In last week’s story about Jazz hiring GroupM, Madzine predicted that telecom companies will invest in either building, acquiring, or partnering with digital assets-as-a-service (DAaaS) infrastructure companies. Today, e& Capital announced it had invested in a digital assets infrastructure firm called Fuze.
“This will help telecoms enable financial institutions and businesses across the region offer regulated digital assets to their clients, as well as an over-the-counter (OTC) trading desks,” said the prediction from last week. “Keeping in mind Pakistan’s crypto council, this will allow telecoms with DAaaS ventures to launch a full suite of stablecoin infrastructure products.”
The impending acquisition of Telenor Pakistan by Pakistan Telecommunication Company Limited (PTCL), a subsidiary of e& (formerly Etisalat), represents a significant consolidation within the Pakistan telecom industry. This report provides a strategic analysis of this transaction, focusing on its potential impact on the market, the synergies and risks involved, and the implications for VEON and its subsidiary, Jazz.
The analysis indicates that the merger will create a near-equal competitor to Jazz in terms of subscriber base, potentially intensifying competition. While the deal offers PTCL opportunities for revenue and cost synergies, it also presents integration challenges and faces regulatory scrutiny.
For VEON, it is crucial to closely monitor the merged entity’s strategies and leverage Jazz’s existing strengths to maintain its market leadership. Key recommendations for VEON include focusing on enhancing Jazz’s network quality, expanding its digital service offerings, and proactively developing strategies to counter the increased competitive pressure.
1. Current State and Trends
The Pakistan Telecom industry presents a landscape of steady, albeit not explosive, growth, with a valuation of $4.52 billion in 2025 and a projected Compound Annual Growth Rate (CAGR) of 3.28% from 2025 to 2033. This pace suggests a maturing market where achieving substantial growth may necessitate strategic maneuvers such as mergers and acquisitions, rather than solely relying on organic expansion.
The primary drivers fueling this growth include the increasing penetration of mobile and internet services, particularly in previously underserved rural areas. This expansion is supported by the rising adoption of smartphones and the availability of more affordable data plans, which in turn propels the popularity of Over-The-Top (OTT) services and PayTV. Â
A significant trend within the Pakistan telecom sector is the ongoing shift towards digitalization. This is evident in the expansion of 4G network coverage across the country and the gradual introduction of 5G technology. This technological advancement requires continuous and substantial investment in infrastructure and the development of a skilled workforce to support these sophisticated networks. Data services have emerged as the dominant segment within the industry, driven by the ever-growing consumer demand for high-bandwidth applications like video streaming, online gaming, and cloud services.
Notably, mobile broadband is and will continue to be the primary catalyst for data growth, significantly outpacing the expansion of fixed-line internet access. Furthermore, the government’s increasing emphasis on digitalization and the imperative to enhance connectivity in remote regions of Pakistan are creating new avenues for growth and expansion for telecom operators. Industry forecasts suggest an average growth rate of 6.2% from 2023 to 2030, indicating a potentially more optimistic outlook compared to other projections. This difference could stem from varying methodologies or the inclusion of broader Information and Communication Technology (ICT) segments in the latter forecast. Â
The competitive landscape of the Pakistan telecom industry is characterized by the presence of four major players: Jazz, Zong, Telenor, and Ufone. Among these, Jazz currently holds the leading position in terms of subscriber base, commanding a market share of approximately 37-38%. Telenor Pakistan is another significant player with a substantial subscriber base of around 43-45 million, translating to a market share of roughly 22-26%.
China Mobile-backed Zong is also a key competitor, boasting approximately 51 million subscribers and a market share in the range of 25-26%. Ufone, which is owned by PTCL, currently has a smaller footprint with around 25-27 million subscribers and a market share of about 13-19%. The impending acquisition of Telenor Pakistan by PTCL, with Ufone as its mobile arm, is projected to create a significantly larger entity with a combined subscriber base exceeding 70 million. This would position the merged company as the second-largest operator in Pakistan, closely rivaling Jazz’s leading position.
The market is also witnessing a growing trend among operators to diversify their revenue streams by expanding into adjacent digital services such as e-commerce, smart home solutions, and digital payments. Â
The regulatory environment governing the Pakistan telecom sector is primarily shaped by the Pakistan Telecommunication Authority (PTA). The PTA’s authority is derived from key legislation, notably the Pakistan Telecommunication (Re-Organization) Act of 1996. This act provides the fundamental framework for regulating the establishment, operation, and maintenance of telecommunication systems and the provision of telecom services within Pakistan.
