Vodafone to own 23% of green-field Qatar OpCo; invest £250m-plus
30 May 2008
Vodafone and Qatar Foundation LLC intend to sell 40% of the shares in a new operating company, Vodafone Qatar Q.S.C., via an initial public offering (IPO), according to reports.
Pending confirmation of a mobile licence and other approvals, HSBC Middle East Ltd and Qatar National Bank have been nominated to oversee the IPO, which will see Vodafone and Qatar Foundation retaining a 45% stake in Vodafone Qatar, with a further 15% to be held by the state institutions, and the remaining “40% of the share capital will be allocated to an initial public offering for Qatari nationals on the Doha Securities Market”.
Vodafone Group owns 51% of Vodafone and Qatar Foundation, via its Vodafone Europe B.V. entity, with the Qatar Foundation for Education, Science and Community Development (Qatar Foundation) holding the balance.
“ We are a non-profit body committed to education, research, and community development. And whatever we earn from Vodafone Qatar we will plough back to promoting these. ”
— Rashid al-Naimi, Vice-President of Administration, Qatar Foundation.
This suggests that Vodafone will ultimately hold a 22.95% economic interest in Vodafone Qatar.
Under the terms of the licence held by the joint venture, 40% of the company must be sold to the public by 30 November 2008 — a deadline that appears to have been extended from 30 June 2008. Vodafone and Qatar Foundation won the bidding for Qatar’s second mobile licence in December 2007.
Vodafone Qatar is tipped to commence services in the first quarter of 2009, and to quickly cover the whole country, although Vodafone previously stated that services could start before the end of 2008. The operating company is said to be Vodafone Group’s first green-field start-up for ten years.
“ With the agreement of the regulator, we have decided to undertake the IPO in the autumn [of 2008], and we expect services to be launched at the very end of 2008 or early-2009.”
— Mark Pursey, spokesman, Vodafone Group.
The local regulator, the Supreme Council of Information and Communication Technology (ictQATAR), subsequently revealed that Vodafone Qatar’s licence will cost QAR 7.716bn (£1.07bn/€1.36bn).
“ $2.1bn is fair value by Gulf standards [for a mobile licence] to compete against the region’s last monopoly. Although Qatar’s penetration rate is already above 100%, they should be able to win share from Qatar Telecom. ”
— Andrawes Snobar, analyst, Arab Advisors Group.
It was previously reported that Vodafone’s share of the bid was less than £300m (€383m), which would seem to fit with a proportionate share in the region of £250m. However, Vodafone Qatar will have additional capital investment and working capital requirements, which, presumably, could easily double this funding requirement, although the entity could raise additional funding in its own right, thus capping Vodafone’s direct investment at a previously suggested $400m (£202m/€258m).
The licence is likely to be for 20–25 years, and may include fees related to revenue and “industry projects”, rollout obligations, number portability, and national roaming rights restricted to Al Rayyan and Doha. Vodafone appears to have been interested in seeing the draft licence extended to encompass fixed-wireless spectrum and to ease proposed restrictions on the use of “mobile backbone transmission and international gateway facilities”.
- Qatar has a population of 900,000 or more, including foreign nationals, but, like other Middle East markets, it also has: a rich and fast-growing economy; large-scale immigration, particularly of guest workers; many expatriates utilising international services; few players (state-owned Qatar Telecom, or Qtel, is the region’s last monopoly); and supports relatively high average revenue per user (ARPU) and probably early adoption of value-added services.
Aside from revealing the IPO plans, Vodafone and Qatar Foundation’s board made other key announcements, including the intention to appoint Grahame Maher as Chief Executive of Vodafone Qatar, and the application for government and regulatory approvals to incorporate Vodafone Qatar. 49-year-old Maher currently heads Vodafone Czech Republic (see separate report) and, in a statement, his track record leading other operating companies in Australia, New Zealand, and Sweden was also flagged.
Vodafone and Qatar Foundation’s board of directors is constituted of:
- Rashid al-Naimi (Qatar Foundation).
- Paul Astley (Vodafone Group).
- Ian Gray, Chairman (Vodafone Group; Chief Executive, Vodafone Egypt).
- Sheikh Hamad Bin Nasser al-Thani (Qatar Foundation).
- Matthew Harrison-Harvey (Vodafone Group; Senior Public Policy Manager).
Vodafone Qatar itself is expected to have nine directors, of which four will be nominated by Vodafone, two by Qatar Foundation, two by shareholders, and one by the government.
The arrival of Vodafone Qatar is expected to see communication costs fall, with the country said to have the highest ARPU in the region, at around $85 (£43/€55) per month.
Maher on Vodafone Qatar
“ We have been accused of paying too much every time we buy a licence. This is speculation by analysts who do not know what they are talking about. We believe it is a good business and investment. ”
“ Vodafone Qatar hopes to achieve nationwide coverage as quickly as possible. ”
“ We have the benefit of starting from the beginning. We will have the highest technical capability from day one and we will be focusing on services and how to deploy these. ”
“ I guarantee serious competition. We will bring in new services and tariffs, all of which will be made known to the media once we get ready to start up. ”
“ We may have the local and international combination of call centre locations. But our service team will be based in Qatar. It is absolutely essential to quickly reach our customers whenever they require us. ”
“ Qtel is a very good operator not just in Qatar but in many places around the world. We know it is going to be a hard battle. But we have the knowledge, expertise, and capability to penetrate the market. We are bringing the best team to achieve it for us. We will also rely heavily on technically competent Qataris who can make it happen. ”
“ We will reduce our operating costs so that we can maximise value to our customers. Wherever possible, we will co-operate with Qtel so that the expenses can be reduced. For example, we can consider sharing towers so that the operating costs in terms of site lease fee or electricity charges will get reduced. ”
“ We have gone to much smaller markets in Europe and in Fiji and are doing well. Setting up the required infrastructure in Qatar will not be difficult. Qatar is only being built. We can build the necessary infrastructure and a separate gateway here in time. ”
[Vodafone, 28 June 2007; Reuters, 11 December 2007; Financial Times and AFX, 25 March 2008; Al Bawaba, Gulf Times, Mena Report, Reuters and Vodafone and Qatar Foundation’s, 24 April 2008; Reuters, 27 May 2008; Bloomberg and Gulf Times, 28 May 2008; Gulf Times and The Peninsula, 29 May 2008.]
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