The telecommunications industry in Papua New Guinea is synonymous with the rugged terrain that it operates in.
As a monopoly function of the government-owned Telikom, communications has been an exasperating experience for business and individual customers alike; due mainly to its undulating service which has for so long been a major feature in its landscape.
Only recently with the introduction of a new mobile service competitor—Digicel—did many Papua New Guineans realise what they had been missing out on.
The new competitor’s aggressive marketing campaign has turned out to be a wake-up call, as it created an impetus for the sleeping giant-Telikom-to become more accountable to the 6 million Papua New Guineans, many of whom desire to keep up with fast paced technology.
Armed with the newly formulated ICT (Information Communications and Technology) policy of government, the Minister for State Entreprises Arthur Somare teamed up with the Independent Public Business Corporation (IPBC) and the Telikom board to take the organisation on a “path of delivering improved services through a national network at affordable prices”.
This has ultimately meant selling Telikom’s B Mobile service, its cash-cow, to a newly formed consortium while retaining majority shareholding in the new joint venture.
In May last year, the Telikom board identified a critical need for injection of competitive mobile telephony expertise and capital into the B Mobile business to create value and to ensure that B Mobile retained its position as PNG’s number one mobile carrier.
The board decided that the first step was to seek joint venture partners with the requisite mobile expertise, experience and capital.
Chairman of the Telikom board, Gerea Aopi stated at the announcement of the B Mobile sale last month that “it was also important that any new B Mobile structure would allow for ordinary Papua New Guineans to purchase shares in the company in the near future”.
The process of seeking joint venture partners was undertaken by the IPBC, which holds the national government’s equity in Telikom.
Expressions of interest were sought by IPBC in June last year and major foreign telecommunications companies operating in the region were approached.
Following this, the Telikom board endorsed a submission to cabinet for a consortium, through their special purpose company Capital Way Holdings Ltd, to partner with Telikom in its B Mobile business.
The Capital Way Consortium involves four partners who will inject the much-needed mobile telecommunications expertise and capital which B Mobile requires.
Aopi said “this new consortium also brings a necessary element of PNG participation and indirect ownership by working class Papua New Guineans”.
The partners are Trilogy International Partners LLC (20% of B Mobile JV), General Enterprise Management Services (HK) Limited (20% of B Mobile JV), and 10% shares are from two large superannuation funds in PNG, Nambawan Super (5% of B Mobile JV) and Nasfund (5% of B Mobile JV).
Under the agreement, these four partners will inject US$45 million (about K130 million) into the new B Mobile JV to earn their interest, while Telikom will inject its B Mobile assets into the joint venture.
As a result, Telikom and the Capital Way Consortium will hold 50% interest each in the new B Mobile JV. In all, Papua New Guinea ownership of B Mobile will remain at 60% due to Telikom’s 50% interest and the super funds’ combined 10% interest.
The board of the B Mobile JV will be chaired by Telikom director Anthony Smare and will have representation from the Capital Way Consortium and Telikom.
The Capital Way Consortium will provide significant management and technical expertise to the new B Mobile JV through key senior positions.
Telikom staff primarily involved in B Mobile operations are expected to transfer from Telikom across to the new B Mobile JV; at this stage with no staff losses predicted.
Telikom workers around the country have called on IPBC and the government to make public due diligence reports and details of the partial sale of B Mobile.
The PNG Communications Workers Union which represents Telikom employees has said that it was left out of the joint venture process and that B Mobile is being under-sold at K130 million when its true value was over K250 million. The cash-cow, they claimed, earns about K200 million every year.
Good governance: Chairman Aopi emphasised that all his board members were satisfied with the procedures and processes that involved seeking out a joint venture partner to ensure adherence to good governance.
In terms of benefits the new B Mobile joint venture expects to bring about, Aopi stated: “The infusion of capital and expertise into the B Mobile JV will allow B Mobile customers to have enhanced access to efficient, reliable and competitive mobile phone services, and ensure B Mobile retains its position as Papua New Guinea’s largest mobile phone carrier with the best network. In the process, it will create significant value for Telikom’s investment in B Mobile.”
“Super funds Nambawan Super and Nasfund’s combined membership base of 250,000 working class Papua New Guineans will now indirectly own a part of the B Mobile business, and like the people of PNG through the national government’s ownership of Telikom PNG, benefit from the increased value generated by the Capital Way consortium’s management and technical expertise and by their capital investment;” he added.
Aopi also said; “The JV arrangement will also serve the dual purpose of enabling Telikom to focus solely on upgrading its core network to first world status, realising greater value from its international gateway, and improving and realising greater value from the nation’s fixed line telecommunications network and internet services, yielding affordable and reliable world class telecommunications services to the people of Papua New Guinea”.
Satellites, submarine cables and other network assets of Telikom are consequently expected to be upgraded and expanded as well, to further enhance services.
The B Mobile JV partners have made a commitment to list the consortium on the Port Moresby Stock Exchange within at least three years to provide opportunities for Papua New Guineans to purchase shares in B Mobile.
The listing on the POMSOX (Port Moresby Stock Exchange) will also enable employees of B Mobile to share in the growth of B Mobile through the issue of employee stock options.
The B Mobile JV has been hailed as breaking new ground in PNG’s history—as it provides a model for the current government’s Public Private Partnership (PPP) initiative. The PPP is an arrangement whereby the value of a state-owned enterprise is unleashed in a manner that benefits the people of PNG through better services and increased returns on investment, whilst ensuring that majority ownership still remains in PNG hands, ultimately through public ownership via public listing on the Port Moresby Stock Exchange within a defined time frame.
Chairman of the Nambawan Super Limited, Sir Nagora Bogan said the offer to participate in the B Mobile JV was the first proposal received by the fund under the Public Private Partnership initiative.