After just three years of going public, Wateen Telecom Limited (KSE: WTCL) went private; back to its UAE-based majority shareholder, Warid Telecom International (WTI). Last week, the KSE board approved WTIs voluntary delisting request dated March 28, where the latter will buy back, under delisting regulations, Wateens ordinary shares listed on the three bourses at a minimum price of Rs4.50.
Wateens management is expected to call an extraordinary general meeting very soon, to seek its shareholders approval for the voluntary delisting of the Companys shares.
WTIs latest letter to the KSE, dated September 19, indicates that the ordinary shareholders may get a share price of exactly Rs4.50. That marks a significant cut from the initial offering of Rs10 per share, but still offers a premium over the scrips last trading value.
Apparently, Wateen is going private for the same reason it went public. The grapevine during its IPO days suggested that Wateen needed equity injection for debt management, and not capital expenditures. Three years later, the purpose of delisting is unequivocally financial restructuring, announced by the sponsor itself in March:
"WTI has assessed the position and believes there is no longer any equity value in the business for existing Wateen shareholders; and that without significant restructuring, which can only be executed if the business is taken private, the business will face an uncertain financial future which is likely to result in the crystallisation of a substantial shortfall for creditors."
The sponsor-which is part of the Abu Dhabi Group and now fully owns Warid Pakistan-sounded confident that ordinary shareholders will get a good deal, given Wateens woes. "WTI believes that the de-listing provides the shareholders with an exit from the business at a return of value which is in excess of that which they would receive on an orderly disposal of the business."
There are questions as to whether Wateen-a Company that holds licenses in key telecom segments and owns vast fiber optic infrastructure and connectivity networks-would be able to straighten out its financial issues. The Companys balance sheet is said to be saddled with an outsized amount of debt. It had declared an after-tax loss of Rs1.71 billion for the nine-months ended March 2013.
Wateens business prospects currently offer a mixed picture. While business is said to have improved in segments like long distance and international telephony as well as carriers business, the Wimax broadband services are bleeding the Company in a competitive market of low customer loyalty. But given the right focus and investments, Wateen can give other market participants a serious run for their money.
In this context, all punditry is now focused on whether the sponsors fresh equity shots can stand the test of time for a revival in Wateens fortunes.
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