Telenor Advocates Telcos’ Consolidation in Pakistan

Terming low ARPU as the main cause for not getting high returns and sizeable growth, Jon Eddy Abdullah, Telenor Pakistan’s Chief Executive, urged telecom companies in Pakistan merging/acquiring, even before the launch of 3G in the country.

In an interview with Financial Times, Telenor Pakistan’s chief said that five operators in one market are too many; he wished 3 telecom companies operating at most, just like in many other global market.

Jon Eddy didn’t comment when asked if Telenor’s can be part of any speculation consolidation, however, he did mention that all operators may talk to each other for any possible merger/acquisition.

In response to a question on third generation technology, Mr. Abdullah said the government would need to offer incentives to existing operators for moving towards 3G.

Telenor has invested $2bn in Pakistan since it arrived, but Mr Abdullah said a move to 3G needed to be thought through. “The question comes to basics. We spent $290m on a 2G licence in 2004. We are years away from recouping that investment.”

Telenor had entered into Pakistani market exactly 5 years ago.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK

  • from my stay at Telenor i can tell u one thing .. Whenever the question of acquisition was asked he said its high time that Companies consolidated … i guess Telenor wants to reduce competition … i think government should stop any such deal and let them fight for lower rates … if companies consolidate prices will go up once again

  • “We spent $290m on a 2G licence in 2004”

    Then this is a management problem when they could not see the upcoming technology was arriving but they invested in 2g and now you want to avoid competition.

  • Everywhere in the world when the industry saturates, consolidation takes place. And Pakistan reached saturation quite a while ago.

    Thing is – the sector’s got declining ARPU, and the only way to increase it is by acquiring another company’s subscriber.

    Running off from competition isn’t the main highlight of this article – the point is that the industry has saturated to such an extent it’s not as profitable as it used to (I’m not saying it’s not – just not relatively that lucrative). There were too many a licenses in the industry in the first place, and when the price war kicked in, everything went topsy turvy – the concept of kinked demand curve kicks in here (for all you economics students).

    I’ll say they should consolidate. Atleast that’ll put everyone at ease – although the resulting move may have interesting consequences for whoever decides to acquire.

    This is what I think (you’re free to disagree)

    1) Mobilink shouldn’t acquire – they’ve got a lead of 8m customers already. Besides, an antitrust action can be imposed on them (IF there’s such a thing in Pakistan) if they go ahead acquiring, and everyone will make an issue of it as well.

    2) Zong may be doing well – but it’s 1/3 of the next-biggest operator in terms of subscriber share.

    3) Telenor, Ufone and Warid are more-or-less close together – who would be considered as the main competitors (the relevance factor). Whoever goes for an acquisition in this list will certainly be at a win-win situation.

  • Acquisition was last year’s term, right now, in my opinion, telcos have started looking for merger; unless investor wants to pull money out of telecom business and invest it somewhere else, maybe in gold or construction. Price has to be very low, for such an acquisition.

    We have been rumoring about acquisitions for more than a year now, but nothing has matured yet and the main reason I see is that no one wants to put further money into telco business.

    Saturation is one thing, there are other relating factors (particularly when we talk about Pakistan), which will take companies to end up with mergers.

    Of course, regulator and CCP may think of competition factor and ultimately about the consumer, but hard reality is that customer may suffer in the end. This is not going to be the only disadvantage of mergers, we may see employment crisis as well.

    But for industry, economy, and the inflow of money, mergers are going to be positive sign.

  • It was bound to happen. The telecom sector reached an artificially inflated point – and the bubble had to burst.

    I _think_ after this burst, the situation will normalize and we _might_ see the advent of newer services (or schemes) that cater to the market more effectively. Right now, it’s heavily fragmented and – well – it’s also in a huge mess.

    My $0.02 > £0.01

  • i dont believe a Pakistani would benefit from mergers or collusions of any kind .. i believe government should give them a hard time, let them fight so as to keep the prices low for the consumer.. also remember competition is the best pill that results in efficiency within companies.. if this competition dies i would say these companies would start down sizing and also become huge bureaucracies

  • no acquisition or mergers should be allowed. They’ll hit the consumer in unexpectedly bad ways. Besides, once the companies are merged, the bigger packs will start playing the monopoly game with prices and QoS.

    Look at the bad QoS and lack of new technology even when there are so many competitors in the market. OFC there is the issue of ROI for newer tech, but that doesnt stop them from improving their current QoS. Too bad the governing authority is too incompetent.

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