Posts Tagged ‘millicom’

Saudi Telecom unveils $10B warchest

KUWAIT-SAUDI-TELECOM

State owned fixed line monopoly Saudi Telecom (STC) unveiled a $10b facility, which will be used to take part in a number of Middle Eastern license acquisitions which are due to be launched in 2009.

“”We can do SR40bn of acquisitions in the next few years. We have no problems with doing that at all”” Khalid al-Ghurair, Saudi Telecom Mobile  has SR40bn ($10.7bn) available for the acquisition of new licences and stakes in other operators, Khalid al-Ghurair, general manager for financial planning and budgeting at the company, tells.

In January, Bahrain and Iran will award new licences or management contracts. Tunis has set a deadline of 5 May for bids for a new telecoms licence, and Algeria, Morocco and Iraq have also committed themselves to auctions. In addition, Lebanon is planning to issue management contracts for two mobile telecoms networks before the end of the year, and Jordan is also planning to auction its first 3G network in 2009. The number of licences on offer means that regional operators will be under pressure to find funding to take advantage of as many of the growth opportunities as possible.

STC is pretty much a late comer to the international market, its hand being forced when its mobile monopoly was broken in 2005. It lost its mobile service monopoly to Etihad Etisalat (Mobily) in 2005, while a consortium led by Kuwait’s Mobile Telecommunications Co (Zain). made the highest bid for a third mobile license in March, offering $6.11 billion. Mobily was able to capture 30 percent of the market within 18 months of starting operations.

In response, STC made some acquisition plays in 2007 , when it acquired a 25 % stake in Malaysia’s Maxis and 26 % of Kuwait’s third mobile licence. Earlier this year, STC acquired a 35% stake in Saudi based Oger Telecom, which brought interests in Turkey (Turk Telekom / Avea) & South Africa (CellC). Further regional acquisitions will probably remain at the same level, STC seems comfortable with taking non-controlling stakes & spreading it’s exposure.

“”We could have gone for majority with Maxis, majority with Kuwait and majority with Oger Telecom, but we are very cautious,”” says Al-Ghurair. “”We are not risk takers.”” In total, Saudi Telecom spent SR24.5bn on the three international deals. It has built up debt of 1.3 times its earnings before interest, tax, depreciation and amortisation (ebitda), partly through the acquisitions, according to Standard & Poor’s.

 

STC has enjoyed monopoly status regards fixed line, up until this year, regulators have now opened the market & there are three new players planning to launch services in 2009. The Optical Communications Company (OCC) is a joint venture between local partners, Verizon (NYSE – VZ) & MSV favourite Millicom International, with other franchises being put together by Hong Kong’s PCCW  (HK – 0008) & regional player Batelco (Bahrain Telecom). The Kingdom remains a strong growth opportunity for fixed line operations as less than 17% of the population currently enjoy fixed services & internet penetration remains at circa 4%.

Verizon has just announced that it will be investing $3B into the OCC joint venture, whilst the PCCW consortium has failed to raise cash via an IPO as expected, due to poor market conditions. Part of the pre-requisite for any of the deals is for the Saudi state pension fund to take a 5% stake, which until now it has demurred to do.

STC received good ratings earlier this  year, Standard & Poor’s Ratings Services assigned STC with ‘A+’ long-term and ‘A-1’ short-term foreign currency corporate credit ratings. Moody’s Investors Services assigned A1 long term local and foreign currency issuer ratings, which will obviously help buoy shareholder confidence & also help in capital markets for the upcoming licensing round. Local competitors such as Zain, have exhausted themselves financially with recent rapid growth in Asian & African markets, which should allow STC to make some real penetration in 2009.

The main competition for me will be Emirates based EtiSalat, which has access to some deep pockets, as it is effectively owned by the Al-Makthoum family, EtiSalat has already managed to acquire a license in Iran & has been expanding into Africa for some time. If STC is to compete, I think they will have to look at raising more than $10B & the S&P / Moodys ratings will surely come into play to that effect. Whatever the outcome at a business level, I can only conclude that this is good for the Middle Eastern region, freeing up access & allowing mass communication on a greater scale.

