Telco consolidation

Online rumours started making rounds last month that Mobilink, the top-ranked operators in terms of total subscribers, might be interested in buying Warid, the last-ranked operator. As with many corporate rumours, there seems to be little that is credible in this particular case at this point in time.
But there is definitely merit in the benefits a potential Warid acquisition can offer to top telco’s in the country. The Abu Dhabi Group (ADG) has certainly shaped Warid into a more attractive prospect when compared to the entity it was in 2013, the year Warid was put up for sale but saw no result on account of low valuations offered by a couple of bidders. Two years on, it’s a different landscape altogether.
Warid had nearly 10 million cellular subscribers as of July end. That’s roughly 9 percent of the pie, but most of these subscribers are claimed by the management to be high-ARPU customers, helping Warid soak up and hold on to bulk of the post-paid segment.
Additionally, Warid has built a sound presence in the two-player 4G LTE market, where its 0.12 million LTE subscriptions are competing well with 0.13 million 4G subscriptions of Zong. Warid is neck to neck with Zong despite a six-month late start back in December 2014.
Put simply, ADG wouldn’t be desperate to find a suitor for Warid, which seems to have a way forward after sulking on the sidelines for some time following the spectrum auction in April last year. Data on Warid’s financials are hard to come by, but its supposedly highly-levered capital structure may not be a problem if top line starts churning faster on the back of lucrative LTE tariffs.
Warid’s coming back to life offers other market participants an alternative to the costly and long-drawn-out journey of organic growth. As identified by other market observers, an operator in Mobilink’s position would, through Warid acquisition, not only beef up its cellular subscription leadership but also get their hands on a running 4G LTE network. Unlike Zong that has both 3G and 4G licenses, Mobilink only has a 3G license, and very soon it may feel the need to enter this segment as it develops further. But the question is where do things go from here? As with all seasoned players with a strong hand, Warid’s sponsor will be better off if it remains open to possibilities: neither seek a hurried sale nor reject any proposal outright. After all, Warid seems on path to recovery, and with passage of time, more of it will help better its valuation. That should be on the mind of those just mulling over the acquisition idea.