Millicom's Asian sell-off: two down, one to go

Vimpelcom's Beeline brand: next stop Laos

Back in late July, global emerging markets mobile group Millicom International Cellular announced that its Asian assets were up for sale. Since then, this blog has tracked other telecoms groups' interest in these operations.

The first confirmed transaction was the sale of Millicom's majority stake in Cambodian mobile operator Cellcard to another of the existing shareholders, the Royal Group. When Millicom first announced its intention to quit Cambodia, Mikael Grahne, the company's CEO, explained that this was partly due to the negative effect on profitability caused by the disruptive market-entrance strategies of the new players that have recently flocked to the Southeast Asian country's crowded mobile arena.

When DTW first covered this story, we saw that the Royal Group's CFO Mark Hanna was quick to dismiss any such concerns about profitability. We have also seen here, however, that in the months which have followed, Mr Hanna has himself felt the need to attack a new entrant for allegedly selling services below the cost of delivery. The apparently disruptive player in question is Beeline Cambodia, controlled by giant Russian mobile firm Vimpelcom.

As the dispute between mobile operators in Cambodia rumbles on acrimoniously, then, perhaps it is legitimate to wonder if a similar set of circumstances will unfold in neighbouring Laos, another country from which Millicom has been seeking to extract itself.

With a mobile penetration rate of just 27.14% (end of June, according to WCIS), Laos would appear to be quite attractive in terms of growth potential. WCIS estimates that Millicom's Tigo-branded operation has built a 17.01% share of current subscriptions since its own market debut back in 2003, when it became the third entrant.

The longest-established mobile offering in Laos is that of the country's incumbent fixed-line operator, Lao Telecom, in which the the Government of the Lao People’s Democratic Republic holds a 51% stake. Via a company named Shenington Investments, the other stakeholders are Thai communications satellite operator Thaicom, ST Telemedia, and Qatari telecoms group Qtel.

While the later entrants have, of course, eroded Lao Telecom's share of the mobile market, this share has only fallen as far as the 60% mark - still a dominant position. I will not pretend to know a lot about the telecoms market of Laos, but I note that the country profile available from Australian research firm Buddecomm mentions that "the rate of regulatory reform continues to lag well behind industry development and has the potential to derail the progress already made if the reform is not speeded up." This, perhaps, explains the qualified success of those challenging the national incumbent telco in the mobile space and might be part of why Millicom preferred to focus its efforts elsewhere.

Undeterred by such challenges, however, is the purchaser of the 78% stake that Millicom International Cellular held in Tigo Laos. That purchaser, as I learned yesterday from TeleGeography, is none other than Russia's Vimpelcom, whose Cambodian Beeline-branded operation has been offering aggressively priced services and arousing the anger of its competitors in the process. If Vimpelcom is planning something similar in Laos, perhaps the arrival of Beeline's low-price offerings will accelerate the growth of the country's modest mobile penetration rate. It's also possible that any such strategy would cause the same friction as seen in Cambodia. Beeline comes to Laos and grows its SE Asia cluster. Let's see if there's a sting in the tale.

Regarding Millicom's plan to quit Asian markets and sharpen its focus on Africa and Latin America, just one task remains - the disposal of its asset in Sri Lanka. DTW has noted in previous articles that interest seems to be strong. The last I read about it, both India's BSNL and the UAE's Etisalat remain in what some are describing now as a "race" to buy Millicom's Sri Lankan operation.

Millicom's Asian sell-off: two down, one to go

Bridging the digital divide between the provinces and regions of Pakistan

Pakistan is the world's sixth most populous country. It is also one which features regularly in TV news broadcasts that remind us of the country's strategic importance - as a state armed with nuclear weapons; as a country whose long history of troubled relations with neighbouring India took a new turn after the Mumbai terrorist attacks of November 2008; as a country with a porous border with troubled Afghanistan.

The country, however, has not featured very heavily here at DevelopingTelecomsWatch - before today, just five of the our first 100 stories even mention Pakistan. Today's short essay will, I hope, go some way towards making up for that glaring omission.

That I was able to round up a few interesting recent stories from the country is due mainly to my knowing of a very useful blog/news site - TelecomPK.net, set up and maintained by Babar Bhatti, a a senior IT professional now based in Dallas, Texas. Most of the news items, articles and reports referenced here today came to my attention via Babar's site and his tweets.

