Etisalat sets sights on Pakistan

Etisalat's affiliate in Pakistan plans to bid for a 3G mobile license costing at least $210 million, in a long-delayed auction process that the UAE operator expects to begin within months.

Etisalat sees huge potential for 3G mobile-internet services in Pakistan as they are currently not available in the country. Farooq Naeem / AFP

Etisalat's affiliate in Pakistan plans to bid for a 3G mobile licence costing at least US$210 million (Dh771.3m), in a long-delayed auction process that the UAE operator expects to begin within months.

Pakistan Telecommunication (PTCL), in which Etisalat owns a 26 per cent stake, will "definitely" bid for a 3G licence in an upcoming auction, said Ahmad Abdulkarim Julfar, Etisalat's chief executive.

Winning the licence would allow Etisalat's affiliate to sell faster mobile-internet services in Pakistan, a business Mr Julfar said has a high potential for growth.

"Pakistan is a market with close to 200 million people … The broadband penetration is very low and there are no 3G services. So the potential is huge," Mr Julfar told The National.

Pakistan's government expects to raise at least $630m from the auction of three 3G licences, with a base price of $210m each. The auction was set to be held in March, but had been indefinitely postponed, according to press reports.

Mr Julfar said Etisalat now expected the request for proposal (RFP) to be issued towards the end of this year or by early next year.

The actual cost of the licence and the funding required to build a 3G network would depend on the terms set down by the Pakistan government, he said.

"Once we know the conditions of the licence, then we will know what kind of network we would need to build, and then we need to price it accordingly. We could share a lot of the network elements with some of the operators, if the licence will allow for sharing."

The Pakistan Telecommunication Authority could not immediately provide a comment when contacted by The National.

Etisalat bought a 26 per cent stake in PTCL for $2.6 billion in 2006. However, tensions arose with the Pakistan government after Etisalat withheld $800m of that payment, reportedly due to complications over the transfer of property units.

An Etisalat spokesman confirmed that the company intended to pay the outstanding sum, although added that still depended on the Pakistan government honouring its obligations.

"Etisalat is committed to releasing all due payments. However, the nature of the contractual terms of this transaction places certain obligations on both parties to the agreement," the spokesman said.

Analysts said that Etisalat is unlikely to achieve any short-term gain from its affiliate purchasing the 3G licence in Pakistan.

"In the short-term, Etisalat will bear the expense of the licence, and it will not reap the fruits very quickly because Pakistan is a low-GDP country," said Reda Gomaa, the portfolio manager at Mashreq.

Mr Gomaa also said the PTCL faced "huge competition" from the four other telecomms operators in the Pakistan market.

Petr Molik, the head of the research division at Mena Corp, said Etisalat's Pakistan business represented "a small part of the group's overall revenues".

Etisalat on Tuesday reported revenues of Dh8.01bn in the third quarter, a 3 per cent decline on the second quarter. A 28 per cent year-on-year increase in net profits was attributed to a one-off sale of Etisalat's stake in the Indonesia operator XL Axiata.

"For Etisalat, it's mostly a disappointing quarter," said Mr Molik. "The silver lining is only coming from the cost savings. But in the long term, you can only save so much money."

Mr Julfar said mobile data posed a source of potential growth in emerging markets.

"We have 3G networks in all of our operations with the exception of Pakistan - not yet," he said. "We expect huge mobile-data growth coming from these markets."

Etisalat pulled out of the market in India earlier this year. Its joint venture there was among several operators to have their mobile licences revoked in what was one of the country's largest corporate scandals.

The alleged malpractice in the allocation of the 2G licences predated the UAE operator's arrival in the market.

Mr Julfar said there were no immediate plans to pursue the Indian market. "In the foreseeable future, we don't have a plan to re-enter India."