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PTCL for sale

International giants are in the run to buy the company

From Shamim Ahmed Rizvi,
Islamabad
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 rights.

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 cent proceeds.

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.