One item I found interesting was written by Babar himself, and concerns how the takeup of mobile telephony in Pakistan has been very uneven across the country's different provinces and regions. Mobile penetration in Pakistan currently stands at 54.11%, according to the World Cellular Information Service from Informa Telecoms & Media. Babar cites figures from the country's telecoms regulatory agency, which indicate a wide variety of cellular penetration rates in the four provinces:

• Sindh - 64.28%
• Punjab - 59.35%
• North-West Frontier Province (NWFP) - 35.37%
• Balochistan - 25.01%

Sindh, in the southeast of the country, is a major centre of diversified economic activity - heavy industry, finance and agriculture. The second best performer in terms of mobile penetration, Punjab, is the county's most populous region and its most industrialised. The two other provinces, where mobile penetration is well below the 50% mark, are places whose share of the national economy is much smaller.

Babar writes Balochistan's low cellular penetration rate is most likely attributable to the province having few urban areas and, as a result, high costs for the roll out of telecoms infrastructure. He feels, however, that recent Universal Service Fund (USF) projects may improve the situation in the provinces. I assume these include the three contracts recently signed by the USF and the country's incumbent fixed line and broadband provider Pakistan Telecommunication Company Ltd (PTCL), as reported on 3rd July by TeleGeography. These include arrangements to bring fibre-optic connectivity to all tehsils (administrative divisions) in southern Balochistan, involving the installation of 1166km of fibre-optic cable in the region.

Much of Pakistan's population is denied access to the range and quality of vital services taken for granted in highly developed countries. Two obvious examples are the provision of health care and education services. Canada-based technology journalist Jerry Blackwell, a regulator contributor to Wi-Fi Planet, wrote an interesting article earlier this month about how communications technology is making an impact with regard to the first of these.

Blackwell's article quotes Phil Cruver, President of KZO Education, an American company that develops content and technology for online interactive learning, who points out that "the literacy rate in Pakistan is only about 50%, and for girls, it’s lower. The country has about 1.3 million teachers now, but it needs double that number in order to meet the standards [in education] that are needed."

The article is part of a series which examines the state of the worldwide WiMAX industry in 2009. According to Phil Cruver, WiMAX will be "absolutely critical" in ongoing efforts to pull Pakistan's public education system up by the bootstraps. Cruver's plan is to deliver interactive streaming video-based learning over WiMAX networks and KZO has already launched pilot projects in Islamabad. This has involved connecting two schools to a WiMAX network operated by Wateen Telecom, a provider of telephony, broadband and multimedia services that is part of the Abu Dhabi Group, which also owns Pakistani mobile operator Warid Telecom.

Comments about technical issues and allegedly poor service for Wateen Telecom WiMAX customers were aired by Chris Cork, a British social worker settled in Pakistan, in September last year. Writing in Pakistani newspaper the News, Cork provided a personal history of the frustrations of getting a reliable Internet connection in the country during his time working there. This concludes with a none-too-complimentary account of dealing with a company whose "name begins with a 'W' and ends with 'n'" when he asked for an externally-mounted receiver to get full benefit of their service.

One Pakistani blogger, writing in December, also reported that the Wateen Telecom WiMAX service, the first such offering for consumers in the country, was facing bad press and suffering reliability problems. That writer's feeling seemed to be that this created opportunities for the providers of two other WiMAX-based services. One of these is Infinity from Orascom Telecom-owned mobile operator Mobilink, the market leader in the cellular space with an estimated market share of 29.74% according to WCIS. The other is wi-tribe Pakistan, part of an international collection of wireless broadband operations owned jointly by Qatari incumbent telco QTel and Saudi firm A.A. Tukri Group of Companies (ATCO). According to TeleGeography, wi-tribe Pakistan began commercial operations earlier this month.

Gerry Blackwell writes that according to the WiMAX Forum, at least two other operators, including Supernet (owned by Telecard, a fixed wireless operator known for its CDMA service) and Burraq Telecom, also plan to launch WiMAX services in Pakistan. The Supernet/Telecard offering, however, may be in doubt if nothing has changed since Babar Bhatti wrote in March about a dispute between wi-tribe and Augere, a European company that was planning to offer WiMAX services in Pakistan via the acquisition of spectrum in the 3.5Ghz band from Telecard.

