Kazakhstan’s state-owned telecoms company has been given permission to buy the country’s largest mobile phone operator after antitrust regulators ignored fears that it would create a monopolistic giant.
Kazakhtelecom, which owns half of the country’s third largest network operator, agreed to buy a 75 per cent stake of Kcell, the market leader.
Dutch telecom company Veon, which owns its biggest rival, had warned antitrust regulators against a “suicidal” decision to approve a merger that it said would hand the state-run operator two-thirds of the country’s mobile market.
“Kazakhtelecom would occupy a super-dominant position . . . across all segments of the telecom market in the country,” said Alexander Komarov, chief executive of Beeline Kazakhstan, Veon’s unit in the country. “For the anti-monopoly committee, without serious, serious remedies, approving this deal would be suicide.”
The proposed deal has raised concerns among some foreign investors as to the role of private business in the former Soviet republic, where state-run firms dominate major industries and a much-touted privatisation of major businesses has been repeatedly delayed and postponed.
The deal means 67 per cent of the mobile phone market in Kazakhstan will be controlled by Kazakhtelecom, the country’s deputy economy minister said last month.
“There are numerous approaches in economic theory. A monopoly has its own advantages, such as having more opportunities for implementing new technologies,” Serik Zhumangarin told reporters. “The drawbacks, however, include rising costs of service, worsening service quality and barriers for a third company to enter the market.”
The 75 per cent stake in Kcell is owned by Nordic network operator Telia and Turkish Turkcell. The stake is worth about $650m at current prices.
“It is a rare case that a market would be transformed from three to two players,” Mr Komarov said. “Of course it will become a non-competitive market.”
“A less competitive environment drives less investment into technology, in the long run,” he added. “From my perspective, this is not a good sign [of state approach to the economy.]”
Mr Komarov added that it was too early to discuss the potential impact to Veon’s strategy and investment profile in the country.
A Kcell representative declined to comment. Kazakhtelecom did not respond to a request for comment.
The country’s economy ministry said in a statement that the anti-monopoly body had thoroughly evaluated the market and taken into account the impact on consumers and other companies in approving the deal.
Kazakhstan’s laws allow for certain “economic concentration” if mitigated by remedies such as “management constraints . . . or disposition of property”.