PRIVATIZATION OF PTCL?
Considering to extend the time frame of PTCL privatisation
FROM SHAMIM A. RIZVI,
Mar 10 - 16, 2003
A process of rethinking has developed in the relevant circles about the Privatisation of Pakistan Telecommunication Company Limited (PTCL) in view of the huge profits shown by the company last year. In the year 2002 the PTCL contributed Rs.19.5 billion in the form of annual profits to the national exchequer besides its tax payments of Rs.12 billion.
According to a school of thought its makes no sense to sell PTCL in the present context. They believe that the Privatisation Commission should focus on those state-owned commercial organisations which caused total loss of Rs.90 billion to the national exchequer during 2002 alone. The losses have come down from Rs.120 billion about 3 years back but the same are still clossal and the commission should put theses units on the top priority of their sell-out programme. The state-owned Pakistan Telecommunication Company Limited has long been a cash cow for the government contributing billion of rupees to its revenues. So there seemed no justification for its hurried sale specially at present when the telecommunication industry around the world is not in good shape. It has still not come out of the great crash of 2002. If the government were to sell PTCL now it would get only a fraction of company's true worth, they argue.
Based on these arguments advanced by a group in the Finance Ministry the Ministry of Science and Technology (the controlling ministry of PTCL) is considering to extend the time frame of PTCL privatisation. The other group, equally vehment, is of the view that this is the right time to privatise PTCL as its huge profits will attract buyers. With deregulation of the telecommunication sector which is in the offing, the PTCL will loose its monopoly and consequently its profits would he reduced considerably. The loss in profits will naturally affect its sale price. In order to survive in the deregulated highly competitive environment, the PTCL has to be revamped at a high cost in order to make the organisation better-equipped to provide flawless service to its subscribers. Even after doing that it would not be certain that PTCL would so effectively compete in the market with private operations and maintain its profitability level. This line of argument sounds equally weighty. Faced with delimma the Ministry of Science and Technology is also thinking to extend time frame for deregulation as well.
According to reports the Ministry of Science and Technology has prepared a draft plan for extending the deregulation time frame, which it as reportedly been advised by the Ministry of Finance to stretch out by two to tree years. The Finance Ministry has suggested a new schedule, keeping in mind future revenue generation from PTCL and prospective investment by private investors in the telecom sector.
The deregulation of PTCL is part of the plan for the deregulation of the telecom sector as a whole, in order to level the playing field for private sector firms.
The Pakistan Telecommunication Authority decided to deregulate telecom service by doing away with PTCL's monopoly, with a view to allowing competition that would lead to better services for consumers. But the move to privatise PTCL comes at a time when telecom firms around the world are in serious trouble.
The best option available under the circumstances seems to gradually unload government shares through stock market. The recent performance of the stock market and improvement in the fiscal and monetary position of the government auger well for the success of the privatisation process through stock markets. A manifestation of this is the realisation of Rs.2.7 billion in the shortest span of just five weeks through the disinvestment of government-owned shares in Attock Refinery Limited, Pakistan Oilfields Limited, DG Khan Cement and some shares of National Bank on the stock markets.
It, however, appears that Privatisation has taken a back seat in the priorities of the present government. High hopes attached to the democratic set-up about privatisation agenda are on the wane, as the things are not moving as envisaged.
Authorities are unsure about the maturity of transactions approved by the Musharraf cabinet and were likely to be completed in 2003. The list of transactions targeted for bidding in 2003, now seems extremely difficult if not impossible to achieve. The Privatisation Commission, according to sources is not optimistic of meeting its envisaged or targeted bidding.
In its annual report 2002, the Privatisation Commission enlisted 20 types of sales for the present calendar year. However, the things are not reportedly moving as envisaged because of lack of foreign investment and scarcity of potential buyers. Not even one has been achieved so far.