, is shifting its investment strategy from managing telecoms assets to acting as a passive investor.
The company chairman is Sheikh Nahyan bin Mubarak, the Minister of Higher Education and Scientific Research. Warid Telecom is the third-largest mobile phone operator in Pakistan, with about 8.5 million subscribers and 19.4 per cent of the market. But industry analysts say the market has become crowded, with five major operators driving prices down and shrinking profit margins.
"Every operator in Pakistan is looking for consolidation," said Bashir Tahir, the chief executive of the Abu Dhabi Group. "We are talking to every operator and we know they are also talking to each other."
Mr Tahir said he had been negotiating with Pakistan Telecommunication Corporation (PTCL), the country's largest telecoms company, and Telenor, the incumbent operator in Norway that owns a subsidiary in Pakistan. "[PTCL] has shown keen interest in Warid Telecom," he said. "We are talking with them and I'd be happy to invest with them, but the bases have to be clear."
PTCL owns the Ufone mobile brand and is managed by Etisalat, the UAE's largest telecoms company, which owns a 26 per cent stake in the operator. If a deal is struck, the newly merged company would immediately become the largest mobile phone operator in Pakistan, controlling at least 40 per cent of the market.
"Whenever a deal happens, the operator will get a big lead on the others," said Ali Tahir, the group chief commercial officer of Warid Telecom.
"We'd rather have a slice of the bigger pie." Pakistan has more than 97.6 million mobile phone subscribers and a penetration rate of 59.03 per cent, figures from the Pakistan Telecommunications Authority showed. It is forecast to grow to 130.6 million subscribers by 2013, according to IE Market Research. The industry generated revenues of 212.42bn Pakistani rupees (Dh9.18bn) in 2008, while the monthly average revenue per user rate is about 185 rupees, the regulator said. Ali Tahir, the son of Bashir Tahir, said the economic and political situation in Pakistan over the past two years had made it difficult to grow Warid Telecom.
"Liquidity in this market has dried up," he said. "Inflation has increased and the [Pakistani rupee] has depreciated by up to 40 per cent.
"While we have maintained market share and revenues, it has been a challenge because we have borrowed in dollars."
PTCL would be a likely acquirer of Warid Telecom, said Ahmed Nabil, the chief operating officer at Javed Omar Vohra, a brokerage in Karachi. Although Ufone holds about 19 per cent of the mobile phone market, the company needs a boost as its monthly subscriber gains have slowed and its profit outlook is being impaired by its rivals, Mr Nabil said.
"For [PTCL], it makes sense to take over other operators to expand their operation base and add revenue sources," he said. The Abu Dhabi Group's investment portfolio, which it says is worth more than $10bn, includes a number of banking and construction businesses, predominantly in Asia and Africa.
It has been involved in Pakistan since 1997, when it purchased Bank Alfalah, then a three-branch bank that has now grown into the fifth-largest financial institution in the country.
"If you are a passive investor and want to manage a telecoms company, it is very difficult to do," Mr Tahir said. Any deal is likely to include a "put clause" that will give the Abu Dhabi Group the option of selling the rest of its stake at a set price within three years, he said.
The investment bank Goldman Sachs is advising the Abu Dhabi Group. Other advisers involved in the negotiations are JP Morgan Chase for SingTel and Citibank for Telenor, Mr Tahir said.
Source: http://zawya.com/Story.cfm/sidZAWYA20100204045101/Abu%20Dhabi%20Group%20to%20sell%20Pakistan%20stake
