Future scenarios for Talco’s in Pakistan : Telenor and Ufone merger should not be rules out-

ISLAMABAD ( ABRAR MUSTAFA )

While profitability, viability and sustainability of businesses around the world, and in Pakistan, are facing serious challenges, there is a perception that mobile companies are in the safe zone due to their product proposition

These companies might be less affected than some other businesses, however recent quarterly results of Q1 of these companies don’t seem to be very encouraging and might get worse for Q2, 2020.

Telenor Pakistan seemed to be in one of the most worse situation with ~11% revenue decline compared to last year. Even Jazz, the leading operator performed a bit better, it also showed a decline of 2-3% for the same period.

Considering Covid-19 really hit Pakistan in Q2, we can expect even worse results for the current quarter. What does it mean for these operators for future……

It has been long argued that Pakistani mobile market is essentially a 3-player market, and while it has already come down from 6 players to 4, there is a strong likelihood of  it being further consolidated, and that not in too distant future

There have been talks of one of these operators being merged with, or bought out by, other operators. Speculation has been that Ufone option has been and is being considered, especially by Telenor and China Mobile. Considering Ufone has slipped from being number 2, to the last position at 4, this may not be ruled out. Considering the 4G market being currently dominated by Jazz and Zong, possibility of Telenor and Ufone merger should not be rules out- using spectrum, infrastructure and footprint synergies, this served both companies’ interests. Well-informed circles of telecom sector said that Pakistani market, where four telecom firms are operational, has capacity for two to three companies.

A merger of Telenor and Ufone is likely and if it happens total companies in Pakistan will reduce to three. They are of view that it will decrease the deficit to maximum extent.

The sources claimed that initial negations between the firms have started, adding that there would be three companies by the end of 2020 it talks are successful and government departments do not create any hurdle.

Business activities, education, and all public and private working came to a halt following the lockdown, which has been imposed to control the spread of coronavirus.

The telecom companies have to face losses due to decrease in the use of their services following the lockdown.

Telenor and Ufone hold 3G network with 5MHZ each. The Telenor additionally holds 4G spectrum but it could  not take benefit from it due to less availability of the compatible mobile phones.

Moreover, Ufone is facing losses as it has less customers and it is also unable to provide 4G service which is need of the hour.

Following initial talks between Ufone and Telenor, the Pakistan Telecommunication Authority is expected to back the merger.

After the merger, the new firm will have customers more than Zong and Mobilink and its spectrum will also double to 10MHZ, making a way for it get 4G spectrum.-

If for any reason, starus quo is maintained and no consolidation happen within next 12 months, there is a serious chqnce of market failure with another operator biting the dust.

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