PTCL fails to address CCP concerns over Telenor merger

Key questions on $1b investment plan, financial health, and tower strategy left unanswered

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ISLAMABAD:

Pakistan Telecommunication Company Limited (PTCL) has failed to adequately respond to key questions raised by the Competition Commission of Pakistan (CCP), a mandatory prerequisite before it can secure regulatory approval for its planned merger with Telenor Pakistan.

During a public hearing conducted on Tuesday conducted by CCP, PTCL's management was unable to provide clarity on various financial, regulatory, and strategic aspects of the proposed transaction, including a dubious $1 billion investment plan.

Sources told The Express Tribune that the CCP raised three core concerns during the session.

The first question related to the proposed business plan worth $1 billion. PTCL and its subsidiary Ufone are both currently operating at a loss, while Telenor's financial condition also remains weak. The CCP raised a fundamental question, given that PTCL had arranged a loan to acquire Telenor in the first place, how is it planning to arrange financing worth $1 billion after the merger takes place?

Further doubts were cast over the absence of any investment timeline in PTCL's proposed business plan. This omission raised serious concerns over the plan's feasibility and credibility. PTCL claims that Ufone will expand its network and tower infrastructure after the merger, but the CCP pointed out that a larger network alone does not guarantee profitability. It further questioned what PTCL intends to do with the acquired towers and whether it was considering selling them, use them to raise capital, or integrate them operationally.

In addition, regulatory accounting issues also came under scrutiny. The CCP said that PTCL must submit the consolidated regulatory accounts for both Ufone and Telenor to the Securities and Exchange Commission of Pakistan (SECP) post-acquisition.

PTCL failed to offer satisfactory answers during the hearing and has requested more time to prepare a comprehensive response.

According to a CCP statement, the hearing was part of proceedings under Section 11(6) of the Competition Act, 2010. PTCL's senior management appeared before the CCP bench and presented a detailed overview of its claimed efficiencies, regulatory filings, and proposed structure for acquiring 100% shareholding in Telenor Pakistan (Private) Limited and Orion Towers (Private) Limited.

The CCP bench, comprising of CCP Chairman Dr Kabir Ahmed Sidhu, Member Salman Amin, and Member Abdul Rashid Sheikh, posed several probing questions to assess the merger's broader implications on competition and consumer welfare.

PTCL has long been providing cross-subsidies to Ufone, but the government now seeks to scrutinise Ufone's accounts before approving the proposed merger plan.

Ufone's financial losses were absorbed by PTCL, which in turn prevented the parent company from distributing dividends to its shareholders. Despite this, Ufone's management and board of directors continued to enjoy full perks and privileges.

Although government nominees have held seats on Ufone's board, they have never questioned the persistent losses. The country's anti-trust watchdog has also asked PTCL to submit Ufone's financial accounts. While Ufone did comply, the submitted records were reportedly too complex to evaluate effectively.