Although some have raised concerns about Wateen Telecom's WiMAX service, Blackwell reports that Phil Cruver of KZO Education has no complaints: "It was so quick to get service," says Cruver. "We paid for it, and it was up and running within 24 hours."

Blackwell writes that when KZO first got involved in Pakistan, WiMAX wasn't on its radar. "To be very honest, we didn't know there was a WiMAX," Cruver says. "It's just serendipity that Pakistan has the first nationwide WiMAX network."

Cruver's last comment might not be accurate. Gerry Blackwell writes that Pakistan is really just "on its way to having a nationwide network", with service is only available in major population centers, and coverage spotty outside city centres.

As discussed, the second area of vital services in which WiMAX could potentially make a very valuable contribution in Pakistan (and other developing countries) is healthcare.

Earlier this year, Monica Paolini of Senza Fili Consulting (from whom I once sought advice about the agenda content for a Fixed-Mobile Convergence themed conference I hosted in Miami many moons ago) wrote a paper on the theme of expanding the reach of healthcare in developing nations with WiMAX. Sponsored by Intel and Cisco, this paper notes that today, in developing nations, patients have to travel to their nearest clinics or hospitals to receive even basic treatment and to more distant institutions for specialised or emergency care. Monica argues that this model does not provide comprehensive and efficient access to healthcare and suggests that reliable, always-on broadband wireless connectivity makes a new healthcare model possible -medical professionals reaching out to patients where they live and when they need care, bringing access to a range of medical resources through voice, data and video applications.

In her paper, Monica discusses an example from Pakistan - a Cisco trial combining satellite and WiMAX connectivity to mobile units that provide early oncological screening for patients in rural areas.

Overall, Monica uses her paper to make a case for why WiMAX stands out as an ideal technology to support telemedicine initiatives. Rather than focus on the capabilities of the technology, however, I'd like to consider the business models needed to make such initiatives a success.

Monica quotes Debra Sloane, Global Healthcare Solutions Partner Manager at Cisco, who says that "extensive cooperation among public agencies, health care providers and [telecoms] operators is necessary for the creation of new business models that can address the specific
needs of communities."

Just as we have noted that WiMAX networks in Pakistan are currently confined to urban centres, Monica notes that wireless networks tend to be initially deployed in high population-density areas and suburban business districts where the highest-paying subscribers can be found. Monica argues, therefore, that governments, health care agencies, and NGOs need to work together with network operators to ensure that operators see a business opportunity in under-served urban and rural areas. Perhaps Pakistan's Universal Service Fund could be used to intervene in this way. As far as I can tell, however, the USF's activties do not yet include any such initiative.

To conclude, while it seems that a number of worthy initiatives are improving the currently uneven access to telecoms and Internet services and to other vital services, Pakistan continues to be notable for a marked digital divide between its various regions.

Bridging the digital divide between the provinces and regions of Pakistan

Out of Africa: Zain to sell assets to a European buyer?

Earlier this week I started to receive email news updates suggesting that Zain, the Kuwait-headquartered multinational telecoms group specialising in mobile communications across the Middle East and Africa may be quitting the latter territory.

If this is correct, Zain's stay in Africa will turn out to have been quite a short one, having extended its reach from its Middle East roots via the 2005 acquisition of Celtel International, the pan-African telecoms group founded by the Sudanese-born British entrepreneur Dr. Mo Ibrahim.

One report from TelecomPaper contends that Zain Group may agree as early as this week to sell its African unite to a French company for up to USD 12 billion. A French company? A good guess has to be France Telecom/Orange, right? That was my first guess, but one report from a Nigerian newspaper is tipping Vivendi, the telecoms and media group whose assets include majority stakes in French quad-player SFR and Morocco's Maroc Telecom. It must be said that I haven't found any other articles naming Vivendi as an interested party...

The Nigerian report continues that if the deal isn't settled, Zain will study bids made by other companies. Apparently, the plan is for the French company to buy Zain Africa's debts, which will be discounted from the purchase price.

