Saudi Oger increases stake in Zapp, Qualcomm makes exit

The company's lack of communication in recent months was explained by Di Pietro through the changes that are going to happen in the shareholding structure of the company. The present two major shareholders of Telemobil are the chipset producer Qualcomm and Saudi Oger, through Omina investment fund, and Inquam, who control about 50 percent each.
“The weaker communication of our plans in 2007 is due to the negotiations held between the two shareholders for the exit of Qualcomm from the Telemobil business. This does not mean that a new shareholder could enter the business, only that Saudi Oger will increase its stake. By the end of the year the transaction should by closed,” Di Pietro said.
The GM could not provide any details about the value of the transaction or possible changes that could take place with involving business, management or focus of the operator due to this move. The discussions between the two shareholders for the selling of shares to Saudi Oger started a few years ago, but they entered the final stage this year and the complete takeover by Oger should take place by the end of December. Qualcomm's decision to exit the business was caused by the focus on the chipset production, while for Saudi Oger, telecommunication is the core business.
Saudi Oger, through its subsidiary Oger Telecom, provides telecommunication services, fixed-line services, mobile communications and internet access in the Middle East, Europe, Africa and other regions worldwide. Oger Telecom controls 55 percent of Turk Telecom, the leading fixed-line telephony operator in Turkey, which controls 81 percent of the third largest mobile telephony operator in Turkey, Avea. Oger Telecom manages the third license in South Africa, Cell C, and has 75 percent indirect ownership of the company. It has other stakes in Inquam in Romania and Portugal.
The news about the changes in Zapp's shareholding structure comes after persistent rumors about the sale of the company's 3G license or even the entire business.
After the transaction between shareholders is completed the operator will proceed with its plans to launch pre-paid services in the first quarter of 2008 and 3G services in the second quarter of 2008. Other plans include the expansion of its current network. “The total investment for both the 3G network and launch of services and the current network expansion is about $50-60 million,” the GM said. The 3G services will use CDMA technology on the 450 MHz frequency, where the majority of the network is already built and needs further updates. The financing for the investment will be provided by the shareholders or a shareholders' guaranteed loan, still to be decided. By the end of 2009, the operator plans to reach 97-98 percent coverage of the population.
At the launch, the 3G services will be available in 19 cities, while by the end of 2008 the coverage should increase to 113 cities in the country. “We put this coverage in the offer we made to the regulator for obtaining the license, along with the commitment to launch commercial 3G services by June 2008, but we are going to do this sooner,” said Di Pietro. Next year the operator will also start some advertising campaigns and will put more money in marketing to promote its newly-launched products, which will continue to focus on data services. This year, the company's marketing budget was about 50 percent smaller than the previous year.
Next year, the operator will also increase its number of dealers and owned shops, once the 3G services are launched. Currently there are about 250 Zapp shops on the market, out of which 24 are owned by the operator and the other shops are dealer-owned.
In October the CDMA operator launched VoIP services inside the network for a flat fee. By the end of 2008, Di Pietro expects the new service to have up to 20,000 customers. “We are very confident in the success of this service. This is the future in telecommunication. In time, operators will launch offers based on a flat fee subscription, with no time limit for calling minutes. This is also our mid-term strategy; unfortunately the interconnection regulations prevent this from happening among different operators,” said the GM. In his opinion, another characteristic of the telecommunication market in the future will be the attention given to the rural areas which will generate significant revenue.
The number of clients for Zapp's fixed telephony service, FixTel, is currently close to 60,000. By the end of the first half of 2007, the operator had a little over 500,000 clients, while the turnover was at almost the same level of Cosmote's, Razvan Patrunoiu, finance manager of Telemobil, said. Cosmote's revenue for the first half of the current year was more than EUR 63 million. In contrast to Cosmote's focus on mass-market voice services, Zapp's focus is on delivering mass-market data ones.
At the end of the first half of 2007 Cosmote had more than 2.2 million customers. The other two operators on the market, Vodafone and Orange, have already launched 3G services on the market and are the leaders in terms of revenue, profit, and number of clients. The latest entrant on the mobile telephony market is RSC&RDS, which also owns a 3G service license.
The local market of telecommunications had a value of EUR 4.2 billion in 2006, while regulating authorities estimate its value to reach EUR 5 billion in 2007.

Roxana Mihul