VEON has confirmed that it will sell its Pakistani towers business to a subsidiary of Malaysian telco giant Axiata for US$940 million following an earlier Bloomberg report suggesting the operators were in talks.
Under the cash deal announced Wednesday, Axiata Group Berhad infrastructure division Edotco and a Pakistani investment firm called Dawood Hercules will together pay 98,700 million Pakistani rupees ($940 million) for Deodar, the towers business of VEON subsidiary Jazz.
The agreement will leave Edotco with a 55% stake in Deodar and Dawood Hercules with the remaining 45%.
It will give them about 13,000 towers and appears to support Axiata's broader strategy of acquiring more infrastructure assets in Asia before it eventually lists the business.
VEON, by contrast, believes an "asset light" approach will free up resources for investment in services and digital transformation. (See VEON's Digital Overhaul Much More Than Rebranding.)
The Amsterdam-headquartered operator, which counts Russia as its biggest market and changed its name from VimpelCom earlier this year, has been channeling funds into software and virtualization technologies as it looks to regain some of the services territory it has lost to Internet players.
In a statement, VEON said the transaction valued Deodar at a "high single digit multiple" of its annual earnings (before interest, tax, depreciation and amortization), without providing more detail.
It also said that Deodar would enter into a 12-year "master services agreement" with Jazz following the sale -- which it expects to complete by year end -- to ensure its Pakistani business can continue to make use of Deodar's assets.
VEON intends to use the proceeds from the sale to pay for spectrum and slash debts at Jazz. According to the terms of the deal, it will receive PKR69.93 billion ($666 million) when the deal closes and the remainder of the fee within 12 months of that date.
VEON controls Jazz through its 57.7% stake in Global Telecom Holding (GTH), which is also the holding company for a number of other VEON subsidiaries in emerging markets, including Algeria's Djezzy, North Korea's Koryolink and Bangladesh's Banglalink.
"This transaction is highly value accretive for VEON and GTH and a further execution of VEON's asset light strategy," said Jean-Yves Charlier, VEON's chief executive, in a statement. "It also reflects the start of a long-term partnership with a strong counterparty with significant experience in tower management."
Today's deal follows VEON's sale of about 7,300 towers in Italy to Spain's Abertis for about €693 million ($828 million, at today's exchange rate) in 2015.
While Abertis then paid about $100,000 per tower, Deodar is costing Edotco and Dawood Hercules just $72,000 per tower. An analyst cited in a Bloomberg report said the figure made sense given that average revenue per user is substantially lower in Pakistan than Italy.
— Iain Morris, , News Editor, Light Reading