VelaTel snags 75% stake in Balkan WiMAX duo

9 Dec 2011

US-based VelaTel Global Communications has announced that it has entered into an agreement with the shareholders of Herlong Investments to acquire a 75% controlling interest in Herlong and its operating subsidiaries, Croatian WiMAX operator Novi-Net and Montenegrin start-up company Montenegro Connect. The transaction is expected to close the first week of January 2012, in order to allow sufficient time for VelaTel’s auditors to iron out the financial details of the deal. In exchange for its 75% equity stake, VelaTel will contribute all CAPEX and OPEX necessary to deploy and operate the two networks until the companies are able to generate positive cash flow. In addition, VelaTel is obliged to roll out 75 base transceiver stations (BTS) in the two countries, alongside core equipment, related infrastructure and software capable of supporting up to 150,000 subscribers. VelaTel reports that it has already placed an equipment order with strategic partner ZTE Corporation, and handed over a USD713,000 down payment for the equipment, which the Chinese vendor has already manufactured. The telco expects to complete the deployment of the new equipment during the summer of 2012.

Prior to VelaTel’s takeover, Novi-Net held 3.5GHz WiMAX network operating licences for five counties in Croatia, with 21MHz of paired spectrum in each region. However, VelaTel has now confirmed that the Croatian government has granted Novi-Net a nationwide WiMAX licence, ‘as part of its protocols to become the next member of the European Union (EU)’; the improved concession grants it the use of 42MHz of spectrum in the 3.5GHz frequency band. Novi-Net currently owns a data centre, a network core and eleven BTS, and counts approximately 1,500 subscribers.

Meanwhile, Montenegro Connect holds a similar nationwide licence in its home market, with 40MHz of spectrum in the 3.5GHz spectrum band. Although Montenegro’s year-round population stands at 625,000, it enjoys over one million tourist visitors per year. Unlike Novi-Net, Montenegro Connect is a so-called ‘greenfield’ operation, with just two BTS installed for testing purposes; the company currently has no commercial presence or subscriber base.

Although each operation will have separate networks and billing processes, and adhere to different regulatory regimens, VelaTel has said that it expects ‘to realise significant savings by consolidating many functions in the two contiguous markets that share the same language and economic demographics’. VelaTel CEO George Alvarez added: ‘Combining our engineering and deployment expertise with the experience and local knowledge base of Novi-Net’s personnel will allow Montenegro Connect to hit the ground running, and avoid many of the learning curve issues a new operator typically experiences. These companies provide us a low-cost entry into the geographic centre of the Balkan countries. We expect this to lead to other opportunities in the region’.

Croatia, Montenegro, Montenegro Connect, O Telekomunikacije (formerly Novi-Net), VelaTel Global Communications (formerly ChinaTel)