International giants are in the run to buy the
From Shamim Ahmed Rizvi,
Apr 02 - 08, 2001
The Minister for Privatization, Altaf Saleem, while
addressing a "Media Seminar on privatization" in Islamabad,
disclosed that International telecom giants are in the run to buy
Pakistan's state-owned telecom company, which is being offered for sale
with the management control to the private sector on March 29th. The
commission will invite Expressions of Interest (EOI) for the utility
called Pakistan Telecommunications or PTCL, for the sale of its shares
and management control to a strategic investor.
The firms, which have expressed their seriousness to
buy the PTCL, include the Quest of Australia, Beirut-based O. J. Group
of Saudi Arabia (owned by Lebanese Prime Minister Rafiq Hariri) and
Oricsson of Egypt. One company each from Malaysia and United Arab
Emirates (whose names could not be confirmed) have also shown their
interest in the deal.
"There will be more companies coming in once we
invite the EOI," Altaf told reporters. The Privatization Commission
and Mediators arranged the one-day seminar, which was also addressed by
young Finance Minister of Sindh Abdul Hafeez Sheikh and Adviser
Privatization Commission Mateen Thobani.
Goldman Sachs, the Financial Adviser to the
Privatization Commission on PTCL since 1998, has readied the transaction
to offer to the international market. "By June the transaction will
be taken to the market," Altaf said.
The Goldman Sachs is likely to be supplemented by
another household name in world's financial markets, JP Morgan, to help
fetch the best price for Pakistan's prized entity. The Minister claimed
that the PTCL privatization would improve the service, generate more
revenue and jobs and reduce tariff. He, however, did not agree with the
view that the regulatory bodies, including the Pakistan
Telecommunication Authority (PTA) had failed to protect consumers
Saleem agreed with a questioner that the PTCL would
not be sold at a prices at which it could have been sold few years ago.
The depressed telecom market at international level and the fact that
PTCL had left only two years monopoly period before the opening of local
market for all international players under WTO agreement, were
identified as two main reasons for a significant decrease in PTCL price,
he said. They however still believed that the transaction is still quite
exciting as a number of international firms have shown their interest in
buying the utility. The situation has certainly improved (in favour of
Pakistan) after the meeting of Pakistan Development Forum.
The Minister told newsmen that the United Bank
Limited (UBL) will also be offered for sale on March 28 as the
commission will invite Expression of Interest (EOI) on that date. The
government plans to off load 26 per cent shares of UBL with transfer of
management to a private investor. The Minister disclosed that there was
a proposal to inject Rs. 22 billion as fresh equity on the Bank to
turn-it-around before under-taking its privatization. "We however,
shot down the proposal and asked the government to privatize it
immediately", he said adding that Habib Bank Limited will also be
offered for sale on similar basis by June 2002. The government has
already handed over 49 per cent shares of ABL and MCB.
Other than telecom and banking, the oil and gas and
power sectors are also coming up for sale to stop immense financial
bleeding by the state owned enterprises. Pakistan pays 25 billion rupees
in gas subsidy providing relief to only 3 million people at the cost of
whole nation, Altaf said. Annual losses to the exchequer by public
sector entities amounts to 80 billion to 90 billion rupees per annum.
"Privatization will benefit the bulk of consumers, investors and
taxpayers," Altaf said.
Pakistan has earned well over 30 billion rupees from
the 12 per cent sale of PTCL shares to date, which comes to 65 per cent
of the total US$ 1.7 billion proceeds gained by downloading the state
entities during the last 10 years.
Pakistan estimates to generate US$ 3 billion revenue
from the sale of 51 per cent shares of state enterprises in next 18
months. Major transactions include telecommunications, oil and gas,
banking, power and industry.
Creeking under the huge burden of US$ 37 billion
foreign loans, Pakistan has put in place a law binding the governments
to allocate 90 per cent of the privatization proceeds for debt
retirement. The social development sector will get the remaining 10 per
Since 1990s the Privatization has been the integral
part of successive governments. The present government has also given
the Privatization Commission more independence by promoting it to the
level of a Ministry. Other than implementing sectoral reforms it has
also attempted to strengthen the regulatory framework.
Earlier, the Sindh Finance Minister Abdul Hafeez
Sheikh, addressing the seminar, said the privatization process required
strong political will to achieve the desired targets. He was of the view
that some vested interest were opposing and hindering the process.
Arguing forcefully in favour of Privatization, Sheikh
said the hidden opponents of the process should be handled properly.
"The chief executive of an enterprise should be sacked if he
opposes the privatization, "Sheikh said adding that the
privatization process, in most of the countries, had benefited both
politically and economically to the government which took up the task
and completed it.
The Sindh Finance Minister said that the bureaucracy
should not be running a car factory or a fertilizer producing plant.
"This is not their job, "Sheikh said, "and they can not
run it efficiently." He said the huge amount being wasted on the
public sector enterprises could be used for development projects once
this financial bleeding stopped.
Mateen Thobani, the Adviser Privatization Commission
gave a presentation on the Privatization process and procedures. He said
the government had introduced certain regulations to ensure transparency
of the deals. Thobani said the government was also creating an enabling
environment through sectoral reforms, deregulation and liberalisation.