PTCL Acquires 100% of Telenor Pakistan’s Operations

Pakistan Telecommunication Company Limited (PSX: PTCL) has entered into a Share Purchase Agreement (SPA) to acquire 100% of Telenor Pakistan (Private) Limited (TPL) shares, amounting to an Enterprise Value of Rs108 billion ($380 million). The deal, as reported on the Pakistan Stock Exchange, will be executed on a cash-free, debt-free basis, with PTCL funding the acquisition through external debt.

Telenor Pakistan, a prominent mobile operator serving 45 million subscribers, boasts a reported revenue of Rs112 billion and an EBITDA margin of 43% based on the last 12 months as of September 2023. The transaction is poised to facilitate in-market consolidation in the telecom sector, enhancing the industry’s long-term outlook.

PTCL, Pakistan’s leading information communication technology (ICT) company, with a market capitalization of Rs 49 billion ($173 million), operates the country’s largest fixed-line network. It offers a range of products/services, including voice services and high-speed broadband internet. PTCL holds a 100% stake in Ufone and U Microfinance Bank and is predominantly owned by the Government of Pakistan (62%) and Etisalat of the UAE (26%).

Topline Pakistan Research estimates that PTCL will utilize borrowed money for the deal, incurring an annual interest payment of Rs19 billion. This is based on borrowing $380 million (Rs108 billion) at 18% (8% interest rate + 10% currency depreciation), significantly lower than Telenor’s EBITDA of Rs112 billion in the past year. The merger of PTCL, Ufone, and Telenor is anticipated to generate synergies from shared infrastructure.

The Telenor Pakistan shareholders will receive the debt raised by PTCL from external sources, aligning with PTCL’s announcement to fund the deal through borrowed funds. This contrasts with the 2015 deal between Mobilink and Warid, where Mobilink acquired all of Warid Telecom’s shares, with Warid’s owners gaining a 15% stake in Mobilink without any cash payment.

Telenor Group’s sale of its Pakistan operations is part of its strategy to build scale and market-leading players in Asia. The transaction values Telenor Pakistan at NOK 5.3 billion on a cash-and-debt-free basis, including the repayment of intercompany loans and reduced interest-bearing liabilities. The remaining Telenor Asia portfolio includes leading operators in Bangladesh, Malaysia, and Thailand.

CEO of Telenor Group, Sigve Brekke, expressed pride in Telenor Pakistan’s 18 successful years of operations and emphasized the strategic decision to sell aligns with their goal of building number one positions in the markets they operate. The sale is expected to strengthen Pakistan’s telecom sector, creating new growth opportunities. The transaction, subject to regulatory approvals, is anticipated to be completed in 2024.