Mobilink and Warid Agree Over in-Market Consolidation

VimpelCom, the parent company of Mobilink, and the Abu Dhabi Group, a major sponsor of Warid Telecom, have agreed over in-market consolidation in the Pakistani cellular sector by merging their respective subsidiaries, according to Daily Times.

According to VimpelCom, the license of  4G/LTE services made Warid an attractive case for the company that also closed the deal with the Abu Dhabi Group to acquire its subsidiary, Warid Telecom.

The telecom sources and participants of deal also disclosed that:

“Mobilink’s bid for the merger and acquisition of Warid reached beyond the advance levels, as Mobilink had completed due-diligence of Warid two months ago, while the merger of both companies is expected to be announced officially in January 2016.”

If these expectations turn true then there are also chances that Mobilink, being a market leader in terms of subscription, is likely to shift significant load of subscribers on Warid’s network, and then the buyer may utilize Warid’s 4G /LTE network, subject to be approval of the regulator.

Sources also said:

“Warid would remain a separate entity and the name of company wouldn’t be changed by VimpelCom initially, but the Dubai-based cellular phone company would keep about 20 to 30% shares as its ownership.”

Analyzing more about the advantages of this deal it can be said that the main benefit of this merger for the users of both companies could be perceived that as currently one company has 3G while another has 4G/LTE services. Warid users would have the option of 3G while Mobilink’s customers could avail 4G services.

With the lowest subscribers’ base in the market, Warid has large space available on its spectrum, thus Mobilink can shift its significant load on Warid’s network to gain better quality of service, while 4G aspirants of Mobilink would be moved to Warid network, they added.

Some unfortunate consequences of this merger includes:

1. As Warid’s current vendor, Ericsson, as VimpelCom and Ericsson don’t share good business ties historically, so it is a probability that after the official announcement of the merger, VimpelCom would not keep Ericsson as Warid’s vendor, sources claimed.
2. Also thousands of Ericsson’s workers in Pakistan, who manage Warid’s technical affairs, are likely to be at stake, however if Mobilink cancels Ericsson’s contract, it has to compensate the vendor as Ericsson signed the contract with Warid for two years in April 2014, source added.
3. The main reason for failure of Warid sell off in the past with many telecom giants include heavy liabilities; which can somehow make Mobilink either rethink or slows down to come to final decision about the merger.

Both parties have declined to comment on these news while saying that “We don’t comment on market rumours or speculation.”

The news first appeared in: Daily Times