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Cellular companies’ merger to diminish govt’s 5G auction plan
LAHORE - The much-hyped and talked about merger between the two telecom companies would end up in creating monopoly of one company that would drastically discourage healthy competition and would dent telecom industry by compromising the customers-oriented policies and lay-offs in cellular sector. Moreover, this merger has diminished the government’s plan of auctioning the remaining 3G-4G and upcoming 5G spectrums.
On November 26, the CEOs of Mobilink and Warid announced in a press conference that both the companies stand merged and would be eventually absorbed into one entity. Apparently, the decision has been taken to benefit the 45 million subscribers of the two companies. Yet, however, behind the scene accounts narrated by telecom insiders tell a different story altogether. The market sources believe, in the name of so-called merger, a stage has been set whereby one company draws the maximum benefit and would enjoy monopoly in the telecom company. “I really wonder if this really is a merger, in the first place. A merger allows two companies to come together to form one united entity. But in the case of Mobilink and Warid, the entire stage is set to favour Mobilink and Warid would get vanished. Given the scenario, we can safely say that a mega monopolistic arrangement is in the making under the direct patronage of the government authorities that are watching this entire episode as a silent spectator,” commented a telecom insider. The source described the situation as a free-for-all opportunity for the Mobilink at the cost of destroying the telecom industry. As per the merger agreement, Mobilink will acquire 100 % shares of Warid. In this backdrop, huge lay-offs at both the telecom companies are feared that would scale-up unemployment and create a situation of uncertainty.
According to PTA officials, all telecom operators have communicated to Pakistan Telecommunication Authority (PTA), stating that the cellular mobile operators (CMOs) had committed major investment in the NGMS auction held in April 2014.
“However, we regret to inform that all the promises made during the auction process remain unfulfilled till date,” sources quoted the cellular companies as having conveyed to the state-run telecom regulator.
“We through this letter once again want to clarify that it might not be possible for the existing CMOs to commit any investment in the spectrum auction unless our problems are addressed on priority basis”, the telecom companies have conveyed, according to sources.
The Mobilink parent company Vimpel Com last month had announced the Mobilink’s acquisition of Warid Telecom. Mobilink will first acquire 100% of Warid’s shares in consideration for the Dhabi Group shareholders acquiring approximately 15% of Mobilink’s shares.
Mobilink Chief Executive Jeffrey Hedberg will become the CEO of the combined business, which will serve 45 million customers in Pakistan, giving it a substantial lead in terms of market share. According to reports, the board of the new company will consist of seven directors, of whom six will be nominated by Vimpel Com and Global Telecom Holding (GTH) and one nominated by the Dhabi Group shareholders.
The merger is expected to create capital and operating expenditure synergies of about $500 million. The combined revenue of both companies for the year leading to September 2015 was $1.4 billion. The transaction is expected to close within six months, subject to obtaining approvals from the relevant authorities in Pakistan.
Telecom Politics in place.
I do wonder how much this merger will affect the other players though. I guess we’ll find out next year.