Millicom mulling Pakistan exit

13 Nov 2006

Millicom International Cellular (MIC) has announced that it is considering exiting the Pakistan mobile market due to long running concerns over the profitability of its wireless subsidiary Paktel Ltd. In a statement the company said: ‘Millicom had been considering significant investments to build market share in Pakistan but the return on those investments had been overshadowed by, among other things, the challenging business conditions in the Pakistan mobile telephony market and frequency interference issues. Paktel has been granted additional 1800MHz spectrum to resolve these issues but the grant of such spectrum was not permanent and, as part of an overall discussion with the Pakistan Telecommunications Authority (PTA) to resolve these interference issues permanently, Paktel has requested a deferral of the latest instalment of its licence fee (USD29.1 million) which the PTA has not granted. As a result, Millicom is considering a sale of its interest in Paktel, but there can be no assurance that the sale will be consummated and another option that may be considered is the closure of Paktel.’

According to TeleGeography’s GlobalComms database, Paktel launched AMPS services in 1991. It was awarded a GSM-900 licence in February 2003, which enabled it to begin migrating its customers from analogue to digital networks. In October 2003 it was awarded additional GSM-1800 spectrum free of charge, but when the PTA subsequently awarded two new cellular licences for USD291 million in April 2004 it said it wanted to introduce licence fees for existing spectrum allocations. In August 2004 Paktel filed a lawsuit against the PTA, refusing to pay the USD38.8 million fee the regulator said it owed for the GSM-1800 spectrum, but its appeal was thrown out by the High Court in Lahore just days later. Millicom has since been rumoured to be looking to exit Pakistan and agreed to offload a 10% stake in Paktel to Arfeen Group in June 2006 as part of a deal which saw it sell its other Pakistan cellco Pakcom to the same buyer; as a result it now owns 89.9% of Paktel.

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