The PTA is responsible for a wide range of regulatory functions, including the issuance of licenses for various telecom services and the allocation of radio frequency spectrum. The Ministry of Information Technology and Telecommunication (MoITT) plays a crucial role in formulating policies and directives that guide the overall development and regulation of the telecom sector. Since the 1990s, the Pakistan telecom market has undergone full liberalization, resulting in a competitive landscape with the emergence of private operators alongside the state-owned PTCL.
The PTA issues both individual and general licenses to telecom service providers, ensuring compliance with regulatory standards. The government is also actively engaged in facilitating the deployment of next-generation technologies, including 5G networks, to enhance the country’s digital infrastructure. The proposed acquisition of Telenor Pakistan by PTCL is currently under review by the Competition Commission of Pakistan (CCP), which is tasked with ensuring that the merger does not substantially reduce competition within the sector.
Recent developments suggest that the CCP is likely to approve the merger, potentially with certain conditions, following intervention from the Special Investment Facilitation Council (SIFC) and a proposed $1 billion investment from e&, the majority shareholder in PTCL.
2. Financial Performance Analysis of PTCL and Telenor Pakistan
An analysis of the financial performance of both PTCL and Telenor Pakistan is crucial to understanding the strategic rationale and potential impact of the acquisition. PTCL Group has demonstrated strong revenue growth, achieving a 17% year-over-year increase in revenue during the financial year 2024. This growth is further highlighted by PTCL’s standalone performance, with a 12% YoY revenue increase in 2024, reaching Rs 107.7 billion. A significant contributor to this growth is the remarkable 25% YoY revenue increase reported by Ufone (PTML) in 2024. This positive revenue trajectory continued into the first quarter of 2025, with PTCL Group reporting an outstanding 22% year-over-year revenue growth, reaching Rs 61.8 billion.
Despite this robust revenue growth, PTCL Group incurred a consolidated loss of Rs 14.39 billion in 2024, although this represents a reduction from the Rs 16.73 billion loss in the preceding year. However, PTCL as a standalone entity achieved an operating profit of Rs 12.2 billion (a substantial 55% growth) and a net profit of Rs 4.8 billion in 2024. Notably, Ufone also showed a positive development by returning to operating profit with a strong EBIT of Rs 4.6 billion in 2024. Telenor Pakistan has also exhibited strong financial performance. The company reported a 12.0% growth in service revenue during the fourth quarter of 2024. This growth was supported by a 13.0% increase in Average Revenue Per User (ARPU), which effectively offset a slight 2.7% decline in the subscription base, indicating a focus on higher-value customers. Furthermore, Telenor Pakistan achieved a solid 25.2% increase in EBITDA during Q4 2024 , reflecting strong top-line growth and effective cost management.
In the third quarter of 2024, Telenor Pakistan reported a 6.7% year-on-year revenue growth , demonstrating consistent financial progress throughout the year. Key financial ratios and performance indicators further highlight the strengths of both entities. PTCL’s premium FTTH service, Flash Fiber, experienced an unprecedented YoY revenue growth of 104% in 2024 , underscoring its success in the fixed broadband market. Telenor Pakistan’s focus on ARPU growth indicates a strategic emphasis on revenue quality.
The acquisition will be primarily financed through debt, with PTCL seeking to raise a debt facility of up to US$ 400 million. This financing is being provided by an IFC-led consortium , which includes the Silk Road Fund (SRF) and British International Investment (BII). The enterprise value of the acquisition is PKR 108 billion on a cash-free, debt-free basis. This debt-funded acquisition will increase PTCL’s leverage, and the impact of this increased debt on PTCL’s financial stability and future investment capacity will need careful consideration. However, the involvement of international financial institutions like IFC suggests a degree of confidence in the transaction’s viability. Â
3. Strategic Rationale and Potential Synergies of the Acquisition:
The acquisition of Telenor Pakistan by PTCL is underpinned by several strategic objectives aimed at reshaping their competitive positioning and accelerating growth within the Pakistan telecom market. A primary goal is to create significant synergies by combining the strengths and expertise of both organizations. This consolidation is expected to drive innovation, bolster the market’s overall capacity, and enable the merged entity to reach a broader customer base, thereby accelerating their respective digital transformation journeys.
