Posts Tagged ‘WiMAX’

Serbia seeks to liberalise fixed line market in 2009

Lack of competition for fixed line monopoly Telekom Srbija has left Serbs complaining of a poor quality service, which is partly analogue, partly digital, with many households still sharing lines, so that only one can use the phone at the same time.  According to the regulator’s figures, landline penetration was around 38 percent in 2007, while GSM penetration was almost 112 percent, a discrepancy explained by long waiting times for landlines to be installed.

Presently, only the mobile sector in Serbia is fully liberalised , earning an estimated €1.8 billion in turnover. Norway’s Telenor bought local operator Mobi 63 in 2006 for €1.5 billion euros & currently services approximately 39% (3 million users) of the market, while Mobilkom, the mobile telephony arm of Telekom Austria , paid €320 million to acquire the third mobile licence bringing an approximate market share of 5% . The remainder is controlled by Telekom Srbjia’s mobile arm MTS which claims more than 5.6 million subscribers, as of November 2008, Telekom is a joint venture 80% owned by the government, with the remainder held by Greco-German OTE Net (Deutsche Telecom recently acquired a 25% in the Greek carrier for €3.2 billion)

Serbia made the first moves towards opening the telecoms market in 2005, by establishing an independent regulatory body, but the process has been stalled by political turmoil caused by frequent elections and long periods without a government. The projected opening of the landline market in 2009,  will come a year before the government launches an expected initial public offering for Telekom Srbija. With the IPO having been postponed postponed to 2010 due to the global financial turmoil, Telekom Srbija raised prices in November, in all too familiar bid to attempt to expand its network before competition arrives. Telekom, who are being advised by Morgan Stanley on the offering,  is currently estimated to be worth €2 billion, based on 2006 accounts. On completion, the new Telekom will be dual listed on the Belgrade & London Stock Exchanges.

Minister of Telecoms Jasna Matic has said to local press that she expects ‘several’ companies to participate in the tender for the second fixed line telephony licence, scheduled for the summer. In a statement Matic said that the introduction of competition to the fixed line telephony scene would lead to ‘expedient improvement’ of the market. She added that a tender for fixed wireless telephony concessions covering rural areas was also in the pipeline. At present no companies have expressly come forward to state participation, however a roll of contenders is not difficult to imagine.

Deutsche Telecom has a track record of buying into Balkan operators, with branded operations already running in Hungary, Croatia, Montenegro, Macedonia & Greece (via OTE). Greek operators Cosmote has also been making inroads, having picked up licences in Romania & Bulgaria, however they may be put off by the level of capital expenditure required to compete effectively. Telekom Austria are also a likely competitor for a fixed line licence, as they are already active in country via Mobilkom & have ongoing operations in Slovenia, Croatia, Macedonia & Bulgaria. More interesting to me is the opportunity to roll out fixed wireless broadband services in to rural areas, something that has been ongoing in recent EU entrants such as Slovakia, Croatia & Slovenia, independent telcos such as Swiss based  WiMAX Telecom, which operates rural infrastructure in Austria as well as the aforementioned, could form part of a larger bid with Telekom Austria. As ever, a watching brief.

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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.