Millicom considers calling it quits in Pakistan

Millicom plans to sell or shut down its Pakistan telecom company citing challenging business conditions.
Luxembourg based global telecom investor Millicom has appointed Lazard to review strategic options for its Pakistan telecommunications business, Paktel.

Millicom has been operating in Pakistan since 1990, owning an 88.9% interest in Paktel, the country's fifth largest telecom company in terms of active subscribers. As of September 30, Paktel had 1.53 million subscribers, representing an increase of more then 60% over the same period of the previous year.

But on November 13, Millicom announced that ôchallenging business conditions in the Pakistan mobile telephony market and frequency interference issuesö were driving its decision to exit the country.

In October 2004 Paktel was granted an additional 1800 Mhz spectrum to resolve frequency interference issues. At the time Millicom had said it expected Pakistan to be ôone of the most attractive mobile telephony markets in the world in the coming yearsö. But the grant was temporary and discussions with the Pakistan Telecommunications Authority (PTA) to resolve things permanently could not be satisfactorily concluded. Millicom also requested a deferral of the latest instalment of its license fee, totalling $29.1 million, which was turned down.

Millicom stated that it is therefore considering either selling or closing down Paktel, as it believes the loss it would incur in 2007 and 2008 were it to continue to fund Paktel, is larger then the loss which a sale or closure might force.

This year has brought a spate of capital markets deals from Pakistan, which is fast becoming the flavour of the month among investors, due to the progressive policies of the current government.

Two of the recent transactions have been in the telecommunications sector. In March, Etisalat UAE acquired a 26% equity stake and management control in Pakistan Telecommunications in a privatisation deal. Then, just a month ago, PakistanÆs MCB Bank completed PakistanÆs first private sector equity deal in 10 years and became PakistanÆs first company to list on the London Stock Exchange. The $150 million GDR attracted $700 million of demand and was widely expected to be the first of a spate of GDR offerings from Pakistan, as issuers gained confidence in tapping the international markets again. More recently, Pakistan Mobile Communications (Mobilink) achieved fine pricing on a $250 million seven-year bond with the order book over-subscribed by 15 times.
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