Pakistan on Tuesday turned down an offer from Etisalat for the settlement of a privatisation dispute with payment of $263 million, which was only one-third of the outstanding dues, and asked the United Arab Emirates (UAE) company to double the amount.
The offer made by UAE’s telecom giant Etisalat is even lower than the price it was willing to pay six years ago. A delegation of Etisalat met Finance Minister Ishaq Dar for the second time in two months to find a solution to the 17-year-old privatisation dispute.
The company owes $800 million in privatisation proceeds of Pakistan Telecommunication Company Limited (PTCL). However, no Pakistani government has taken the buyer to the international court of arbitration.
“Both sides agreed to proceed with the resolution of all outstanding issues between Etisalat and the Privatisation Commission in a spirit of goodwill,” said the Ministry of Finance. But it did not share terms of the offer.
Etisalat International’s delegation was led by its Chief Executive Officer Mikhail Gerchuk. The delegation comprised Abdulrahim Abdulla Abdulrahim Al Nooryani, CEO Etisalat Pakistan, Hatem Bamatraf, President and CEO PTCL and Ufone, and Kamal Shehadi, Chief Strategy International.
The UAE firm has withheld money due to Pakistan’s inability to transfer the remaining 33 properties in the name of PTCL, which the government had committed in 2005. However, Pakistan has already transferred over 3,000 properties but Etisalat did not pay any money out of the remaining $800 million.
A government official said that Ishaq Dar was willing to settle the dispute at around $500 million in cash. But Etisalat did not immediately respond to the minister’s counter-offer. This suggests that the government is willing to write off at least $300 million out of the outstanding dues. Over the years, many Pakistani cabinet ministers have made counter-offers but the matter is still pending.
A recent independent study conducted by two economists finds that PTCL’s deal was in violation of Pakistani regulations as the company’s management was handed over for just 26% shareholding.
In July 2005, Etisalat bought 26% shares in PTCL with management control at a price of $2.6 billion. After coming to know that the second bid was way lower at $1.4 billion, the UAE 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 transfer the properties owned by PTCL to Etisalat. But many of the properties were not owned by PTCL or the federal government. Some belonged to the provincial governments. The dispute is over two major properties located in Karachi and Multan, whose value runs into billions of rupees.
In 2018, the then privatisation secretary said that according to Pakistan’s assessment, the value of disputed 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.
Pakistan served a second shortfall notice on Etisalat in September 2015, informing the company that it could not transfer the remaining 33 properties and that it would have to pay the outstanding dues by adjusting the value of those properties, according to the privatisation secretary.
The Privatisation Commission has in the past informed the Public Accounts Committee (PAC) that Etisalat did not share its valuation with Pakistan but, according to information, it was over $450 million. Etisalat has submitted its valuation to the escrow account agent of HSBC Bank, London.
Published in The Express Tribune, December 21st, 2022.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