No Tell Mobitel

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The market is going blue in the face waiting for the outcome of the battle of the suitors for a stake in CamGSM, the parent of local mobile phone company Mobitel – part of Khmer conglomerate Royal Group.

In December 2010, Reuters reported that France Telecom and Telekom Indonesia were both vying for a place at the Mobitel table, with the former bidding to buy a minority 40% interest while the latter was negotiating the acquisition of a majority stake, apparently valued at over $US500m, in CamGSM.

CamGSM, fully owned by Cambodia’s Royal Group after it bought Millicom Group’s 58.4% stake in 2009 for $346 million, was until recently the largest mobile operator in Cambodia through its Mobitel and Cellcard brands. At that time, France Telecom had been rumoured to be in negotiations to buy the whole company, but the deal apparently fell over at the last hurdle.

Up until being saddled with the massive interest bill from its bridging loan used for the buyout of Millicom, Mobitel had been Royal Group’s cash cow. However, Royal was left with an unsustainable debt from a bridging loan financed by Standard Chartered and ANZ after the France Telecom deal fell over. Since then, however, this appeared to have been remedied when Royal pulled off a coup in November 2010 by refinancing the debt on much more favourable terms through a loan from the Bank of China.

At the same time, Mobitel inked a five-year deal worth $500 million for the supply of equipment and services from China’s Huawei Technologies, building on an initial three-year $200 million deal at the beginning of the year.

Telekom Indonesia’s bid puts the total valuation of Mobitel at around $US1 billion, a stunning 60% premium on its value at the time of the Millicom buy-out. This seems somewhat rich given that statistics from Cambodia’s Ministry of Posts and Telecommunications (reported by the Phnom Penh Post) in November 2010 that showed Mobitel had dropped to become the number two by subscriber numbers.

Analysts are now curious why a deal with either France Telecom or Telekom Indonesia has not been struck?

Is it possible that the deal that helped secure the loan from BoC, involving what many regard as an unnecessary revamp of Mobitel’s infrastructure, is now holding up sealing the deal? Any undisclosed ancillary conditions to the loan could make valuations of CamGSM’s assets extremely difficult to reach agreement on.

Is this what is holding up agreement on the dowry?

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