China Mobile’s Pakistan unit Zong is no longer interested in buying rival Warid Telecom, Zong said on Thursday, leaving Pakistan Telecommunication Co (PTCL) as the sole declared bidder for the country’s No.5 mobile operator.
“Initially, we were looking at Warid pretty seriously,” said a Zong spokesman, Pakistan’s fastest-growing operator, nearly doubling its customer base since 2010-11 to 20.2 million in May.
“But after going through the books and everything our consultants gave us the opinion that is was better for us to opt out because of the kind of investment we would have to put in.”
Pakistan’s mobile operators are dogged by low margins, strong competition and the fact that the government has yet to hold a long-stalled 3G licence auction.
These make the sector ripe for consolidation, despite promising long-term prospects, and Warid’s Abu Dhabi owners put the ailing company up for sale after it lost nearly a third of its subscribers from a 2008-9 peak of 17.9 million.
A potential sale for Warid is seen raising about $1 billion.
Zong, which announced its interest in Warid in September, will instead focus on preparing to launch 3G services, the spokesman said, saying this would be “a capital intensive investment”.
Pakistan’s sale of 3G licences and accompanying spectrum has been delayed for about three years, but operators are hopeful the auction will be completed by early 2014.
Just over two-thirds of Pakistanis have a mobile phone subscription, giving some room for customer numbers to increase, while 3G should provide a significant boost to revenue.
PTCL, a unit of the United Arab Emirates’ Etisalat, bid for Warid on Sept. 30. Should it be successful, PTCL’s mobile unit Ufone would become the second largest operator. Ufone had 23.9 million subscribers in May, according to the Pakistan Telecommunications Authority.
Russia’s Vimpelcom, whose unit Mobilink is the market leader with 36.7 million subscribers, declined to comment when asked if it had bid for Warid. Vimpelcom had hired Citigroup Inc to advise on the potential acquisition of Warid, sources told Reuters in July.
Warid also declined to comment on questions relating to the company’s sale. Norway’s Telenor’s is the number two operator, with 31.7 million subscribers.