ISLAMABAD: The Pakistan Telecommunication Company Ltd (PTCL) said on Thursday it has signed a share purchase agreement with Telenor Pakistan to buy 100 per cent of its shares based on an enterprise value of Rs108 billion ($380 million).

The deal, structured on a cash-free, debt-free basis, is subject to regulatory approvals and customary closing conditions, the PTCL said in a statement. PTCL’s share price rose 8.3 per cent on Thursday.

The company said it is “actively working towards a smooth transition process to ensure minimal disruption for employees, customers, and other stakeholders”.

Hatem Bamatraf, president and group CEO of PTCL and Ufone, hoped the deal would result in “enhanced value for our customers and stakeholders as they are the ultimate beneficiaries of this transaction”.

However, a Telenor Pakistan executive, requesting anonymity, observed that it was not a good sign that a foreign investor was leaving the country, apparently due to difficult economic conditions. Besides, some Telenor employees might be laid off because of the deal, he said.

PTCL, which holds 100pc stake in Ufone and U Microfinance Bank, is 62pc owned by the government of Pakistan and 26pc by the UAE telecom operator Etisalat by e&.

Telenor Pakistan, launched 18 years ago, has 45.2 million customers, according to the Pakistan Telecommunication Authority (PTA). This suggests that Ufone, which has 25.2m subscribers, will have over 70.4m users after the deal, almost equal to those of Jazz, which acquired Warid Telecom some eight years ago.

‘Second-best alternative’

Norway’s Telenor has been restructuring its Asian businesses, building bigger units in Thailand and Malaysia via local mergers, and had said it hoped to decide on a solution for the Pakistan business by year-end.

“We also tried to do a merger in Pakistan, but we didn’t manage to get that, and when we saw this wasn’t happening, the second-best alternative was to arrange a sale,” Telenor CEO Sigve Brekke told Reuters.

“It was a combination of not getting the structure in place, and value. So, we found a sale was better for our shareholders,” he added.

In the first nine months, Telenor Pakistan contributed 2.6bn kroner (around $247m) in service revenue and 1.4bn kroner ($133m) in earnings before interest, tax, depreciation and amortisation (EBITDA) to the Norwegian group.

Telenor said the aim is to close the deal with PTCL during 2024. The sale was not estimated to have a significant impact on financials for 2023, it said, according to Reuters.

Digital connectivity

Meanwhile, caretaker IT Minister Dr Umar Saif hoped the PTCL’s acquisition of Telenor operations in Pakistan would strengthen digital connectivity and contribute to the overall growth of the telecom sector.

In a meeting with officials of both companies, Dr Saif said the IT ministry was committed to enhancing telecom services, focusing on improving quality and accessibility across the country.

He asked telecom companies to proactively take measures to deliver superior services to consumers, emphasising the sector’s significant contribution to the nation’s progress. He also announced that spectrum auctions would be held soon.

Published in Dawn, December 15th, 2023