Friday, April 18, 2008 10:59:25 PM Oman Time. MUSCAT: Omantel, the Sultanate’s biggest telephone company, has completed the acquisition of a majority stake in Pakistan’s Worldcall Telecom Limited.I continue to consider this a bizarre transaction, with limited economic justification beyond vapid talk of a huge market (see the full article for lots of bullshit about the strategic positioning of WorldCall). The deal values the Pakistani company at more than 30x net income (2007 income was just over $10mln), for a company that reported flat revenue from 2006 to 2007 and declining profits.
As per the deal Omantel has acquired 488.8 million shares of Worldcall for a consideration of $200 million. Of this, 451.2 million shares were acquired from the sponsors itself while 37.5 million shares were purchased through the securities market route or from the public.
A press conference was arranged yesterday at a hotel in Lahore to mark the occasion. Omantel’s CEO Dr Mohammed bin Ali Al Wohaibi apprised the gathering of Omantel’s plans in Pakistan.
And, of course, the majority of the shares were bought from an Omani Businessman Sheikh Sulieman Ahmad Said Al Hoqani, using mostly the Government’s and the public’s money (as Omantel is a publicly traded company on MSM but still majority Omani Government owned). Hmmmm. Perhaps I just don’t have enough vision to see the huge income growth potential WorldCall offers Omantel, especially once wedded to Omantel’s experience and lower cost of capital, although I’m clearly not alone in that as the shareprice has stayed around 18 PKR. Omantel also seems to be financing the deal through a syndicated loan issue.
Certainly, the Muscat market shrugged off the news. Omantel’s shareprice is still rising, and once the long sought after strategic investor is found or announced, I would expect a further bump-up in Omantel share price if that strategic partner is a big mobile operator from elsewhere in the Gulf area.
Omantel therefore admit to having paid around 25 PKR (Pakistani rupee) per share, a 50% premium on the recent traded prices, but more than two and a half times, ie 250% what was the traded value of the company in 2007 before the rumour of the bid leaked. You can see the graph of the WorldCall share price here.
Somebody must be very, very, happy that Omantel decided to do this deal, and must be Sheikh Al-Hoqani and his associates in First Capital Securities Corp. Ltd. The relationship between WorldCall and First Capital Securities Corp. is also totally unclear, although they essentially share the same board of Directors and have the same CEO. And debt interest payments were around 50% of WorldCall's operating income. I wonder who holds that debt?
If you’re interested, you can find full publicly reported Financials on WorldCall here.
I posted on this previously in November 2007
Note, I misquoted WorldCall CEOs pay in the earlier post – he was reported as paid 1.6 mln PKR, not US dollars!