PTCL-ETISALAT DEAL IN A FIX
TARIQ AHMED SAEEDI
Apr 12 - 18, 2010
Terming the privatization deal of Pakistan Telecommunication Company Limited (PTCL), country's pioneer and biggest telecom service provider as 'unfair', Minster for Privatization Senator Waqar Ahmed in National Assembly said that the sale of PTCL shares to UAE-based Etisalat was in sheer violation of the rules and regulations of privatization. He alleged that deal was made without taking in to confidence the privatization commission.
Interestingly, he smells a rate in the privatization agreement only when the UAE telecom giant refused to disburse $800 million it owes to the government of Pakistan on the ground that the government did not meet its obligations of transferring ownership rights of properties.
Government of Pakistan sold 26 per cent (1.326 billion) B class of shares of PTCL to Etisalat-UAE at sale price of Rs156,328.4 million on July, 2005. The payment was mutually agreed to be in instalments, according to Etisalat's officials. The company concluded the deal in 2006 and it withheld $800 million because of non-delivery of 3,500 properties, The National cited Mohammed Omran, the chairman of Etisalat, as saying. He said the company was privileged under the terms of agreement to stop payments in case of non-obligations in particular "until possession of all properties".
Telecom analysts are forewarning the deal would be rolled back to a status of 2005 when the then government agreed to divest 26 per cent of shares of PTCL against a payment of in dollar 2.6 billion and in rupees over 156 billion.
To some, rollback will be avoided since architecture (privatization minister) of the deal at that time Dr. Hafeez Sheikh is head of finance ministry today. So it would be akin to challenging the judgement or prowess of in-office head who heads the core ministry, they commented. Besides, Pakistan can not afford to return the amounts which it has received so far from the shareholder. Senator Waqar said Etisalat had given out US$1.79 billion so far to the government. He said of that only 251 million dollars had been used to defray payments on account of voluntary separation scheme as severance pays to the employees while 1.5 billion dollar was transferred to the federal government. "The remaining amount of proceeds has been utilized for payment of the transaction cost on account of financial advisory and legal experts," a privatization commission's press handout quoted him as telling the House.
It may be recalled that worker-unions in PTCL went in to widespread protests against the privatization and forced the management to cancel the agreement. When the agreement was in the final stage of execution, the PTCL offices were giving a look as if in go-slow.
A blame game has set off at present. While Pakistani government still occupying 62 per cent stakes in PTCL holds Etisalate responsible for delaying payments, the UAE-based telecom lambasted the non-transference of fixed assets to 26 percent shareholder and called it a violation of the agreement. PTCL is a leading fixed line and wireless local loop service provider of Pakistan. According to statistics of Pakistan Telecommunication Authority, the telecom bellwether achieved the fixed line subscribers mark of 3.37 million by end of March, 2009 while its subscribers to wireless local loop services reached 1.19 million by January, 2010. In both accounts, it has no parallel amongst competing five fixed line service providers NTC, Brain Limited, World Call, Union Communication, and Naya Tel, as well as out of seven wireless local loop rival seven telecom companies Telecard, WorldCall, Great Bear, NTC, Wateen, Mytel, and Link Direct. PTCL is laying extensive fibre optic network nationwide. The company has acquired 85 per cent market share in broadband market with its customers reaching 336,000. PTCL's broadband penetration has spread over 200 cities.
Waqar Ahmed said Etisalate has withheld $800 million payment to the government. Government of Pakistan sold 26 per cent of PTCL shares to Etislate at $2.6 billion. On the other hand, top officials of Etisalat retorted over the statements made by Pakistani minister terming the deal unfair, saying "the company applies the highest standards of transparency in conducting its business operations and international expansion strategy", The National reported. "We are confident that when the privatisation commission fulfils this obligation, Etisalat will immediately release the instalments," Etisalat chairman said.
Senator Waqar told the National Assembly 3,500 properties including lands which are to be transferred to Etisalat are not owned by federal or any provincial government and are private properties under litigation.
Etisalat (also known as Emirates Telecommunications Crop), operating in 18 countries across Asia, Africa, and Middle East, is UAE-headquartered leading telecommunication companies and has customer base of 100 million plus. In 2009, the telecom giant net revenues and net profit surged 5 per cent and 16 per cent to AED30.83billion and AED8.83billion over the last year. It engages in multiple telecom services including internet, voice, mobile, broadband, broadcast, and corporate data. The company handles largest volume of voice traffic in Middle East and Africa and is 12th largest carrier of voice traffic in the world. According to the company's report, its BalckBerry, 3G, and voice roaming services are effective in 185 countries.
National Assembly Standing Committee on Privatization is said to probing in to the matters especially contravention charges levelled by minister for privatization. Prime Minister has constituted ministerial committee to review issues related to mutation of lands and discuss with Etisalat release of outstanding amount of $800 million. PTCL is said to have increase voice tariffs without giving prior notice to its fixed line subscribers. The services of the company are already in question with many disgruntled subscribers shifted to other substitutes because of declining quality of services and arbitrary tariffs. Over delayed revisit to the privatization agreement has goofed up the quality of services-though single minded focus to broadband is fruitful. Government should move fast to resolve the issue.