PTCL views this acquisition as a crucial opportunity for market consolidation, which will empower them to invest more strategically in developing the most advanced next-generation network infrastructure across Pakistan. Ultimately, this move aims to position the combined entity as the largest cellular operator in the country, surpassing the current market leader. Furthermore, PTCL anticipates that this acquisition will significantly strengthen digital connectivity throughout Pakistan and contribute to the telecom sector’s overall growth and modernization. Â
The merger presents several potential revenue synergies. By combining the subscriber bases of PTCL/Ufone and Telenor Pakistan, the merged entity will gain access to a vast pool of over 70 million subscribers. This scale offers substantial opportunities for cross-selling a wider range of services to a larger customer base.
The complementary network coverage of PTCL/Ufone, with its stronger presence in urban centers, and Telenor Pakistan, with its wider reach in rural areas , will enable the merged entity to offer enhanced coverage across a broader geographic area. Additionally, Telenor Pakistan’s focus on higher-value customers, as evidenced by its ARPU growth, could potentially lead to an overall increase in the merged entity’s average revenue per user. Â
Significant cost synergies are also anticipated. The combination of network infrastructure, including over 22,000 towers , and spectrum holdings will allow for network optimization, potentially reducing operational costs and improving efficiency. The integration of IT systems, sales networks, and administrative functions is also expected to generate operational efficiencies. Furthermore, the larger scale of the merged entity could lead to reduced capital expenditure on future network upgrades and expansions due to the consolidation of existing assets.
However, the integration of the two organizations will not be without its challenges. The need to integrate different network technologies, including GSM, UMTS/HSPA+, and LTE, operating across various frequency bands , will require careful planning and execution. The consolidation of disparate IT systems, billing platforms, and CRM systems will also be a complex undertaking.
Moreover, potential cultural differences between the workforces of PTCL/Ufone and Telenor Pakistan will need to be managed effectively to ensure a smooth transition. The integration process will also involve addressing potential job redundancies and ensuring a cohesive and productive workforce. PTCL anticipates that the comprehensive integration of all aspects of the two businesses could take at least two years to complete. Â
4. Risk Assessment of the PTCL-Telenor Pakistan Merger:
The proposed merger between PTCL and Telenor Pakistan faces several potential risks that could impact its successful completion and the performance of the combined entity. A significant hurdle is the regulatory approval process. While the Competition Commission of Pakistan (CCP) is reportedly moving towards approving the merger , final approval is still pending and could be subject to certain conditions. The CCP has previously flagged concerns about a substantial reduction in competition and the potential strengthening of PTCL’s dominant position within the telecom sector.
Competitors such as Jazz and Zong have voiced their apprehensions regarding increased market dominance and the potential for anti-competitive practices. Delays in the CCP’s decision have already occurred and could potentially impact the timeline for the 5G rollout in Pakistan, as well as the merger agreement itself, which may have specific timelines. While the CCP’s likely approval, potentially facilitated by the intervention of the SIFC and a proposed $1 billion investment from e& , suggests a positive outlook for the deal’s completion, the final conditions imposed by the regulatory authorities will be critical. Â
Integration risks represent another significant area of concern. The technological integration of the networks of PTCL/Ufone and Telenor Pakistan, which utilize different technologies and operate on various frequency bands , will be a complex undertaking. Ensuring seamless communication and interoperability between these networks is essential to avoid service disruptions.
The consolidation of IT systems, including billing platforms, CRM systems, and operational support systems (OSS), will also pose substantial challenges related to data migration and process harmonization. Furthermore, the integration of the workforces from two distinct organizations with potentially different corporate cultures could lead to friction, resistance to change, and decreased productivity. The risk of losing key talent during this period of uncertainty is also a significant consideration. Â
The competitive response from existing players, particularly Jazz and Zong, could also pose risks to the merged entity’s success. With the creation of a near-equal competitor in terms of subscriber base, Jazz is likely to intensify its competitive strategies to maintain its market leadership.
Zong has already voiced strong objections to the acquisition, arguing that it could significantly distort the competitive landscape and potentially lead to spectrum dominance by the merged entity. This could result in price wars or aggressive marketing campaigns from competitors aiming to protect or gain market share. Â
Finally, the broader macroeconomic and political risks inherent in operating within Pakistan need to be considered. The country faces ongoing economic challenges, including inflation, currency devaluation, and rising energy costs , which could impact the profitability and investment capacity of all telecom operators. Political instability and regulatory uncertainties also add to the complexity of the operating environment.
5. Impact on Market Share and Competitive Dynamics:
The merger of PTCL and Telenor Pakistan is projected to significantly alter the market share dynamics within the Pakistan telecom sector. Based on the current subscriber numbers of Ufone and Telenor, the combined entity is expected to command a mobile subscriber market share of approximately 36-37%. This will position the merged company as a very close second to Jazz, which currently holds the largest market share. This near parity in market share between the two leading players is likely to intensify competitive intensity within the market.
