ADGs buyback: With SingTel gone, Warid single again...

On January 29 this week, the Abu Dhabi Group (ADG) - the majority owner in Warid Telecom - announced that it had bought back from Singapore Telecommunication Limited (SingTel) 30 percent of the telcos shares. The stake was sold by the ADG to SingTel earlier in 2007, reportedly for a sum of $758 million at that time.
ADG is a large ME business conglomerate, whose Pakistani business ventures are in sectors such as ICT, banking, energy, real estate, and healthcare. Warids press release on this share sale quoted an ADG representative reaffirming the Groups commitment to Warid and the Pakistani telecom sector, adding that "the Group plans to continue to improve Warid Telecoms operation in Pakistan by introducing new technologies, services and packages."
Meanwhile, SingTel filed a notice in the Singapore Exchange (SGX) on January 29, announcing that its wholly-owned subsidiary SingTel Pakistan Investments Limited had entered into an agreement for the sale of its entire 30 percent stake in Warid to Warid Telecom Pakistan LLC, an ADG subsidiary. SingTel informed shareholders that the transaction would be subject to certain conditions being met, including the approval of certain lenders of Warid.
Sources say that SingTel wasn satisfied with the returns from its Warid investment, despite equity injections during last five years. SingTel informed SGX that this share disposal had followed a strategic review of its Warid investment and future opportunities in Pakistans telecom sector.
SingTel said in its notice that the sales consideration was arrived on a willing buyer, willing seller basis after taking into account Warids past performance and business prospects. However, the transaction details, which show an estimated loss of $186.23 million to the seller, suggest that SingTel wanted out. SingTel will receive $150 million in cash, payable in tranches over three years after transaction completion.
Moreover, the company will also have a right to receive a 7.5 percent share of the net proceeds from any future sale, public offering or merger of Warid.
Yesterday, Moodys rated SingTels move as mildly credit positive, but having no immediate impact on companys rating or outlook. "Despite the fact that SingTel will book a loss of $186 million on the disposal, the deal is credit positive as it absolves SingTel of a guarantee of $90 million thereby reducing its gross adjusted debt by the same amount. SingTel will also be released of its equity undertaking of approximately $51 million," said an analyst Moodys.
Its been eight years since Warids launch, and the brand has maintained a steady presence in Pakistan. The subscriptions have been continuously declining-currently, every tenth subscriber in the market is on Warids network -but thats also the reason why its network quality remains good. Warid is also said to have a solid base of high-net-worth post-paid subscribers - an attraction.
After SingTels divestment, some possibilities emerge, but it is a bit too early to say if Warid is up for grabs. China Mobile Pakistan (Zong) is especially said to have its eye on Warid for some time now, and this recent development may motivate it again. A merger or acquisition in the near future cannot be ruled out as the share disposal consideration includes a provision for SingTel share in any such event.
Perhaps, a cue for things to come could be taken from the ADGs recent history in Pakistan. There have been major management reshuffles at Bank Alfalah and Wateen Telecom in the last two years, which seem to have positive effect on the two entities performance, especially the Banks. Some sources say that the Group may focus more of its attention on Warid now, to transform it into a better shape, and probably talk to M&A aspirants later.
A latest development seems to confirm that possibility. The Groups footprint has now converged into the area of branchless banking after Warid and Bank Alfalah both joined hands to launch their own mobile financial services, whose pilot testing is currently underway. To conclude, it seems that with the control of things firm in its hands, the ADG is looking to turn things around at Warid to be able to compete better.