Pakistan revives hope of recovering $800 million from Etisalat

Delegation of UAE company meets prime minister to discuss pending issue

Shahbaz Rana January 31, 2018
In July 2005, Etisalat had bought 26% shares in PTCL with management control at a price of $2.6 billion. After coming to know the second lowest bid was actually $1.4 billion, the UAE-based firm tried to backtrack from the offer. PHOTO: FILE

ISLAMABAD: After putting recovery of $800 million from Etisalat on the backburner eight months ago by terming it a “sensitive matter”, the PML-N government has again expressed hope of getting outstanding amount from the Dubai-based firm.

A delegation of Etisalat - a telecom giant of the United Arab Emirates - is again in Islamabad, and met Prime Minister Shahid Khaqan Abbasi on Tuesday to discuss the issue of the $800 million in outstanding dues, according to Privatisation Secretary Irfan Ali.

It was the second visit by Etisalat in the last one month. The company has defaulted on $800 million it owed Pakistan on account of privatisation proceeds of Pakistan Telecommunication Company Limited (PTCL).

Govt downbeat on recovery of $800m from Dubai-based firm

In July 2005, Etisalat had bought 26% shares in PTCL with management control at a price of $2.6 billion. After coming to know the second lowest bid was actually $1.4 billion, the UAE-based firm tried to backtrack from the offer.

Then Privatisation Minister Abdul Hafeez Shaikh lured the company by offering it to make an initial payment of $1.4 billion and the remaining amount in nine installments until September 2010. Moreover, he committed to transferring the properties owned by PTCL to Etisalat.

Pakistan served a second shortfall notice to Etisalat in September 2015, informing the company that it cannot transfer the remaining 33 properties and that it would have to pay the outstanding dues by adjusting the value of these properties, according to secretary privatisation.

The secretary said that according to Pakistan’s assessment the value of these properties was not more than $88 million. But according to the agreement, the highest value determined by any of the two parties will be the final price of the properties.

In our assessment there would not be a major difference between the valuation determined by Pakistan and Etisalat, Minister of Privatisation Daniyal Aziz told The Express Tribune.

For two years, Etisalat was not ready to discuss the issue but now the company is willing to consider the valuation clause, said the privatisation minister, adding that Etisalat would take about six to seven weeks to finalise its own valuation of the 33 outstanding properties.

After all these years, we are now satisfied that the matter will be resolved soon, said Aziz.

However, there seems to be a wide gulf between the valuations from both parties.

About three years ago, the then Privatisation Commission Chairman Muhammad Zubair told the Public Accounts Committee (PAC) that Etisalat did not share its valuation with Pakistan but, according to information, it was over $450 million. He said the firm had submitted its valuation to the escrow account agent of HSBC Bank, London.

The secretary said that Etisalat is now inclined to settle the issue but lately the company’s lawyers raised some more questions which the government is trying to sort out.

Pakistan keeps mum on $800m owed by UAE's Etisalat

After showing it as part of privatisation proceeds for years, former finance minister Ishaq Dar had excluded the $800 million in arrears from the privatisation of PTCL from the budget books.

The secretary privatisation said that the UAE telecom giant is willing to consider the valuation of 33 properties of PTCL. Irfan Ali said that the primary reason for non-recovery from Etisalat was because of its exceptionally high bid for PTCL.

He added that Etisalat is making a few additional demands but the government had informed it that only matters covered in the Sales Purchase Agreement would be discussed during negotiations.

He said that Etisalat has demanded Pakistan to issue a second shortfall notice afresh. But he did not give the reasons for the demand, as Islamabad had already served the notice in September 2015.

An official of the Privatisation Commission said that there was no logic in issuing another shortfall notice since there was no change in the status of properties and their valuations.

Published in The Express Tribune, January 31st, 2018.

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reality check | 3 years ago | Reply Most foreign investors require International arbitration for contract disputes ... why hasn't Pakistan demanded arbitration?
Guest | 3 years ago | Reply It is sad that you don't sense danger
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