PTCL chief explains acquisition of Telenor Pakistan
- Says market consolidation will create value as Pakistan's sector is just big enough for three major players
ISLAMABAD: President and Group CEO, PTCL and PTML, Hatem Bamatraf stressed on Thursday that Pakistan’s telecom sector is just big enough for three operators to create value.
Bamatraf was speaking to an audience during an event in Islamabad that was was held after PTCL formally announced its acquisition of Telenor Pakistan.
In a notice to the Pakistan Stock Exchange earlier in the day, PTCL said it has entered into a Share Purchase Agreement (SPA) with the shareholders of Telenor Pakistan (Private) Limited (TPL) for the acquisition of 100% shares for Rs108 billion (roughly $385 million).
While responding to a query from Business Recorder at the event in Islamabad, Bamatraf explained that the sector has seen erosion of value because there are so many players operating in the space.
“Relooking and consolidating the market into three players will actually protect the value,” Bamatarf said.
He said the change in the structure of the market was due since the four companies have not been in a healthy position.
He said he was expecting the approval of the transaction by the regulators to be quick as well, stressing that this is actually a correction to the market.
Telecoms: consolidation on the cards?
“We don’t want to drag it for months,” he said.
Baratarf said that many will benefit from this transaction “but the primary beneficiary would be the customer”.
He added this will lead to technology advancements as well such as 5G, AI, IOT, and improvement in infrastructure.
Revenue and profitability
While talking to Business Recorder, PTCL Chief Financial Officer Nadeem Khan said synergies will be the biggest drivers for profitability for PTCL.
As a group, he said that it is estimating Rs45 billion EBITDA after the Telenor acquisition immediately, which will improve profitability and add to synergies.
“Call it cash flow if you don’t like EBITDA. It will be equal, in just over two years, to the investment of Rs108 billion,” he said.
“We will reduce operating and capital expenditures, and we will be able to serve a much larger customer base, offer much better coverage and quality. Better coverage is going to drive both the topline and EBITDA,” he earlier said in the programme.
On the issue of how payment will be made for Telenor transactions and whether the State Bank will allow such a huge transaction in dollars, Khan said their investors are foreigners so there will be no issue as such, hinting that payments will be made abroad from investors or financiers abroad.
Market share after the acquisition
When this transaction materialises, the consolidated company will command a share of 37% in the cellular mobile operators’ space (adding up market share of Ufone and Telenor as per Pakistan Telecommunication Authority (PTA) data), which is almost equal to Jazz, the current market leader in Pakistan.
Telenor may consider closing operations
Mobilink or Jazz had also acquired another telecom company Warid in 2015 to become the market leader in the country.
On the legal issue whether Ufone and Telenor are allowed to share their respective spectrums, PTCL officials said that it has happened in the past in the case of Jazz and Warid and they don’t see it as an issue.
Another official told Business Recorder that Ufone and Telenor have contiguous spectrum – meaning their respective spectrum comes after one another and there is no company spectrum between them.
He said that this will give better service and experience to the user.
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