Global Insight Perspective | |
Significance | Norway's incumbent telecoms operator has won the Serbian government's auction for Mobi 63. |
Implications | It outbidTelekom Austria's mobilkom and Egypt's Orascom Telecom, which were the other two bidders shortlisted to participate. |
Outlook | The move expands Telenor's footprint in the Balkans, and will enable the company to create synergies across its Central and Eastern European (CEE) operations. |
Telenor bid 1.51 billion euro (US$1.93 billion) for Serbia's second-largest mobile operator Mobi 63, which secured the Norwegian telecoms group a 10-year renewable licence for GSM 900/1800 and UMTS frequencies. Telenor not only won the mobile licence, but also Mobi 63's existing assets; these include a customer base of approximately 2.5 million (at end-2005), including 2.1 million active customers. Telenor's bid exceeded rival offers made by mobilkom and Orascom Telecom (see Serbia: 27 July 2006: Mobi63 Tender Attracts Three Bidders Before Auction Begins). The starting price was 800 million euro (see Serbia: 1 May 2006: Serbian Government Launches Tender for Mobtel and 22 May 2006: Government Shortlists Nine Bidders in Mobtel Tender).
Telenor will take over Mobi63 from the Serbian government, which owned a 70% stake in the cellco, and a group of Austrian investors led by Martin Schlaff, with a 30% stake. Formerly known as Mobtel, the government created Mobi 63 in April this year, after the operator’s mobile licence was revoked as a result of alleged illegal dealings by the company's previous owners, the Shlaff-led investors. These sold the operator’s licence in the UN-administered province of Kosovo to the telecoms company Mobikos, owned by businessman Ekrem Luka, without seeking prior government approval. The government then claimed that the sale threatened national security (see Serbia: 30 December 2005: Serbian Government Cancels Mobtel's Wireless Operator Licence and 13 January 2006: Serbian Government Takes Over Mobtel's Ownership).
Outlook and Implications
Balkan Hub: Telenor first entered the Balkan region more than 10 years ago, and currently has mobile operations in a number of neighbouring countries. The acquisition of Mobi 63 will allow the Norwegian group to create a strong operational hub in the Baltic region along with long-term synergies among its Balkan units. Telenor operates ProMonte GSM in neighbouring Montenegro and Pannon in Hungary. Montenegro has two mobile phone operators: market leader ProMonte, controlled by Norway's Telenor; and Monet, owned by Hungarian incumbent Magyar Telekom (which is in turn controlled by Deutsche Telekom) (see Serbia: 17 October 2006: Montenegrin Mobile Penetration Tops 100% in September).
High-Growth Market: With its existing Balkan presence, Serbia fits within Telenor's geographical strategic scope. Telenor forecasts that 100% of the Serbian population will have mobile phones by 2010, compared to a current mobile–penetration level of 65%, and that Mobi 63's market share will exceed 50%. Mobi 63 is Serbia's largest cellco after MTS 064, owned by state-controlled incumbent Telekom Srbija. The company made an estimated 233 million euro in revenue in 2005, with an EBITDA (earnings before interest, tax, depreciation and amortisation) margin of about 53%. Its full-year EBIT stood at 96 million euro, while capital expenditure (capex) reached 44 million euro.
Mobi 63 is debt-free. The company has around 950 employees. Its market share stood at 45% at end-2005. Telenor plans to invest substantially in its new Serbian unit, and forecasts that its capex as a share of sales will exceed 20% for the first three years. In the medium term, Telenor anticipates the capex ratio to fall to less than 12%.
It expects ARPU to decline to 9 euro per month in the medium term, from 10.40 euro in 2005. ARPU generally falls as market penetration grows, as competition pushes down mobile service prices. According to Telenor forecasts, Mobi 63's EBITDA margin will fall to 45% in 2010 from 53% in 2005, in relation to its market-share expansion plans.