Mobitel gains time, but who will buy company?

Monday, 08 November 2010

By Steve Finch

Phnom Penh Post

MOBITEL’S announcement of a US$591 million deal with Bank of China to refinance last year’s $421 million agreement buys Mobitel time, but the country’s leading network has still not found an international telecoms partner.

The refinancing package means Mobitel has breathing space – as the terms of the new deal are longer term – but that also means the firm will likely be saddled with interest payments for more time.

The network had been expected by many within the sector to have found a global telecoms firm to buy a stake. That would have permitted repayment of the original loan, meaning a replacement lending package would not have been required.

Most people will no doubt come to the conclusion that has overshadowed the Cambodian mobile phone sector for some time now: Selling off mobile phone assets in part or in full has become tricky given the high level of competition and low current returns.

That certainly seems to be the case, but then setting up a deal to sell part of Mobitel is a large and complex issue that would naturally be expected to take time. The question for any investor though remains: How much is Mobitel worth and what are the network’s longer-term prospects?

When The Royal Group took on Millicom’s majority stake last year, the operation was valued at $605 million in terms of assets, but then 2010 has hardly been a good year for anyone in the sector as competition has stifled revenues.

Companies looking at Mobitel’s longer-term prospects though could only come to the conclusion the firm is still in pole position to outlast the current sector-wide malaise.

In a market in which consolidation is likely, Mobitel will continue to be the market leader and by committing to infrastructure expansion following two deals with Huawei worth a combined $500 million, the network is positioning itself in the right way.

Expansion into more rural areas allows Mobitel to battle its main competitor Metfone, whose main advantage is its wide coverage following a rapid infrastructure rollout. In the past 18 months Mobitel has been much better at competing in urban areas. Prospective buyers including France Telecom, according to reports, will therefore see long-term value in a Mobitel stake.

Committing to the long haul in the mobile sector, while uncertainties, including the lack of a long-awaited telecoms law, remain, is a big commitment for a foreign company that would almost certainly have no experience of the Kingdom. So, who will get into bed with The Royal Group by taking on Mobitel?