SingTel to Acquire 30% Stake in Warid Telecom for US$758 mil.

SingTel, South-East Asia's leading mobile operator, yesterday announced that it had agreed to acquire a 30% stake in Warid Telecom, Pakistan's third-largest mobile operator, for US$758 million. The deal gives Warid, which is owned by the private Abu Dhabi Group, an enterprise value of US$2.9 billion. Industry sources said SingTel was up against MTN of South Africa and Britain's Vodafone Group for the Warid stake. "SingTel has made substantial investments in markets with high growth potential in South Asia, such as India and Bangladesh. Warid Telecom in Pakistan is a natural fit," said SingTel’s Group chief executive officer (CEO) Chua Sock Koong, adding: "We see strong upside in terms of the company’s performance and look forward to its continued contribution towards the development of mobile communications in Pakistan."

Outlook and Implications

• Warid's Market Position: The deal will enable SingTel to enter Pakistan's fast-growing telecoms market after a failed bid to U.A.E.-based operator Etisalat for a stake in Pakistan Telecommunication Co Ltd (PTCL) in 2005 (see Pakistan: 14 April 2006: Etisalat Obtains Management Control of PTCL). Warid is well positioned in Pakistan's mobile market, being one of the fastest growing players. In just two years from its commercial launch in 2005, Warid has acquired nearly 9.7 million mobile subscribers, representing an estimated market share of 16.6%, and making it the third-largest mobile operator in Pakistan, as of April 2007. It competes with Mobilink, now a 100%-owned subsidiary of Egypt-based Orascom Telecom, Ufone (part of PTCL), Norway's Telenor, Paktel and Instaphone. Facing strong competition from Warid and Telenor, which also entered the market in 2005, the top two players Mobilink and Ufone have both seen declined market share.
• Mobile Growth in Pakistan: The mobile subscriber base in the country marked 58.4 million at the end of April 2007, as compared with 29.6 million at end-April 2006, showing year-on-year (y/y) growth of almost 100%. During the fourth months between January and April this year, a total of 10.1 million subscribers were added—a monthly average addition of 2.5 million. With a comparatively low mobile penetration rate of 37.6% (at end-April), and a strong regulatory regime, the Pakistani mobile market still presents significant growth opportunities and has recently attracted sustained interest from international telecoms operators. For instance, China Mobile, the world's largest mobile operator by subscribers, this year acquired 100% of Pakistan's fifth-largest mobile operator Paktel (now named CM Pak) and has embarked on significant network expansion at its unit (see Pakistan: 1 June 2007: Ericsson, Alcatel-Lucent Wins GSM Network Contract from China Mobile Pakistan).
• SingTel's Investment Strategy: The deal is in line with SingTel's overall strategy of investing in high-growth regional mobile markets, as it faces stiff competition in its home market, where mobile penetration has exceeded 100%. Ms Chua, who succeeded Lee Hsien Yang as group chief executive in April this year, has previously stated that, under her leadership, the group will continue to make sensible regional investments, including looking at new investments as well as raising the stakes in existing regional associates (see Asia-Pacific: 22 September 2006: New SingTel CEO Reaffirms Investment Strategy in Regional Mobile Markets). SingTel already owns 30.47% of the top Indian mobile player Bharti Airtel, 35% of Indonesia's leading mobile operator PT Telkomsel, 21.4% of Thailand's largest mobile operator Advanced Info Service, 44.53% of Globe Telecom in the Philippines, and 45% of PBTL in Bangladesh, as well as 100% of Australia's Optus. Including Warid, SingTel, together with its associated companies, will have a major presence in eight regional mobile markets, with a total of more than 130 million subscribers.