Pakistan could be the next destination for Singapore Telecommunications Limited after officials on Thursday named state-owned Pakistan Telecommunications Company Limited as a "possible" investment target."
"The Pakistan Telecom is among those possible," investments for SingTel, said Chief Executive Lee Hsien Yang.
While it evaluates whether to buy a stake in the Pakistan Telecom, Singapore operator has also expressed interest in buying a mobile phone license in Pakistan. Vodafone Group PLC (VOD) and US-based MCI Inc. are among other 33 companies that have expressed interest.
Investment by companies such as Vodafone or SingTel would be a boost for Islamabad, which has failed to attract any significant international investors because of fears of terrorism and political instability, despite a booming economy and one of the world's best performing stock markets.
Pakistan has been looking to sell a strategic stake - as much as 26 percent - of the Pakistan Telecom, the country's second-largest listed company that runs a nation-wide fixed line and international direct dialling network and a mobile phone service in a country of 140 million.
The government also hopes foreigners will invest some US $1.5 billion to upgrade the country's dilapidated telecom infrastructure and that privatising assets such as the Pakistan Telecom will allow Islamabad to pare down its US $34 billion debt.
The government owns 88 percent of the Pakistan Telecom while the rest commands a US $2.5 billion market capitalisation on the Karachi Stock Exchange. The SingTel's market capitalisation stands at US $22 billion.
"Southeast Asia and North Asia have fairly limited potential in terms of buying opportunities for the SingTel," said Barclays Capital analyst Lloyd Ong.
"Pakistan is an extension of its radar screen, but in terms of growth it will be better than what we've seen in the (immediate) region here", he added.
Senior SingTel officials have met Pakistani officials, hoping that the country's Privatisation Commission would accelerate the sale process which has been in limbo since the sale was first announced in 1990s. Goldman Sachs and JP Morgan Chase are advising the Pakistan government.
The sale may even be discussed in Singapore when Finance Minister Shaukat Aziz visits the city-state starting on Friday, sources said.
The Pakistan Telecommunications Co reported a better-than-expected 17 percent net profit growth for year ended June 30 due to a fall in interest payments and higher domestic revenue. The net profit rose to Rs 23.08 billion from Rs 19.81 billion in previous fiscal year.
It plans to add 690,000 new subscribers over next two years to its current four million.
The teledensity in Pakistan for fixed-lines is low at just 2.7 phones per 100 people.
The buying a significant stake in the Pakistan Telecom would be consistent with SingTel's overseas expansion strategy where it has typically sought control of companies, particularly in fast-growing emerging markets.
The SingTel "would want to have a significant role in the business" if it chooses to invest in the Pakistan Telecom, Lee said.
If the SingTel does decide to proceed, investing in the Pakistan Telecom would add another major Asian investment to its portfolio, which now spans Australia, Thailand, Indonesia, India and the Philippines.
The S$20 billion SingTel has spent on acquiring assets has allowed it to become Southeast Asia's largest telecommunication group which earns some 68 percent of earnings before interest, tax depreciation and amortisation from outside Singapore.
As for mobile phone license, Pakistani officials will meet interested parties on February 18, during which terms of the licenses on offer will be unveiled. The licenses are expected to be awarded in March.
"We've put in an expression of interest for the two licenses on offer (but) it's much too early to say if we would like to participate in that," Lee said, adding: "It costs a relatively small amount to express an interest".
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