The Gulf's smaller states are leading the latest wave in the issuance of new mobile operating licenses and the manner in which they are choosing to go about it reflects the sometimes divergent agendas of national regulators and potential investors/operators.
Earlier this week Kuwait's Establishing Committee for the Third Mobile (ECTMTC) Telecommunications Company issued a request for information from foreign and domestic investors interested in acquiring up to a 26% stake in the proposed company. The Kuwait government has already established that a 24% stake in the new operator will be owned by the state and affiliate institutions, with the remaining 50% set to be listed publicly on the stock exchange.
The ECTMTC expects the 26% stake to be sold to a Kuwaiti listed company or a foreign telecoms operator though incumbent operators MTC and Wataniya are excluded from becoming directly or indirectly involved in the shareholding of the new company. It will thus be interesting to see the calibre of telecoms investor that is attracted to assuming a minority stake in the third operator in a market that has a limited population and in which SIM card penetration already exceeds 100%.
From where I am sitting, I find it difficult to believe any of the region's tier one operators such as Etisalat, Orascom Telecom or STC would make a play for the stake, and it would be understandable if even some of the smaller yet largely ambitious regional operators such as Qtel, Batelco and Omantel passed on this particular investment opportunity.
It is true to say that when Wataniya Telecom entered Kuwait as the second mobile operator in 1999, similar doubts had been raised regarding the government's ownership of a stake in the operator as well as the prospects of success for a second player in a market that monopoly MTC appeared to be servicing satisfactorily. However, the staggering US$7 billion valuation placed on Wataniya through the majority stake acquired by Qtel earlier this year makes a strong case for the value that can be created under circumstances that may upon first glance appear limited.
In Qatar the national regulator has announced that 12 of 17 bidders have been shortlisted for the country's second mobile licence. It is a strong field of regional and international interested parties, a list that the committee in Kuwait would no doubt be envious to attract. Orascom Telecom, Vodafone, Etisalat, MTC, AT&T, and Reliance are amongst the pre-qualified participants and ictQatar expects to award the second licence in October, having assessed the bidders on expertise, financial security and operator commitments, amongst other criteria.
In an attempt to make the licence offer as attractive as possible, ictQatar has included a clause in the licence conditions that places a three-year moratorium on the entry of any independent service provider into the market. So while this clause helps protect the interests of the winning bidder for an initial period of time, and thereby increases the value of the opportunity and raises the amount that is expected to be bid by interested parties, the moratorium also runs the risk of stifling the development and introduction of innovation in Qatar's telecoms market by third-party service providers.
ictQatar further announced that a 40% stake in what becomes Kuwait's third mobile operator shall be offered in a public listing, while a further 15% will be held by government. In the similar situation to the one in Qatar, this leaves the ultimate telecoms investor as a minority stakeholder in the operator to be established, and while such a model has not deterred telecoms operators from paying significant upfront licensing fees in Saudi Arabia, it remains to be seen what type of value will be placed on the greenfield opportunities in these smaller Gulf countries given the terms of investment.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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