China Mobile answers Pakistan's
call By Syed Fazl-e-Haider
QUETTA, Pakistan - China Mobile
Communications Corp has entered an agreement with
emerging-markets telecom operator Millicom
International Cellular SA to buy 88.86% of the
outstanding shares of Paktel Ltd, a
mobile-communications operator in Pakistan.
According to the deal, China Mobile, a
state-owned enterprise, will pay about US$284
million, which includes the repayment of
inter-company debt, to Millicom if the transaction
is completed. The completion of the transaction is
subject to certain regulatory
approvals and procedures. If
such approvals are obtained, completion is
expected at the end of next month.
The
transaction is considered the first real Chinese
strategic investment in Pakistan's
cellular-telephone market since Beijing began
encouraging overseas expansion by leading state
companies, a move aimed at developing firms
capable of competing with multinationals.
China Mobile's $5.3 billion bid for
Millicom International Cellular fell apart last
year, because Millicom said it had been unable to
agree terms.
According to some sources,
challenging business conditions and interference
issues forced Millicom to sell its Pakistani unit
with no return on its investment. Millicom is an
international investor in cellular telephony
services, particularly in emerging markets. Its
assets comprise cellular operations in Latin
America, Asia and Africa. Moreover, it has five
high-speed wireless data businesses. However, the
company has been selling off some of its
operations because of financial difficulties.
Pakistan's telecom market has become
highly competitive in the provision of services.
In fact, the operators of Paktel had not planned
their marketing strategies in view of rising
competition in the already overheated mobile-phone
market, which became further charged with the
entrance of Telenor and Warid. Paktel was already
facing stiff competition with Mobilink and Ufone.
Millicom had decided to exit the Pakistani market
last November after it had gained additional space
in the 1,800-megahertz spectrum, but the grant was
not permanent. Additionally, authorities had
refused a request to delay payment of a $29
million license installment. About 10 entities
expressed interest in Paktel after that.
Paktel is the fifth-largest
mobile-telephony operator in Pakistan. The company
had 1.5 million subscribers as of September 30,
2006, up 62% year on year. It was the first
company to be granted a license to provide
cellular-phone services in Pakistan. It was Paktel
that launched cellular technology and introduced
mobile telephony in the country. Paktel GSM was
launched with a subscriber capacity of more than 2
million, and its total coverage will be expanded
to 150 cities and towns across Pakistan.
The sale of its stake in Paktel to China
Mobile will allow Millicom to focus on the 16
markets in which it already has strong positions.
Shares of Millicom last Friday reportedly closed
at $67.65 on the Nasdaq, up 2.3%, after reaching a
year high of $68.09 earlier in the day. The shares
have more than doubled from their July 3 low of
$31.71. China's deal with Millicom is likely to
have a major impact on the overall market.
In terms of its market value, China Mobile
is currently the largest among all the
overseas-listed Chinese companies and among all
the telecom carriers in Asia. Established in 2000,
it has a registered capital of 51.8 billion yuan
($6.5 million) and assets of more than 400 billion
yuan. It is the primary telecommunications
provider in China. It fully holds the equity of
China Mobile (HK) Group Ltd, which established
wholly owned subsidiaries in 31 provinces in China
and went public on the Hong Kong and New York
bourses.
China Mobile is part of the
international computer network and is authorized
to provide global networking services. The
corporation is the largest GSM (Global System for
Mobile) communications provider in the world,
having a network covering all the cities and more
than 96% of the rural towns in China. China Mobile
provides roaming service with the cooperation of
108 operators in 59 countries and has more than 66
million customers.
During the past five
years, Pakistan's telecom market has witnessed a
transition from a regulated state-owned monopoly
to a deregulated competitive structure. There are
five gateway exchanges in Pakistan's international
network - two in Islamabad and three in Karachi.
International telephone, telex, data and video
services operate through these earth stations. The
government has plans to increase fixed-line
teledensity from 2.5% at the end of 2002 to 7%
(about 10 million fixed lines) by 2010. The target
can be achieved by installing up to a million
additional lines annually.
Pakistan's
telecommunications infrastructure, including its
satellite and submarine networks, has seen a
change over a period of 15 years. According to a
report on Pakistan's telecommunications
infrastructure, the number of fixed exchange lines
in service in the country has increased more than
fivefold. The majority of working lines are in
urban areas, but 70% of Pakistan's population is
rural. A more balanced distribution needs to be
developed for the longer term.
It is worth
mentioning that China Mobile also made a bid last
year for a stake in Pakistan Telecommunications
but lost out to Emirates Telecommunications.
Syed Fazl-e-Haider,
sfazlehaider05@yahoo.com, is a Quetta-based
development analyst in Pakistan. He is the author
of six books, including The Economic
Development of Balochistan, published in May
2004.
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