In a significant move within Pakistan’s telecom sector, Telenor Pakistan has concluded its long search for a buyer with a 100% equity transfer to Pakistan Telecommunication Company Limited (PTCL) for a cash-free, debt-free sum of PKR 108 Billion. This strategic shift aligns with Telenor’s exit from lagging Asian markets, marking a pivotal moment in the country’s telecom landscape.
Telenor’s Exit Strategy:
Telenor’s departure stems from challenges such as the declining Average Revenue Per User (ARPU), standing at $0.8/month, and spectrum-related issues. Targeting low-income rural populations led to significant growth initially, but the adoption of 3G/4G services and OTT apps eroded Telenor’s dominance in voice and SMS services. Regulatory hurdles, spectrum and license fee issues, macroeconomic challenges, and unfavorable market conditions culminated in Telenor’s decision to exit Pakistan.
PTCL’s Strategic Move:
PTCL, backed by the e& group, strategically acquired Telenor Pakistan, adding substantial growth potential to its portfolio. Ufone’s struggles in the 4G market, delayed entry, and reliance on 3G technology paved the way for this acquisition. Post-merger, Ufone’s subscriber base is expected to surpass 70 million, bringing it on par with the industry giant, Jazz.
The merger unlocks numerous synergies, with adjacent spectrums enhancing bandwidth, network capacity, and service coverage. Ufone gains access to Telenor’s extensive telecom tower network, providing nearly 50% control of the country’s tower market. PTCL’s fiber infrastructure, spanning 60,000 km, positions the group as a dominant force in the infrastructure segment.
The acquisition, financed through a $400 million loan reportedly sought from the International Finance Corporation (IFC), is expected to yield substantial financial benefits. The strategic move is forecasted to result in increased revenue, improved services, and operational efficiency, aligning with the industry’s goal of strengthening market players.
While industry experts predict improved margins and increased Average Revenue Per User (ARPU), concerns about potential price hikes arise. The reduced competition, with only three major players remaining, may lead to price increases, but increased profitability could fuel technological advancements benefitting consumers in the long run.
Challenges and Government Role:
The prevailing low ARPU, high taxation, spectrum pricing in dollars, and substantial right-of-way charges are cited as factors deterring foreign investment. With the departure of reputable investors like Telenor, there’s a call for policy revisions to ensure a more favorable environment for telecom companies.
Microfinance Bank and Easypaisa:
Contrary to speculations, Telenor Microfinance Bank and Easypaisa remain unaffected by the acquisition. The leadership and ownership structure of Telenor Microfinance Bank, jointly owned by Ant Group (Alibaba) and Telenor’s Norwegian parent company, remains intact.
In conclusion, PTCL’s acquisition of Telenor Pakistan signifies a pivotal moment in the country’s telecom history, promising operational synergies, financial growth, and potential challenges that necessitate strategic responses from industry players and policymakers alike.