Telecom companies from around the world are dashing to the Asia Pacific region as they begin to find willing sellers that need cash to expand their telecommunications services.
“It’s definitely a buyer’s market right now because of the economic conditions in the market,” said Edward Czarnecki, director of international consulting for telecommunications and media with BIA International Inc. in Chantilly, Va. “A lot of telecommunications companies in Asia are looking for cash … Asia is a major market by any standard, and there may be a window of opportunity for many operators in Europe and the United States to invest in telecom properties now at relatively attractive terms with a significant upside in the future when these economies heat up again.”
Czarnecki said many Asian operators and governments are looking for outside money to finance telecom projects.
“At least one Pacific-Rim country is in the market for a small soft loan to help,” he said.
Several U.S. and European companies are said to be sniffing around in Asia for joint-venture schemes. A tremendous decrease in inflated asset values offers a historic opportunity to buy, say analysts. Many companies, after suffering for more than a year with currency devaluations and economic instability, now are willing to sell assets at prices buyers want to pay. Governments also are relaxing foreign-ownership limits within their countries either out of economic need or because of International Monetary Fund requirements.
“Carriers can’t raise money locally because the liquidity in their markets has disappeared,” said Sandy Calhoun, international telecom attorney with Deacons Graham & James in San Francisco. “They must look abroad for financial resources to expand services.”
South Korea
South Korea has become a hotbed for investment. Last week, Korean personal communications services operator KT Freetel said it received a letter of intent for an estimated $380 million equity investment from an unnamed U.S. fund. The fund will hold a 20-percent stake in the company through purchasing new shares.
The country’s two other PCS operators already have received investments from foreign companies. British Telecommunications plc in October announced plans to acquire a 23.49-percent stake in LG Telecom and will spend about $392.1 million for the stake. In August, Bell Canada International Inc. and financial services firm American International Group Inc. agreed to invest a combined $265 million to purchase a 39.4-percent interest in Hansol PCS Co. Ltd.
British Telecom has said its strategy is to form joint ventures and work with strategic partners in leading markets in the Asia-Pacific region. Besides its investment in LGT, the company announced this summer it will take a 33.3-percent stake in Binariang Bhd, a fixed and mobile services provider in Malaysia.
Yet even more attractive for foreign investors is the fact that some companies in the affected regions, like South Korea, still are growing their subscriber bases because prices have become competitive with wireline service. Analyst firm Warburg Dillon Read estimates South Korea will hold about 13.5 million mobile phone subscribers by the end of 1998, compared with 6.8 million the previous year. LGT alone is expected to add more than 1.6 million subscribers this year.
Bell Atlantic International said its wireless venture in Indonesia is growing its customer base despite severe economic problems in the country.
“Wireless service is certainly coming in line with landline rates in many cases,” said Steve Fleischer, spokesman with Bell Atlantic. “If all things are equal, people will choose wireless. Obviously people want to have the freedom and accessibility that wireless provides.”
Still, the window of opportunity for investors in Asia may not last too long. Eli Noam, telecommunications economics professor with the University of Columbia, said governments’ policies toward foreign investment can quickly change.
“Privatization and foreign investment are welcomed, but attitudes can change,” he said. “There may be a phase countries go through to solicit foreign companies and try to get the best deal out of them. Once they get the benefits of the best deal, they may not do it a second time.”
