Jazz, Edotco Cancel $940million Deal Amid Approval Delay

Edotco Group Sdn Bhd, the Malaysia-based telecom infrastructure services firm, and Pakistan Mobile Communication Limited (PMCL), commonly known as Jazz, have scrapped a $940 million deal, involving acquisition of 13,000 cellular towers, after a long approval limbo, officials said on Monday.

“It was bad luck, but there was no option other than cancellation of the deal,” a senior official at Jazz. The Jazz official said both the companies were attempting to complete the transactions for the last one year and had engaged the authorities concerned for approvals. “However, due to unwanted delays the deal was cancelled by both the parties,” he said.

The Jazz official added that such tower acquisitions were witnessed when the telecom industry reaches a certain level of maturity and Pakistani industry had hit that stage. This development comes as a blow to foreign direct investment in Pakistan mainly because of a hold up in certain regulatory approvals by government offices including Pakistan Telecommunication Authority (PTA), State Bank of Pakistan (SBP,) and others.

Earlier, the deadline to complete the deal was July 2018; however, both the parties agreed to extend the agreement till September 15 anticipating positive development after general election in Pakistan. But, there had been no further movement on the acquisition even after Pakistan Tehreek-e-Insaf’s (PTI) coming into power.

Another industry official said such deals by and large hit snags at a time when governments were undergoing a transition of leadership, but in Pakistan’s case it had been longer than usual.

“Both Pakistan and Malaysian governments passed through the transition during the last five months or so. Thus, progress on the approvals was halted practically,” the official said. In the case of the PTA, he specifically mentioned the authority’s board was incomplete as the last chairman Dr Ismail Shah’s tenure had come to an end and neither a new chair was appointed nor was the last one given any further extension.

“In the absence of chairman PTA, no policy decisions were made and no approvals were given to the industry during almost last seven months, which ultimately led to the cancelation of deal,” the official said.

Further, the official added that both parties, anticipating a positive development and appointment of a new chairman PTA, extended the deal completion time to September 15. “However, having received no positive response regarding the progress of approval process, the both parties mutually decided to cancel the deal and walk away,” the official said adding, despite this blow, both the companies were positive to do business in the future.

The industry official said it would adversely affect the future plans of government of Pakistan in telecom sector expansion, especially its plan of auctioning of 5G spectrum. Further, the previous government had successfully auctioned the 3G and 4G spectrum and earned foreign exchange, while the cancelation of edotco-PMCL deal would have lasting impact on the future foreign investment in the telecom sector of Pakistan.

The edotco Group Sdn Bhd, a subsidiary of Axiata Group Berhad, in an official announcement said that “The transaction was subject to a number of conditions and terminated due to the non-fulfillment of the conditions precedent to the SPA (sale and purchase agreement) within the stipulated time frame, in particular regulatory approval for the resulting change of control contemplated under the SPA,” the company said.

However, the statement said edotco was committed to Pakistan and would continue to grow its existing business under edotco Pakistan, comprising today of the towers acquired by Tanzanite Towers carried out earlier this year. Suresh Sidhu, chief executive officer of edotco Group, said they did not foresee this affecting their business goals and aspirations.

“We are confident in the potential of the growing market in Pakistan and are committed to the existing operations there. We continue to develop our pipeline of opportunities into Pakistan as well as into other markets in South and South East Asia and are confident we will be able to meet our goals for business growth,” Siddhu said.

Arif Hussain, country managing director for edotco Pakistan said they had seen strong progress in Pakistan since their first acquisition here and business was growing with new orders for sites as well as high demand for adjacent opportunities such as energy solutions.

“We remain focused on building the business in Pakistan,” Arif added.