Zong set to acquire Warid Telecom

The News 21 Sept 2013 LAHORE: Zong – also known as China Mobile Pakistan - has confirmed that it is seriously considering the acquisition of Warid Telecom, the News learnt on Friday. For this purpose, Dubai based investment banking firm MAS ClearSight has been asked to evaluate the deal and assist Zong during the buyout process. “We are looking into Warid very seriously and it does make a lot of business sense for us to go with the deal,” said Sikander Naqi, Zong’s Chief Public Relations Officer. “Zong has grown exponentially in last three years and today we stand as the fastest growing network in Pakistan with over 22 million customers and are continuing to grow on a very fast pace. Our parent company, China Mobile has strong financials to go through with this deal and with $ 70 Billion cash in hand, we already have been given a mandate to go forward with the bid and we are anxiously waiting to see how it turns out.” Buying Warid could be a good idea for China Mobile, especially at a time when new customer acquisitions have become harder. This is due to tighter regulatory measures for selling new SIMs and increased tele-density. In the absence of organic growth, the only way for China Mobile to leapfrog the established operators in terms of subscriber numbers is to make acquisitions. A Warid official said that a three to four weeks deadline has been put in place to file the financial bid. He said a number of companies have shown interest in the company on the basis of its strong infrastructure and dedicated customer base in Pakistan. It seems that other bidders, such as Mobilink, Etisalat and Ooredoo (formerly QTel), are also seriously bidding this time despite previous failed attempts. Zong, with around 23 million subscribers, is currently the number four operator in Pakistan and is trying to get to the number three position in the five players market. If the deal goes through, Zong will jump to second position with more than 34 million subscribers, just 2 million short of Mobilink. Moreover, Warid is acknowledged to have among the best youth and post – paid subscriber bases. Its youth brand Glow and Post - paid are the bright spots among the very low average revenue per user (“ARPU”) customer base for mobile operators in Pakistan. These two segments are also the ones expected to make the most of the upcoming 3G technology, for which licenses are expected to be auctioned soon. The use of 3G services will significantly boost user ARPU. Therefore, it makes sense for operators to capture as much of the potential data customers as possible, in advance of the advent of 3G. This is another reason why China Mobile is keen on successfully bidding for Warid. With a substantial acquisition war chest and an ambition to expand its international business in Pakistan and the region, China mobile appears to have the will and resources to make a serious bid in Warid Telecom’s upcoming auction.