It has been nearly five months since the Abu Dhabi Group (ADG) bought back the 30 percent Warid Telecom shareholding from SingTel. Now, the Reuters news agency has broken this story that Warid has been put up for sale by the ADG.
Recall that when SingTel announced on January 29 to dispose of its Warid shareholding, it agreed to receive $150 million in cash, along with the right to receive a 7.5 percent share of the net proceeds from any future sale, public offering or merger of Warid. SingTel, which had to book a loss of $186 million on its Warid investment, was clearly expecting ADG to sell all or some of its shareholding soon.
BR Research, in its January 31 column, referred to this as follows: "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. The ADG may focus more of its attention on Warid now, to transform it into a better shape, and probably talk to M&A aspirants later."
It appears that ADG is talking now, or will do so sometime soon. Reuters has quoted its anonymous, informed sources that this likely sale may "draw interest from China Mobile and Etisalat". That possibility is actually consistent with the dynamics in Pakistans five-player mobile telephony market.
Orascoms Mobilink or Telenor Groups Telenor Pakistan may desist from bidding, so as not to become too big for their own good. Besides, these two local operators already have a joint ownership structure at the top, global level. So, it boils down to Etisalat (represented by Ufone) and China Mobile (represented by Zong) which can be the most likely suitors for the hand of Warid in any merger or acquisition scenario.
Both Ufone and Zong are underdogs in the Pakistani cellular market. If either of the two manages to consolidate Warids subscribers and networks into their own, it would guarantee them the second spot in terms of market share; just behind Mobilink the market leader (based on March 2013 PTA statistics). But there is another reason why the two may show great interest in the Warid sale.
Government has announced to conduct 3G license auction within next fiscal, though exact timeline and modalities are awaited. In that context, the ADGs likely Warid sale, and its timing, assumes significance. Besides a largely loyal customer base, Warid is said to be holding on to the largest number of post-paid users in Pakistan, many of whom are high-end users who will gladly pay for premium 3G data services.
Both China Mobile and Etisalat are big international corporations with deep pockets. The two companies are expected to go all-out to secure 3G licenses for their local subsidiaries, for offering faster data services will be the key to survival in post-3G milieu. Besides, the two giants will also feel the need to preserve their respective groups international prestige and reputation - so losing is not an option for them.
So, if Warid is indeed up for sale, expect the two companies to be serious bidders.
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Cellular sector Landscape*
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Rank MNOs Market Net
shares subscribers
(%) (mn)
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1 Mobilink 29.74 36.32
2 Telenor 25.25 30.84
3 Ufone 19.33 23.61
4 Zong 15.41 18.82
5 Warid 10.27 12.54
Total 122.13
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