Global Insight Perspective | |
Significance | TeliaSonera has entered into two new markets in Asia. |
Implications | The acquisitions will give the group exposure to tens of millions of potential subscribers. |
Outlook | TeliaSonera will face more competition in Cambodia than Nepal, which is currently a duopoly. |
TeliaSonera has announced that it will acquire a 51% stake in TeliaSonera Asia Holding Group from Visa Group, which will continue to hold a 49% interest in the holding. The US$484-million cash transaction will give TeliaSonera:
- an 80% stake in Spice Nepal, which, according to TeliaSonera, had 1.6 million subscribers and 41% of the Nepalese market in August 2008; and
- a 100% stake in Applifone, which, according to TeliaSonera, had 97,500 subscribers or 3% of the market by the same period.
The Scandinavian group is pitching the acquisitions as an extension of its Eurasian growth strategy. According to Global Insight data, entry into the Cambodian and Nepalese markets will give it access to populations of 14.7 million and 28.76 million respectively at the end of 2008. TeliaSonera will face the following competitive environment in these two markets:
- Cambodia: the locally owned Cambodia Advanced Communications; Millicom-controlled CamGSM; TM International-owned TM International Cambodia, and Shincorp-controlled CamShin. All of these have GSM licences, as does Sotelco, in which VimpelCom recently acquired a 90% stake (see Cambodia: 22 July 2008: VimpelCom Acquires 90% of Cambodia's Sotelco for US$28-mil.) South Korea's SK Telecom also has a CDMA licence through SLD Telecom. We estimate that at the end of 2007 there were 2.58 million subscribers in Cambodia, the bulk of which were accounted for by CamGSM (1.65 million), CamShin (0.47 million) and TM International Cambodia (0.31 million).
- Nepal: While Cambodia has multiple operators, the larger of the two, Nepal, has a mobile duopolyof Nepal Telecommunications Corporation, which as of 14 January 2008 had 1.49 million customers, and Spice Nepal, which had 1.01 million. As such, mobile penetration was well below 10% by that period.
Outlook and Implications
- Beyond Eurasia: TeliaSonera's acquisitions in Cambodia and Nepal underscore the group's commitment to expand beyond its core regions. Like other groups, TeliaSonera is not necessarily going to target assets in neighbouring markets to its current footprint, rather where opportunities for growth lie. The group will be able to utilise the experience it has gained in Central Asia in providing mobile services to low-income users.
- M&A to Continue: TeliaSonera was itself the target of France Telecom, but this deal, like the attempted tie-up between MTN and Reliance, never happened. While a number of issues, including disagreements over price and regulatory concerns, can stymie such large-scale deals, smaller-scale M&A will continue, particularly in the emerging markets. Our monthly review of M&A provides analysis of past and upcoming deals (see World: 11 September 2008: Monthly M&A Review—August).