If there is any truth in this story, genuinely savvy market-watchers are now invited to smile at my naivety now because I must admit that since well before the inception of this blog, I have regularly opined that in the current economic climate, the only telecoms strategic investors likely to remain acquisitive, expanding their geographical reach in any major way, would be those headquartered in the Middle East and Gulf region. I was, of course, thinking of Zain as well as the likes of Etisalat and QTel. If these reports are to be believed, however, we will see a major Gulf region player divesting significant assets with a European buyer being the acquirer. Not at all what I would have expected.

If the timing of this were different, perhaps the pool of prospective purchasers would be larger. For example, one player which would presumably find it very challenging to become involved right now in a tussle for Zain's African assets is the South Africa-headquartered MTN group. If Zain really does intend to quit Africa, the timing is odd, argues Lesley Stones of MoneyBiz. Stones feels that MTN is an "obvious suitor" and therefore wonders why Zain would put its African business up for sale just as the South African group is negotiating a tie-up with Bharti Airtel of India, especially because these two "have agreed to talk exclusively to each other until July 31." MTN, as Stones, notes, was one of the interested parties when Zain/MTC prevailed with its acquisition of Celtel International.

Given my own contention that groups such as Zain are more likely to be in buying mode than selling mode these days, the big question for me around all of this is why Zain would be looking to sell its African unit. Let's look at evidence to support the notion that this would be a strange move:

• Celtel operators across Africa were the subject of an expensive rebranding exercise only last year - surely quite wasteful if there was never a long-term plan to stay in these markets.
• As Lesley Stones notes, as recently as November, Zain Africa CEO Chris Gabriel said the company "planned to be the acquisitor rather than the acquisition in an inevitable consolidation of telecoms players."
• As Stones argues, Zain CEO Saad Al Barrak has not hinted at any plans to sell, instead saying only a month ago that the group has an "unwavering commitment to reach our 2011 target of being a top-10 global mobile operator", an aim that would be made impossible by the shedding of a major chunk of its business.
• Zain’s commitment to Africa saw it launch a network in Ghana as recently as December.
• Zain has announced plans to introduce mobile financial services for Africa's unbanked via cellphones in several countries this year.

Bearing all of this in mind, the whole thing does feel rather implausible. The (non?) story seems to originate from a single article in a Kuwaiti newspaper. As Lesley Stones notes, rumours of the sale may simply be untrue. Watch this space, I guess.

Out of Africa: Zain to sell assets to a European buyer?

Report tips China Mobile, MTN, America Movil as 'best postioned to grow' - but does not consider Middle Eastern, Indian players

graphic from Telegeography's GlobalComms Insight

New research from TeleGeography’s GlobalComms Insight includes predictions about wireless and broadband subscriber growth globally for the next five years. A key finding seems to be that "growth in the value of the telecoms services market will not keep pace with subscriber growth." This feels right. As the report authors note, subscriber growth these days largely comes from countries with very low GDP per capita - i.e. emerging markets.

This is all fine. I am curious, however, to know how the people behind TeleGeography's GlobalComms Insight selected the eight leading service providers studied in the report and positioned on the graph above. It is not without value to consider the global competitive position and the growth prospects of China Mobile, MTN, America Movil, Vodafone, Telefonica, Verizon, BT and NTT. But wouldn't this report be a lot more interesting if telcos headquartered in the Middle East were put into the mix? I hear so many people articulating the view that these relatively cash-rish players are among the best placed to take advantage of the current challenging economic climate - in terms of finding and securing acquisition targets at knock down prices from sellers wanting to raise cash ASAP.

Where, then, would Etisalat, QTel or Zain sit on the graph?

One aspect of this report which does seem useful is ensuring that China Mobile is discussed. The authors call the giant cellco "one company that has managed to buck the general trend, thanks to the blistering mobile subscriber growth in its home market" and note that even this company, "the world’s largest wireless service provider by subscribers is feeling the pressure, as evidenced by last week’s news that it will expand its global footprint by buying a stake in FarEasTone of Taiwan."

I'd also be interested to see where the report authors would place Bharti Airtel in their calculations. Back in February, I considered the view that the rapidly diversifying market-leading Indian MNO might likewise be compelled by competitive pressures at home to look more seriously at international growth opportunities.

Report tips China Mobile, MTN, America Movil as 'best postioned to grow' - but does not consider Middle Eastern, Indian players