Business, Mergers & Acquisitions, Telephony, Pakistan: Singtel is paying US$758 million to acquire a 30% stake in Pakistan’s Warid Telecom. Reasoning behind the investment lies in Warid’s status as third-largest mobile operator in Pakistan, plus the fact that it has achieved a one-sixth market-share in just two years...

Singapore Telecommunications Limited (SingTel) and Warid Telecom (Private) Limited (Warid Telecom), have confirmed their entry into a definitive agreement whereby SingTel will acquire a 30% per cent equity stake in Warid Telecom for an estimated US$758 million.

In just two years from its commercial launch in 2005, Warid Telecom has reached nearly 9.7 million in reported subscriber numbers, representing an estimated market share of 16.6%, and making it the third largest mobile operator in Pakistan as of April this year.

With a large population in excess of 160 million growing at over 2% per annum and a young median age of 20 years, Pakistan represents the sixth largest population base in the world. Fuelled by foreign direct investment, its economy has seen strong growth over the past few years. With a current low mobile penetration rate of 36% and a strong regulatory regime, the Pakistani cellular market is one of the most attractive in the world and has recently attracted sustained interest from international telecom operators.

SingTel will invest the sum as part of a strategy to support Warid Telecom’s continued growth and to enhance its market position. The purchase will be financed through SingTel’s internal and/or external sources of funds.

Warid Telecom is part of the Abu Dhabi Group, led by HH Sheikh Nahayan Mabarak Al Nahayan, a senior member of the Emirate of Abu Dhabi’s ruling family. Commenting on the announcement, HH Sheikh Nahayan, said: “Our partnership with SingTel marks a new milestone in the development of our company. Our customers, employees and shareholders stand to reap the benefits of this partnership as we work together to execute our long-term growth strategy. We look forward to the opportunities that this partnership will bring to Warid Telecom and to the broader telecom sector in Pakistan.”

In turn, SingTel, together with its associated companies, will have a major presence in eight cellular markets in the region with a total of more than 130 million subscribers.

SingTel’s Group CEO Ms Chua Sock Koong, said: “SingTel has made substantial investments in markets with high growth potential in South Asia, such as India and Bangladesh. Warid Telecom in Pakistan is a natural fit. It is also an attractive business with strong brand recognition. The management of Warid Telecom has established an impressive operational track record, turning EBITDA-positive in only 17 months after its commercial launch. We see strong upside in terms of the company’s performance and look forward to its continued contribution towards the development of mobile communications in Pakistan.”

Goldman Sachs advised Warid Telecom and HSBC advised SingTel. Cleary Gottlieb Steen & Hamilton and Allen & Gledhill acted as legal advisers to Warid Telecom and SingTel respectively. Completion of the purchase is conditional upon the fulfilment of certain conditions precedent.