Qtel pays US$635 million to enter Asia
Nasser Marafih is looking to make Qtel a top-20 global contender by 2020
Fulfilling its stated ambition to expand rapidly into international markets during the course of 2007, Qatar incumbent Qtel last month announced the formation of a new strategic alliance with Singapore Technologies Telemedia (ST Telemedia) to explore and invest in new mobile telecoms opportunities while strengthening existing businesses in the Asia-Pacific region.
Under the terms of the agreement, Qtel will invest up to US$635 million in cash for an approximate 25% equity stake in ST Telemedia's Asia Mobile Holdings (AMH). ST Telemedia will remain the controlling shareholder with an approximate 75% equity stake in AMH, which will be the parties' preferred vehicle for future mobile telecoms investments in selected key markets in the Asia-Pacific region.
Considering the market capitalisation was 16% lower than the price Qtel paid for its 25% share in AMH, the Qatar telco's most recent investment was a shrewd one according to Marc Hammoud, vice president of research at Shuaa Capital in Dubai.
"They (Qtel) bought it at a discount on the market, which is quite unusual in the telco sector," asserts Hammoud. "In the past two years, you'd expect to buy telecoms assets at a premium. For example if you look at Telecom Egypt, when it increased its share in Vodafone Egypt it offered a 30% premium on the Vodafone Egypt stock price. Here you have a 16% discount so it is not bad at all," he added.
"Qtel bought a 25% stake in AMH for US$635 million, which values AMH at US$2.54 billion, translating into US$153 per subscriber. Compared to the region's average price paid per subscriber (US$800), it is pretty cheap and a good deal for Qtel," said Hammoud.
AMH currently holds ST Telemedia's stakes in StarHub, the Singapore mobile operator, and PT Indosat, Indonesia's second largest operator with over 14 million mobile subscribers. This strategic alliance will not impact ST Telemedia's existing and potential investments in the Americas, Europe and other regions.
AMH's parent company, ST Telemedia, in is turn is owned by Temasek, the investment arm of the Singapore government and Hammoud believes Qtel's strategic investment in AMH places the Qatari operator in a good position to further increase its presence in Asian markets.
"We may see AMH investing in new companies and therefore Qtel will have a defacto 25% of those investments. So I think that is the idea of Qtel entering AMH," commented Hammoud.
Qtel CEO Nasser Marafih is confident of the potential offered by the Asia-Pacific market and views Indonesia and Singapore as key regional markets.
"We believe that Asia-Pacific is a high growth region and is one of the main areas we have targeted for our expansion. We are excited about the prospects for growth in the region and believe ST Telemedia is an ideal partner for us in this endeavour," said Marafih.
Qtel is also set to consider acquisition opportunities a little closer to home.
"Qtel has secured US$3 billion in loans for further acquisitions. There are the Saudi licences coming up, both mobile and fixed; in Lebanon there is set to be a privatisation of the mobile sector; in Iraq there is a search for another new licence and in Algeria, 50% of the telecoms sector will be privatised in 1H07.So Qtel has a lot of potential investment opportunities coming up," Hammoud concludes.
Qtel has not confirmed its participation in any process yet.