Bloomberg News

Pakistan Telecom May Buy Mobile Carrier to Boost Pricing

October 28, 2011

(Updates with analyst comments in 10the paragraph.)

Oct. 28 (Bloomberg) -- Pakistan Telecommunications Co., owner of the country’s No. 2 mobile carrier Ufone, may buy another service provider as falling rates damp industry earnings before a planned third-generation bandwidth auction this year.

“I don’t rule out an acquisition,” Chief Executive Officer Walid Irshaid said in an interview. “We are not selling, we are buying.”

The Ufone unit may seek acquisition targets as the company’s focus on fixed-line, high-speed Internet and television services has helped boost broadband customers to almost one million, contributing about 20 percent to total sales, he said. Mobile phone subscriptions surged to more than 100 million in the country of 180 million people last year, according to the telecom regulator.

“Pakistan cellular rates are the cheapest in the world,” Irshaid said at the company’s headquarters in Islamabad yesterday. “This can’t continue. This market has to consolidate, otherwise this will be a losing proposition for every operator.”

The government has said it may auction 3G bandwidth in the year started July 1, without saying how many licenses would be at stake for the country’s five mobile services providers.

“There can’t be five 3G operators when the revenue per user is too low,” Irshaid said. ’’There should be only two or three operators with the better control on prices.’’

Profit Decline

The company’s profit dropped 33 percent in the first quarter from a year earlier to 1.4 billion rupees ($16 million), according to a statement to the stock exchange this month.

Net income fell 28 percent from a year earlier to 8.4 billion rupees in the 12 months ended June 30, down from 30 billion rupees in 2004, the year the government deregulated the telecom market, ending the company’s monopoly.

Cash and equivalents rose to 23 billion rupees as of the three months ended March 31, from 19 billion in the previous quarter, according to Bloomberg data. Pakistan Telecommunications, or PTCL, has made no acquisitions in at least the past 10 years, Bloomberg data show.

’’A potential acquisition in the cellular space will certainly consolidate PTCL’s position and give the company some pricing power,’’ said Furqan Ayub, a research analyst at Karachi-based JS Global Capital Ltd. ’’But before that happens, I foresee competition becoming more stiffer and more pain. The investment environment is a bit uncertain at this point.’’

Company’s shares rose 2.67 percent, the most in about two weeks, to 10.75 rupees at 11:59 a.m. in Karachi.

The carrier, controlled by United Arab Emirates state-owned telephone operator Emirates Telecommunications Corp., has built up its infrastructure to handle as many as 2 million broadband customers, Irshaid said. The capacity may help the company compete with rivals Pakistan Mobile Communications Ltd., Warid Telecom Ltd., Telenor ASA and China Mobile Communications Ltd.

Annual net income will probably increase this year, Irshaid said, without giving a more specific forecast.

’’Absolutely, the turnaround has begun,’’ he said. ’’You will see that in our quarterly and half-yearly results.’’

--Editors: Dave McCombs, Garry Smith

To contact the reporters on this story: Haris Anwar in Islamabad, Pakistan at hanwar2@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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