A lack of transparency overshadows Vodafone’s Qatar win

Consumers in Qatar will care little for the way the licensing was handled, however, but will be far more interested in what it will mean to them in terms of extra services and discounted tariffs.

Unexplained changes to bidding

Mobile customers will have to wait until well into next year, however, for the Vodafone consortium, which also includes the Qatar Foundation, to begin rolling out its services. But for now, ictQatar, the country’s telco regulator, has come under criticism from some circles for the way it handled the award of the licence.

In September, ictQatar announced that seven interested parties would have their bids put through a technical evaluation before moving on to a ‘single round auction’ for the surviving candidates which would essentially see the licence handed over to the highest bidder.

But a source close to the bidding, speaking on condition of anonymity, said ictQatar made a radical eleventh hour change to the procedure after the bids had been submitted. ictQatar apparently wrote to the various consortia in mid November and told them their bids would be opened on November 20. The regulator would then inform them what the highest price was and when they needed to submit a fresh second bid - thereby creating an extra round to the contest.

‘The bids were not opened in public, which in itself is quite unusual, and the consortia were told the highest bid was $1.8bn. At this point, Vodafone, the eventual winner, is understood to have been lagging behind with an offer substantially below this figure.

‘The second set of bids was also opened behind closed doors and by this time Vodafone had supposedly upped its offer considerably because the eventual third placed consortium, headed by Etisalat, is strongly believed to have offered over $2bn.

‘But for some reason ictQatar won’t reveal the winning bid price which is really strange given that they revealed the first round figure and this was meant to be an auction. None of the other rivals knows for sure if they were actually out-bid or not. The lack of transparency has somewhat undermined the whole process.’

Estimating the price

The Reuters news agency has reported that Vodafone has paid around $600m for its share of the deal. It is unclear just how big a stake Vodafone actually has in the consortium and if, in fact, it owns a minimum holding of the majority of the consortium’s eventual 45 per cent stake in the new mobile operation (basically 22.5 per cent, plus one share), as required by ictQatar’s initial qualification criteria, then the winning bid could in fact be in excess of $2.5bn.

But AME Info’s source alleged that the second round of bidding wasn’t necessarily about securing a top dollar return for the licence.

‘There is a belief in some quarters that the Vodafone bid was clearly the preferred one and the extra round of bidding was a means to an end, with regard to giving sufficient time for the generation of a much improved offer. So price was not really the driving issue here.’

Indeed, our source suggested that a price of well over $2bn for the licence could actually cause a problem for the business as it would take more than ten years for the start-up operator to generate a seriously viable profit. Additionally, 40 per cent of the new firm is set to be sold off in an initial public offering and if shares are offered at full par value then investors could potentially struggle to get a good return.

ictQatar itself declined to make any comment on the late changes to the bidding process and why the winning bid was not made public, when approached by AME Info.

Good news for consumers and deregulation

But the supposed peculiarities of the bidding process will inevitably become yesterday’s news and, moving forwards, Qatar’s consumers will be able to bid farewell to the end of the final monopoly in the Arab region and enjoy the associated benefits.

Vodafone is considered a progressive firm well versed in competing in existing markets. It has a reputation for building quality networks and businesses and it will undoubtedly deliver a great deal of product innovation that will benefit Qatar’s mobile users. The increased competition will also lead to greater mobile penetration, which already stands at well over 120 per cent.

ictQatar’s award of the licence also marks an important step towards deregulation in the Gulf state’s telecommunications sector and another major move in this direction will be the handing over of Qatar’s second fixed line licence. This should occur within the next few months and will take the form of a comparative evaluation process, involving no financial bids, according to ictQatar’s most recent announcement.

Indeed, Vodafone, having secured Qatar’s second mobile licence, could now be well placed to snare its fixed offering too and make serious headway into Qatar’s telco sector. The firm could utilise its 3G mobile network to roll out wireless local loop and high speed data services, thus achieving significant economies of scale.

See also:
As ictQatar looks to licence, Qtel looks to expand
ictQatar quickly changing the face of Qatar’s telco sector
Special Report: Mobile telecoms in the Middle East