Division of the telecom company before its sale is a key part of government's strategy


Mar 01 - 07, 2004



Highly encouraged by the unprecedented public response to the initial public offer (IPO) of Sui Southern Gas Company (SSGC), the Privatization Ministry is all set to offer shares of PIA, PPL, KAPCO and some of the other public assets to the general public.

The Privatization Minister Dr. Hafeez Sheikh, proudly informed the newsmen at a crowded press conference last week, that SSGC shares have been over-subscribed by 15 times. He said that 5% shares of SSGC were offered to public indicating that preference will be given to the applicants for 1000 shares at Rs. 26 per share in pursuance of the government policy to encourage small investors. "However, the response from the applicants for 1000 shares surpassed all our expectations. In all 2,58,089 applications involving an investment of Rs. 13 billion were recorded. Even after exercising green shoe option for another 5% shares, we can accommodate only 67000 applicants involving an investment of only Rs. 1.3 billion out of Rs. 13 billion," the minister said adding that with OGDCL IPO (over-subscribed) by 8 times and SSGL by 15 times it has been confirmed that the people confidence has been fully restored in the privatization process and the economic policies of the government. The privatization commission was now all set to offer other assets to public in a well sequenced manner and with proper spacing. Five per cent shares of PIA and PPL will be offered to the public in the next 2 months.

Dr. Hafeez Sheikh informed the newsmen that the PC has generated Rs. 42 billion in the first year of the present government through privatization process. While giving the break-up, he said "Out of total amount of Rs. 42 billion, the Commission has generated Rs. 17.3 billion through stock market with offering the shares of the mega entities and Rs. 22.7 billion through strategic sales in the last one year. Under the privatization law, 90 percent of the proceeds of the privatization would be used to pay the debts while 10 percent will be utilized in the poverty reduction programme," he added. He said that PC was all set to offer shares of PIA through stock market likely in March, this year. "In the first phase, 5 percent shares of the PIA will be offered with the option of 5 percent green shoe option". In the PIA, the government holds 57 percent share directly and 20 percent indirectly through financial institutions.

The minister further said that the PC is also planning to offer 10 percent shares of Pakistan Petroleum Limited (PPL) in April, this year. "The government holds 93 percent shares of PPL, 6.1 percent by IFC and remaining some financial institutions," he added.

Besides these, he said, the Commission is also planning to offer the shares of KAPCO and UBL to the general public in a well-sequenced manner and with proper spacing. Regarding the privatization of the Karachi Electric Supply Corporation (KESC), he said the Commission had invited fresh Expressions of Interest (EOIs) and received 4 EoIs from international repute companies. He said the EoIs for the KESC received from UAE, Malaysia, UK and Canada. The date for the bidding of the KESC would be announced after the due diligence and pre-bid conference, he added.

Earlier the Privatization Minister while talking informally to some newsmen hinted at a government plan to spilt Pakistan Telecommunication Company Limited (PTCL) into three separate entities before its privatization, which is due in the next few months. We want to avoid a situation where we have a public monopoly going into the hands of the private sector, especially in an environment where the government regulator may not have the strength to deal with the private monopoly," the minister said.

Shaikh said that division of the telecom company before its sale is a key part of government's strategy to increase competition in the sector and prevent a single private company cornering a deregulated telecom market. The move, say analysts, will prevent the creation of a private telecom monopoly after privatization, but that the process could now be delayed as the restructuring would need to separate the local and overseas calls and cellular operations which could take at least two years.