- $110m sale price less than agreed
- Buyer was Singapore’s Nine Communications
- Ooredoo may have lost $2.7bn
Qatar’s Ooredoo sold its Myanmar mobile network for even less than it originally agreed, new figures reveal, as one expert suggested its multi-billion-dollar losses may also be higher than previously estimated.
The new figures in the telecom operator’s latest financial statement shed further light on a market that was once touted as the last major untapped opportunity in mobile communications.
Ooredoo and Norway’s Telenor became Myanmar’s first foreign-owned mobile operators as the military junta sought to liberalise the economy. On winning a licence in June 2013, Reuters reported the Qatari business would spend $15 billion in Myanmar and launched services the following year.
Mobile penetration soared to 107 percent in 2022 from just 7 percent in 2012. Yet on May 31 this year Ooredoo sold its entire Myanmar operations for QAR400.5 million ($110 million) to Singapore’s Nine Communications. The buyer will pay this amount in instalments over five years, according to the Qatari company’s second-quarter financial statement.
That final sales figure was less than the $162 million announced in September 2022. When asked why Ooredoo had accepted a lower price than originally agreed, a spokesperson said: “This is a reflection of general market conditions locally.”
Neetika Gupta, head of research at Muscat’s Ubhar Capital, said the discrepancy in the announced and final sales prices could also be due to regulatory hurdles or operational challenges.
“It underscores Ooredoo’s urgency to exit a difficult market and reallocate resources to more profitable regions,” she said.
The company has operations in nine countries including Kuwait, Iraq, Oman, Algeria, Tunisia and Indonesia.
Impairments
The spokesperson declined to comment when asked how much money it spent on its Myanmar operations. In 2021, Ooredoo took impairments of QAR 2.25 billion ($618.1 million) on the subsidiary.
Ubhar Capital estimates the business lost about $2.7 billion in Myanmar from 2013 to 2022. Analysis by AGBI last year had estimated the losses at $2.3 billion.
“There’s a cost to cutting your losses and exiting a market that is becoming less and less desirable,” said Omar Maher, a telecoms analyst at EFG Hermes in Cairo.
“Ooredoo is in the process of refocusing its entire portfolio. The company is rationalising its operations and trying to exit markets that are considered non-core and offer little potential – Myanmar was the most notable of these.
“The sale amount wasn’t a great price, but Myanmar isn’t a market that attracts many potential buyers. In a situation like this if you receive an offer that will enable you to recoup some of what you invested then it’s best to sell.”
Ooredoo’s Myanmar unit generated annual revenue of QAR850 million in 2023, down from QAR1.04 billion a year earlier, while its subscriber base has shrunk by nearly half since 2020.
“It was fortunate to secure $110 million from the sale,” said Gupta.
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Unpredictable market
Local currency depreciation, a scarcity of dollars, a lengthy process to obtain dollars, supply chain disruptions and higher transport costs raised operating costs and put “further pressure on already thin profit margins” at its Myanmar operations, Ooredoo’s 2023 annual report states.
“Myanmar was a significant drag on its performance. It appeared to be a very promising market when it was bidding for the licence,” said EFG Hermes’ Maher.
“In practice, operating there proved difficult, especially with all the political turbulence. The currency also depreciated considerably. As a telecom operator, you want to be in markets where the currency is stable, where there isn’t uncertainty from a political or economic perspective. Myanmar’s regulatory environment was also very unpredictable.”
Earnings
Despite the issues in Myanmar, Ooredoo Group reported that net earnings attributable to shareholders rose 4 percent year on year to QR1.9 billion ($512 million) in the first six months of 2024, driven by strong performance in its core markets.
Revenue grew 3 percent annually to QR11.8 billion thanks to solid operational performances in Iraq, Algeria, Qatar, Tunisia and Maldives.