The highly awaited acquisition of Telenor Pakistan by Pakistan Telecommunication Company Limited (PTCL) has encountered additional delays. The completion of the transaction is now anticipated in the first half of 2025, primarily due to challenges in obtaining regulatory approval. This information was disclosed in Telenor Group’s report for the fourth quarter. On December 14, 2023, Telenor agreed to transfer 100% of its telecommunications operations in Pakistan to PTCL. Nevertheless, the agreement remains pending regulatory clearance and is contingent upon standard terms and conditions.
Regulatory Obstacles Delay the Schedule
Telenor had originally expected that the sale would be finalized in early 2025. Nevertheless, in its most recent report, the company indicated that the completion of the transaction has been delayed due to extended regulatory challenges. Consequently, Telenor Pakistan could not be categorized as “held for sale” as of December 31, 2024. Despite this setback, the company expresses optimism that the sale will be completed by mid-2025. The report further specified that the precise timing of the transaction is not expected to have a substantial effect on the group’s overall financial projections.
Political & Economic Instability Presents New Challenges
Telenor has raised concerns about the worst economic and political conditions in Pakistan. The report highlights the risks of civil unrest, security issues, and financial instability, all of which could potentially impact the telecommunications industry. Nevertheless, Telenor Pakistan demonstrated robust financial performance. The company reported a 12% rise in service revenue, largely attributed to its monetization strategy. Additionally, the average revenue per user (ARPU) increased by 13%, which mitigated a 2.7% decrease in the subscriber base.
The fuel prices alleviated due to some economic strain, alongside implemented cost-reduction strategies and consistent revenue growth. Consequently, Telenor Pakistan recorded a significant 25.2% increase in EBITDA for the quarter.
Telenor experienced a reduction of one million in its total mobile subscriber base across Asia during the final quarter of 2024. The majority of this decrease was attributed to Pakistan, which concluded the year with 43.2 million subscribers, while Bangladesh reported a higher figure of 84.3 million subscribers.
Despite Telenor Pakistan achieving robust financial performance, the overall EBITDA for the Asian region saw a decline of 5.7%. This downturn was primarily due to a decrease in revenue from Grameenphone in Bangladesh, alongside rising operational costs. The company indicated that total service revenue in Asia fell by 3.3%, largely influenced by the difficult business conditions in Bangladesh. Nevertheless, the revenue growth in Telenor Pakistan helped to mitigate some of these losses. Additionally, the company’s IoT division, Amp, continued to expand, particularly through its Connexion platform.
High Financial Damages & Workforce Cuts
Telenor reported total other expenses amounting to NOK 400 million in the fourth quarter. This figure encompassed NOK 254 million in losses resulting from asset disposals, with NOK 107 million specifically associated with Telenor Pakistan. Additionally, the company faced workforce reduction costs totaling NOK 152 million, which included NOK 55 million from Telenor Norway.
For the quarter, the company’s tax expenses reached NOK 866 million, reflecting an effective tax rate of 28%. This represents a significant improvement compared to the -31% rate recorded during the same period the previous year. The enhancement in the tax rate was partially attributed to the acknowledgment of a deferred tax asset valued at NOK 227 million in Telenor Pakistan.
PTCL-Telenor Pakistan Deal Our View
The PTCL-Telenor Pakistan agreement is currently in a state of uncertainty due to regulatory delays affecting both companies. The telecommunications industry in Pakistan is grappling with inflationary challenges, increasing operational expenses, and complex regulatory frameworks. A continued postponement of the deal may pose additional difficulties for PTCL, as the prevailing uncertainty could hinder investment choices and future strategic initiatives.
For Telenor, divesting its Pakistani operations is a crucial element of its overarching strategy to optimize its business across Asia. Nevertheless, the persistent regulatory holdups necessitate that it manage the operations for a longer duration than initially planned. The inability to categorize Telenor Pakistan as “held for sale” further complicates its financial situation.
Additionally, the overall economic environment in Pakistan raises concerns regarding the long-term viability of investments in the telecommunications sector. Elevated inflation rates, currency depreciation, and policy ambiguities have already adversely affected the profitability of telecom companies. Should these issues continue, they may further impede foreign investment in the industry.
For more daily updates, please visit our News Section.