UPDATE (05/01/09) : Saudi Telecom eyes government stake in Batelco

Saudi Telecom Co (STC) is eyeing the Bahraini government”s 36.7 percent stake in Bahrain Telecommunications Co (Batelco), a Kuwaiti newspaper said on Sunday. Local newspapers said in an unsourced report that the Saudi firm had submitted a request to Bahrain”s biggest telecoms operator to buy the stake.An STC spokesman could not be reached for comment while a Batelco spokeswoman declined to comment on the report because it related to shareholder issues.
Mumtlakat Holding Co, the investment arm of the Bahraini government, holds a 36.7ـpercent stake in Batelco, according to its website. Mumtalakat”s spokesman Adel AlـAnsari could not immediately comment on the newspaper report.
Batelco is a shareholder in Etihad Atheeb Telecommunications Co, one of three firms licensed to operate new fixedـline networks which would end STC”s monopoly status in this segment.

UPDATE 2 : (29/01/09)  : From Mobile News on WordPress : STC Bags 3rd Mobile Licence in Bahrain

The Telecommunications Regulatory Authority (TRA) today announced that Saudi Telecommunications Company (STC) is the successful bidder for the third mobile Licence in Bahrain with a bid of Bahraini Dinars eighty six million six hundred eighty seven thousands (BD 86,687,000.000)

Value in emerging markets telecoms ?

millicom

The large telco conglomerates such as Deutsche Telekom, Telefonica-O2, France Telecom & Vodafone are always grabbing headlines with regards to acquisitions in new markets, as detailed in yesterdays post on Turkcell & the Balkans. I thought it may be quite interesting to look outside the traditional fold & put a little focus onto a little known player in the emerging markets telco scene.

Millicom International (NASDAQ – MICC)  is a Luxembourg based holding company with a variety of assets spread across 16 emerging markets in Central & Latin America, Africa & Asia.  Millicom serves 20M customers with pre-paid services via its Tigo brand &  cable TV & broadband in Central America via its Amnet fixed line operations. The Group’s mobile operations have a combined population under license of approximately 291 million people.

As with any other publicly traded compan, Millicom has seen some troubled waters in 2008, however looks to be reversing the trend lately, as the following chart shows

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Having lost roughly 60% in value in the last six months, Millicom has been making some serious gains in the last month, bucking the overall trend & winning back 10% or thereabouts in the last 4 weeks of trading. Marc Beuls, President & CEO  presented to investors at the Morgan Stanley 8th Annual Technology, Media and Telecoms Conference in Barcelona in mid – November, his presentation can be downloaded here : Millcom Corp Website

What is clear having looked through the presentation is that Millcom is operating in some interesting markets, which at present have very low penetration of fixed telecoms infrastructure & a burgeoning desire to be connected in some way. Mobile, whether GSM or CDMA is the obvious answer, Digicel Carribean is probably the best example of this & Millicom seem to be following a similar business model, focussing on pre-pay to emerging markets.

With the recent acquisition of Amnet, Millicom now has invaluable in-house expertise to provide fixed broadband services, which have seen a CAGR in 2008 of roughly 24%, this coupled with a much lower CAPEX deployment ratio of 12% than that enjoyed in developed markets, will allow Millicom / Amnet to deploy quicker & to a much wider audience than previously experienced. Amnet is achieving  blended ARPU of $1,807 & at present have a subscriber base of 150,000 users across the three active territories (Costa Rica, El Salvador & Honduras).

By coupling the trusted Tigo brand with the expertise of Amnet, Millicom have a very good chance of penetrating their other 13 markets with new services, fixed / mobile broadband & pay TV services being the obvious contenders. Beuls stated aim is to provide services under a 3 pronged approach to provide the widest possible connectivity choice for potential & existing customers, with plans to integrate WiMAX technologies into its core offering & also as a backhaul component for metro scale deployments.

The recent acquisition of a license to operate in Rwanda, providing synergies with existing operations in Democratic Republic of Congo & also Tanzania, is another string to the Millicom bow. Beuls is looking for futher growth in the region as it goes head to head with other players in emerging markets telecoms, such as MTN Group.

For me a good solid play & one to pick for a long term portfolio.