Paktel

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	24409
Company name	Paktel Limited
Country	Pakistan
Sector	Information
Environmental category	C
Department	Global Inform. & Comm. Tech.
Status	Completed

Date SPI disclosed	May 3, 2006
Projected board date	June 5, 2006
Previous Events	Invested: August 7, 2006 Signed: June 27, 2006 Approved: June 23, 2006

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Paktel Limited (Paktel or the company) commenced operations in 1990 as one of two wireless telephony providers. It is currently 98.86% owned by Millicom International Cellular (Millicom or MIC). As of the end of 2005, Paktel had nearly one million subscribers for a 5% market share placing it as the fifth operator out of 6 players in the market.

The project focuses on the expansion of Paktel’s existing GSM 900/1800 operation in Pakistan through extending coverage and enhancing network capacity. MIC and Paktel will also spend increased resources on marketing and distribution to re-establish the Paktel brand and grow market share. The company will invest in its network in order to improve network coverage as well as enhance the quality of service.

Anticipated development impact of the project

By increasing the availability of telecommunications services in Pakistan, the project will:

- Expand access:

The project will increase the availability of reliable and affordable telecommunications services for consumers and businesses. As of December 2005, mobile penetration in Pakistan was approximately 14.6% (just over 21 million mobile subscribers) and fixed line penetration was approximately 3.0% (4.5 million fixed line subscribers). This project will enable Paktel to upgrade technology, increase capacity, and improve coverage, which will allow more consumers and businesses to have access to reliable and affordable telecommunications services in a country with very low teledensity.

- Extend geographic coverage:

Paktel plans to add new sites to its network as it builds out past the main cities in Pakistan thereby extending service to the frontier and border areas of Pakistan.

- Support telecom liberalization agenda:

As indicated by the telecommunications law passed in 1996 and the amendments and updates issued throughout 2003-2005 as well as the issuance of two new licenses to new entrants in 2004, the Government has committed to establishing best practices in telecommunications sector reform, including market liberalization in the mobile and fixed line sectors. The project will support private sector involvement and promote competition in the telecommunications sector which are goals of the Government.

- Product & Service Innovation:

Although Paktel is not the only mobile operator in Pakistan with foreign sponsors, its relationship with Millicom has resulted in several benefits including knowledge transfer for product and service innovation. Paktel was the first operator in Pakistan to launch several services, including per second billing, and is looking to continue leading the market with innovative products and services best suited for Pakistan. The project will enable Paktel to improve the quality and variety of services offered as its new GSM network will utilize SMS, GPRS and MMS services to enable multimedia and data applications.

- Demonstration Effect & Capital Mobilization:

As a result of past economic and political uncertainties, the climate for private sector investment in Pakistan has been challenging. The new government’s efforts to improve macroeconomic management and public governance are encouraging, and an IFC investment at this time would show highly visible support for the administration’s efforts to encourage private-sector investment. In addition, both the international and local commercial banks participating in the Paktel financing are looking to IFC’s leadership role in providing financing to challenging emerging markets like Pakistan. This catalytical role is even more important with the proposed IFC B Loan.

IFC's expected development contribution

By assisting Paktel in its efforts to launch GSM services and expand its network in Pakistan, IFC will play a vital role in promoting competition in the communication sector and in expanding telephony infrastructure in the country. IFC’s involvement in Pakistan will occur at a time when the economy is growing and the government is promoting foreign investment in the country. Given the relatively low GDP per capita of Pakistan and the relatively low teledensity in the country, the project will have a significant development impact on consumers, the telecom sector, and the local private sector in general.

Environmental and social issues - Category C

This project is a Category C, based on our long term relationship with the sponsor, Millicom International Cellular, and because there are limited environmental and social impacts which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Under IFC's previous investments with the parent company Millicom International Cellular, the companies were required to develop and implement an environmental and social management system (ESMS) and to submit to IFC an environmental/social Annual Monitoring Report (AMR). Paktel has agreed to adopt a version of the ESMS of Millicom International Cellular and implement it in their Pakistan operations. They will provide Annual Monitoring Reports on the implementation of the ESMS to IFC in an agreed upon format.

IFC PROJECTS