The merger will result in a reduction in the number of cellular mobile operators from four to three. This consolidation of the market structure could lead to a more oligopolistic environment. While a reduction in the number of players might suggest a decrease in price competition, it could also lead to a greater focus on service quality, network innovation, and the development of new digital services as operators strive to differentiate themselves in a less crowded market.
Concerns have been raised by existing players, particularly Jazz and Zong, that the increased market share of the merged entity could grant it greater pricing power, potentially leading to the manipulation of tariff structures at their discretion. The significant consolidation of subscribers and infrastructure could allow the merged company to exert more influence over pricing strategies within the market.
However, the Competition Commission of Pakistan (CCP) is likely to scrutinize this aspect closely as part of its regulatory review, and any approval of the merger could include conditions aimed at preventing anti-competitive pricing practices. VEON will need to monitor the pricing strategies of the merged entity closely to assess any potential impacts on Jazz’s competitive position and its own tariff strategies. Â
6. Valuation Benchmarking and Structural Impact:
The valuation of the Telenor Pakistan acquisition by PTCL, with an enterprise value of PKR 108 billion (approximately $385 million) , can be benchmarked against comparable mergers and acquisitions in the telecom industry, both globally and within the South Asian region.
The Asia-Pacific region has witnessed a surge in telecom M&A deals, reaching $7 billion in the first half of 2024, indicating a broader trend towards consolidation within the sector. Several recent telecom mergers in the Asia-Pacific region have demonstrated successful post-merger value creation, highlighting the potential for synergies and improved performance. Telenor itself has a history of strategic mergers in the Asian market, including the consolidation of its operations in Malaysia (with Axiata’s Celcom to form CelcomDigi) and Thailand (with True to overtake AIS). These precedents suggest that Telenor’s exit from Pakistan is part of a wider strategy to consolidate its presence in key Asian markets where it aims to achieve a leading position. Â
Analyzing enterprise value to revenue (EV/Revenue) multiples in the telecom industry provides further context for the valuation of this transaction. In the enterprise telecom communication services and solutions sector, average EV/Revenue multiples have ranged between 1x and 5x. Similarly, enterprise value to EBITDA (EV/EBITDA) multiples for the communications sector have been around 13.68 as of December 2024 , and for telecom services specifically, benchmarks range from approximately 6.89 to 9.98. Calculating the specific EV/Revenue and EV/EBITDA multiples for the PTCL-Telenor transaction would require detailed financial data for both companies, but these industry benchmarks offer a preliminary basis for assessing the deal’s valuation relative to comparable transactions and industry averages.
The acquisition is expected to have a significant impact on the industry structure in Pakistan, reducing the number of major mobile operators from four to three. This consolidation could potentially spur further M&A activity in the future as other players look to gain scale or form strategic alliances to compete effectively with the newly merged entity and the market leader, Jazz. The tower infrastructure landscape may also be affected, as the merged entity will control a substantial number of telecom towers, potentially influencing the dynamics of tower sharing and leasing agreements in the country.
7. Market Sentiment and Analyst Perspectives:
Analyst reports and financial news articles suggest a mixed sentiment surrounding the PTCL-Telenor Pakistan merger. Some analysts anticipate significant profitability contributions for PTCL through this acquisition , viewing it as a strategic move to enhance their market position and leverage synergies. The reported enterprise value of PKR 108 billion for the deal is a key data point for market assessment.
However, there are also prevailing concerns among competitors and within the broader market regarding the potential for reduced competition and the risk of PTCL, with its existing significant market power in several telecom segments, further consolidating its dominance.
The delay in regulatory approval from the Competition Commission of Pakistan (CCP) has also created a degree of uncertainty within the market and among investors regarding the final outcome and potential conditions that might be imposed. The government’s request for the CCP to review the merger ahead of the upcoming spectrum auction underscores the regulatory scrutiny and the potential impact on future market dynamics and the rollout of advanced services like 5G. Â
8. Scenario Analysis and Sensitivities:
To better understand the potential implications of the PTCL-Telenor merger, it is useful to consider several potential scenarios:
- Scenario 1: Smooth Regulatory Approval and Integration: In this scenario, the CCP grants unconditional approval relatively quickly, and the integration of networks, IT systems, and workforces proceeds smoothly and according to plan. This would allow the merged entity to realize synergies and achieve its strategic objectives without significant delays or disruptions, posing a strong competitive challenge to Jazz.
