The prospective buyer is a consortium between Pakistan’s TPL Properties and a UAE-based mobile telecom tower operator, TASC Towers.
The official filing of TPL Properties to the PSX read, “ We are pleased to announce that the Parent of one of the largest Telecom Tower operators in Pakistan, has conditionally accepted the offer, subject to signing of definitive agreements, all necessary corporate approvals and receipt of relevant regulatory approvals, made by our subsidiary TPL REIT Management Company Limited in partnership with TASC Towers (the “Consortium”) for acquisition of their subsidiary (Telecom Tower Infrastructure Company) which owns and manages more than 10,500 telecom towers in Pakistan.”
The reason for setting up a tower company for Jazz was clear -- it was looking to sell it. In pursuit of this objective, the telco giant entered an agreement with Edotco, one of the largest tower operating companies in 2018.
The subsidiary company being referred to is Deodar, a subsidiary of PMCL (Jazz), formed in August 2016 and was transferred the ownership of tower sites of Jazz in February 2017.
The reason for setting up a tower company for Jazz was clear -- it was looking to sell it. In pursuit of this objective, the telco giant entered an agreement with Edotco, one of the largest tower operating companies in 2018.
However, the deal fell through as the regulator played spoilsport and denied approval for the transaction. Experts close to the matter state that the reason for pulling the plug on the deal was presence of an Indian member on the Board of Malaysian telecom firm Axiata, the parent of Edotco.
Yet, troubles for Deodar continued. The Federal Board of Revenue (FBR) passed an assessment order on June 22, 2019, against Jazz in respect to the gain on sale (in effect transfer) of the tower business to Deodar. The income tax demand was a massive Rs22,033 million. Later, Jazz challenged the demand in the Islamabad High Court.
The question arises that why sell the towers? There are two reasons for it. Firstly, the sale would free up significant investment for Jazz which can be channeled to core operations (spectrum, licenses etc.) and business development (Jazz World, Tamasha etc.).
Secondly, by leasing out tower infrastructure instead of owning it, Jazz (or any telco) would save on operational costs as sites are shared between multiple operators which reduces the per tenant cost.
Such transactions are all the more important for a country like Pakistan, where tenancy ratio of tower sites is in the lower echelons, lurking around 1.3, and high energy costs of operating tower sites is preying on the telecom sectors bottom-line.
Yet, sharing infrastructure is not a new phenomenon for the industry. One can take a hint from developments across the border. As per EY, “The “towerco” business model unlocked significant gains – from rapid market expansion and faster time to market, to opex and capex efficiencies, and offloading capex burden from telecom operators. Today, India has 83% of its tower sites owned by towercos, only second to China (100%).”
Pakistan, however, has been late to the party due to absence of a regulatory framework for infrastructure sharing. “Unfortunately, in our country, we’re still waiting for a framework that was promised more than five years ago in the policy,” said Irfan Wahab, CEO Telenor Pakistan, in an interview with the Profit.