The Government has recently announced the partial privatisation of State-owned enterprise Telikom to improve it’s services. Prime Minister James Marape said the move was to encourage expansion and innovation.
PORT Moresby Chamber of Commerce and Industry president Rio Fiocco says Telikom Ltd needs more capital investment to increase its network coverage and compete with Digicel which is soon to be taken over by Telstra, Australia’s leading telecommunications company.
He welcomed the recent announcement by the Government to partially privatise Telikom.
The move is likely to attract more capital to expand and invest in infrastructure to connect more customers especially in rural areas which hopefully means more revenue and profits.
“We welcome the recent announcement by our prime minister of his government’s intention to partially privatise Telikom Ltd and for our superannuation companies to be invited to invest,” Fiocco told The National.
“There are many examples around the world where partial privatisations of SOEs have generated better returns to the shareholders as well as a better service for customers.
“A clear example is Bank South Pacific Financial Group Ltd (BSP) which evolved from the PNG Banking Corporation following its takeover almost 20 years ago.”
He said with the injection of more capital and the appointment of new board members, BSP had grown to be the leading bank in PNG generating solid returns for its shareholders, including the State which retained around 18 per cent of the company.
“Before Digicel entered the mobile phone market in PNG, bmobile had 100 per cent of the mobile market,” he said.
“We can all see the positive difference that Digicel has made to PNG through its increased investment in new towers to expand network coverage to most parts of PNG as well as the latest technology investment in 4G not to mention their marketing and service capabilities.
“Digicel have a much wider network coverage. They claim to cover around 90 per cent of PNG.
“They have invested to build more towers and then spend a lot to maintain them with fuel for generators etc.
“So if you are a coffee or vanilla buyer in a rural area, you will probably use Digicel to connect to your customers because there is no bmobile service in that area.
“So if Telikom Ltd is partially privatised, it can attract more capital to expand its towers and therefore connect to more customers.
“Those rural customers will then have a choice which service to connect with more customers for bmobile means more revenue and hopefully more profits. “More capital investment from the super funds will enable Telikom to compete strongly against Digicel and the new entrant Vodafone.”
Prime Minister James Marape
Marape said Telikom’s partial privatisation would lead to “expansion and innovation, not job losses”.
“It will lead to improved security, governance, and accountability,” Marape said.
“This is an opportunity to place private sector resources where we can see the greatest return on investment and reharmonise the markets where they operate. I encourage the support of all Telikom employees and stakeholders of this privatisation programme.”
Marape commended the superannuation funds for supporting the privatisation of Telikom.
“With the support of these successful institutions, Telikom will quickly re-establish itself as the preeminent telecommunication company, owned by Papua New Guineans, supported by Papua New Guineans, for Papua New Guineans.”
Nasfund chief executive officer Ian Tarutia
National Superannuation Fund (Nasfund) chief executive officer Ian Tarutia had, before Marape’s announcement, told The National that the fund has already signed a memorandum of understanding with its consortium partners to invest in Telikom and was waiting for a formal proposal from the state.
Tarutia said: “Under a PPP arrangement, the State will sell down its shareholding to allow investors to take up ownership rights. In this case the potential investors in Telikom are Nasfund and its consortium partners.
“The State will retain a shareholding but in a lessor capacity. An example of a successful PPP is the PNGBC/BSP story.
“PNGBC was a 100 per cent State-owned bank until Bank South Pacific owned by superfunds, mum and dad investors and smaller institutions acquired majority ownership.
“Now BSP is a successful bank not only in PNG but throughout the Pacific. It is now listed on the ASX (Australian Securities Exchange) and has a presence in South East Asia (Cambodia, Laos).
“Importantly State share in BSP (now 18 per cent through KCH) is worth more for the State than when it owned 100 per cent of PNGBC. This is the model we are looking at.”
BSP Financial Group Ltd chief executive officer Robin Fleming
Meanwhile, BSP chief executive officer Robin Fleming had also told The National that the privatisation of Telikom “is a positive step towards a broader policy of privatisation of state owned entities”.
“The Government via Kumul Consolidate Holdings retained 25 per cent shareholding in BSP, which has since been wound back to 18.6 per cent and other government entities such as MVIL retained shareholding in BSP, with superannuation funds also taking up equity interest.
“Over and above this a profitable BSP has paid company tax of over K2.7 billion during the 20 period with BSP contributing over 17 per cent of the total company tax collected by IRC annually.
“This illustrates that with effective governance via an independent and professional board and with competent management a privatised entity can contribute significantly to government revenues by way of tax paid, dividends on profits and increased value of shares.”
Fleming said the privatisation of state-owned entities in a structured manner would relieve government of the burden of provision of capital to fund replacement of aging infrastructure, purchase of new infrastructure to support expansion of delivery of services, and investments in new technology.
“Critical to any privatisation are an independent board, management with industry expertise, an independent entity responsible for pricing be that ICCC or an industry regulator, and for certain industries a community service obligations framework that provides for delivery of services to less profitable areas which could be supported by a tax concession/tax credit model.”
Telikom PNG and bmobile are currently in the process of merging and will soon undergo a name change to Telikom Limited.
Services offered by both Telikom PNG and bmobile will continue as normal.