Telenor offloads Pakistan ops to e& unit

The Norwegian telco group said it has done a cash- and debt-free deal that values Telenor Pakistan at 5.3 billion kroner (about US$500 million), comprising the repayment of NOK3.5 billion worth of intercompany loans and NOK1.8 billion in reduced interest-bearing liabilities, including leases.

The industry has been expecting a sale of Telenor Pakistan for some time, its outgoing parent having been mulling its options for a year. In October group chief executive Sigve Brekke admitted that he had "yet to come up with a solution" for the Pakistan business, but pledged to make a decision before the end of the year. He was true to his word.

"We systematically considered all alternatives during the strategic review process and believe that, following a sale, the market will be better served by a strong local champion," said Petter-Børre Furberg, recently-appointed Head of Telenor Asia. "Our strategy in Asia is to build number one positions in the markets we operate, with scale as a pre-requisite for value creation and profitable growth."

Telenor is in a fairly strong position in Pakistan, but is not the leading player in the market. According to data from the Pakistan Telecommunication Authority (PTA), Pakistan Mobile's Jazz is the biggest operator in the country with a market share of 37% as of October. Telenor ranked third, its 24% share putting it just behind China Mobile's Zong, which claims 25%.

Clearly that standing does not fit Telenor's brief of holding number one positions in all its Asian markets. However, presuming it gets regulatory approval for the deal it ha just inked, a merged Telenor and Ufone, the brand name used by PTCL's mobile arm, would be neck-and-neck with Jazz at 37%.

That could certainly shake up competition in the market.

PTCL's shareholders will certainly hope so. The firm is still majority state owned, but United Arab Emirates-based e& is is largest private shareholder with a 23% stake, according to last year's annual report.

E& has been on something of an acquisition spree of late, in line with its stated ambition of extending its footprint into new markets. The company made it clear that it is looking for investment in Africa, Asia and Europe and it has already had its chequebook out, picking up PPF Group's telecoms operations in Bulgaria, Hungary, Serbia, and Slovakia in August for €2.5 billion. The telco has garnered a lot of attention for its acquisition of a sizeable stake in Vodafone too.

While Pakistan is not a new market for e&, this deal is clearly part of the same strategy. It gives the company the chance to build up a strong market leader in the country, or at least to challenge for that role.

"By selling to the country's largest integrated ICT company, we believe this consolidation move would help strengthen Pakistan's telecoms sector, creating opportunities in new areas of growth to the benefit of consumers in Pakistan," said Brekke.

He just needs regulators to see it in the same way. Telenor aims to close the deal next year.