Etisalat has also asked the Privatization Commission to allow floating of PTCL shares in Dubai

Nov 21 - 27, 2005

PTCL's much publicized privatization deal with Emirates Telecommunication Corporation (Etisalat) of the UAE has made headlines due to delayed transaction which is lingering for quite some time on the back of a few reservations expressed by the buyers.

Of course the $2.59 billion transaction is the biggest deal in the history of privatization process of Pakistan and may be followed by enhanced flow of investment especially from the Gulf region due to increased interaction between the two states.

In fact, the deal is highly significant from Pakistan's point of view especially in conformity to the government's agenda to build up country's image as a business-friendly state. In this backdrop, President Musharraf is also taking personal interest in this deal and according to informed sources he has talked at the highest level of Emirates. Privatization Minister Dr. Hafeez Shaikh was also in Dubai last week to remove hurdles in the way of smooth transaction of the telecom giant PTCL.

In order to raise funds, Etisalat has also asked the Privatization Commission to allow floating of PTCL shares in Dubai Stock Exchange which will require some legal amendments. However, if allowed, it would have a positive impact on the PTCL shares in the stock market of Pakistan as well.

Actually, Etisalat has placed four demands before the government at the end of the second round of talks held in Abdu Dhabi last week.

The main demand was the permission to pay only $1.06 billion - the second highest bid offered by China Mobile of China instead of paying $2.59 billion it had offered on June 18 for buying the strategic shares.

According to the highest bid, Etisalat has to pay Rs107.01 per share compared to Rs63.48 per share offered by the second highest bidder. In the third round of talks, soon to be started in Pakistan, this issue would be main hurdle in the way of a deal between the Privatization Commission and Etisalat.

Sources said that Etisalat was also not happy of the Rs5 billion package offered by the government to the PTCL employees. It wanted to slash the package to the size of Rs1 billion-an amount that had been offered by the PTCL management earlier and was later increased by the Information Technology Minister, Awais Lagari, due to mounting pressure from the PTCL workers union.

The company's workers union is silent about the ongoing talks between the Etisalat and Privatization Commission after signing an agreement with the government. However, any compromise on the package could lead to an uproar and a situation not different from what happened before the PTCL bidding is likely to re-emerge. Etisalat has also asked the government to allow it make some changes in the top management of PTCL. The sources said the UAE telecom company also wanted a period of 18 months for floating PTCL shares on the market instead of 36 months it had agreed upon before the bidding. It wanted permission to float PTCL shares on Dubai Stock Exchange, a move that would involve certain legal issues.

It may be mentioned that the Privatization Commission had stopped PTCL from making any new investment or selling anything till Etisalat deposits its remaining amount of $2.25billion to the government.

Etisalat has informed the government that a number of the company's projects are currently being completed in Sudan and many other West African counties where the PTCL technicians and other surplus staff could be sent.

The present government has shown its firmness on its commitment to privatize the public sector entities and has produced excellent results so far which is reflected in the total privatization of the banking and the cement sectors, while it is on its way to privatize the telecommunication and energy sectors to honor its words.

On the back of government's firm commitment, PSO's share price has seen renewed interest in recent days on reports of progress towards its privatization. The privatization of PSO is in advanced stages. The reports say that meetings of PSO's management with potential bidders were taking place. The final date of bidding would be announced after the conclusion of meetings. Several weeks ago it was reported that the Privatization Commission had approved prequalification of seven bidders out of the 15 which had earlier submitted Expressions of Interest for PSO's privatization. PSO's 1Q/FY06 earnings had depicted a massive 108% upsurge to Rs2,536m (EPS: Rs14.78) on the ascending track of petroleum prices. Nonetheless, profitability growth going forward is to slow as international oil prices taper off amidst the lackluster picture of domestic demand.


PSO holds the largest share in the market, in fact, it has been the leader of the market for the last four to five years, which makes it highly attractive in the eyes of the international bidders. Hopefully, the privatization of PSO will be a major event in the privatization history of this country followed by the PTCL.

The earnings for the first quarter ended September 2005 depicted a 108% rocketing to Rs2,536million which gives glimpses of the potential of this oil marketing company which has many distinctions on its marketing credit.

The surge in profitability ensued from substantial inventory gains during the quarter on the back of higher domestic POL prices. During the quarter, the government had raised prices twice by 15-18%. On the other hand, OMC industry sales volumes declined approx. 10%. PSO declared an interim cash dividend at Rs6/share.