- Scenario 2: Regulatory Delays and Conditions: If the CCP imposes significant conditions for approval, such as requiring divestitures of certain assets or mandating specific network access agreements for competitors, the merged entity’s ability to realize its full potential synergies and market power could be constrained. This would provide a less challenging competitive environment for Jazz.
- Scenario 3: Integration Challenges: If the integration of networks and IT systems faces significant technical or operational hurdles, leading to service disruptions, customer churn, and higher-than-anticipated integration costs, the merged entity’s ability to compete effectively could be hampered in the short to medium term. This could create opportunities for Jazz to capitalize on any weaknesses or customer dissatisfaction arising from the integration process.
- Scenario 4: Aggressive Competitive Response: If Jazz and Zong respond to the merger with aggressive pricing strategies, enhanced service offerings, or targeted marketing campaigns aimed at retaining their existing customers and attracting customers from the merging entities, the market share gains and revenue projections of the merged entity could be negatively impacted. VEON needs to be prepared for such a scenario and ensure Jazz has robust counter-strategies in place.
The valuation of the merger and its impact on VEON’s strategy for Jazz are sensitive to several key drivers. The rate at which the combined entity can grow its subscriber base post-merger will be crucial for achieving scale and market dominance. Trends in Average Revenue Per User (ARPU) for both Jazz and the merged entity will determine revenue growth and profitability.
The successful realization of both revenue and cost synergies will be essential for PTCL to justify the acquisition cost and for the merged entity to compete effectively. Finally, the pace and adoption rate of 5G services in Pakistan will significantly influence the long-term competitive landscape, and the merged entity’s strategy for 5G deployment will be a key factor to monitor.
9. Conclusion and Strategic Implications for VEON:
The impending acquisition of Telenor Pakistan by PTCL presents both significant opportunities and potential risks for the Pakistan telecom market and, consequently, for VEON’s subsidiary, Jazz. The merger will create a formidable competitor to Jazz, with a near-equal subscriber base and the potential for substantial synergies.
Key opportunities for the merged entity include expanded market reach, enhanced network coverage, and the potential for cost efficiencies through infrastructure consolidation and operational integration. The significant investment from e& further strengthens the financial position of the merged entity, providing resources for network upgrades and competitive initiatives.
However, the merger also faces considerable risks. Regulatory scrutiny, particularly from the CCP, could lead to delays or the imposition of conditions that might limit the merged entity’s market power. The integration of two large organizations with different technologies, systems, and cultures will be a complex and potentially disruptive process.
Furthermore, the competitive response from existing players like Jazz and Zong could challenge the merged entity’s ability to gain market share and achieve its financial targets. The macroeconomic and political instability in Pakistan also adds a layer of uncertainty to the long-term outlook.
For VEON, the strategic implications are significant. Jazz will face increased competitive pressure from a stronger second player in the market. The potential shift in market share dynamics necessitates a proactive and robust response from VEON to protect Jazz’s leading position. VEON should focus on several key strategic considerations:
- Enhance Network Quality and Coverage: VEON should prioritize continued investment in Jazz’s network infrastructure, ensuring superior quality, wider coverage, and faster data speeds, particularly in the rapidly growing mobile broadband segment. This will be crucial for maintaining a competitive edge against the merged entity.
- Expand Digital Service Offerings: VEON should accelerate the development and deployment of innovative digital services through Jazz, including e-commerce platforms, smart home solutions, and digital financial services. This will help diversify revenue streams and enhance customer loyalty in an increasingly data-driven market.
- Strengthen Customer Loyalty and Engagement: VEON should focus on enhancing customer experience through personalized services, targeted marketing campaigns, and efficient customer support. Building strong customer loyalty will be essential for retaining market share in the face of intensified competition.
- Monitor Regulatory Landscape and Competitive Strategies: VEON needs to closely monitor the regulatory approval process for the PTCL-Telenor merger, including any conditions imposed by the CCP. Additionally, a thorough analysis of the merged entity’s post-acquisition strategies, particularly in pricing and service offerings, will be crucial for formulating effective counter-strategies for Jazz.
- Explore Strategic Partnerships and Consolidation Opportunities: VEON should proactively explore potential opportunities for strategic partnerships or further consolidation within the region to strengthen Jazz’s competitive position and capitalize on market trends.
In conclusion, while the merged entity will emerge as a strong competitor, VEON can navigate this evolving landscape and strive to maintain its market leadership in this dynamic and growing market.
