Etisalat, buyer of 26% stake in Pakistan Telecommunication Company Limited (PTCL), and Pakistan may soon resolve a dispute over pending payments amounting to $800 million.
The development comes after both have firmed up their valuations of properties that cannot be transferred with Islamabad ready to take the hit.
Cost of 34 properties, which the government cannot transfer to PTCL due to various reasons, comes to around $92.4 million, said Privatisation Commission Chairman Mohammad Zubair in a testimony to the Public Accounts Committee on Wednesday.
The PAC had called the PC official for an update on the PTCL deal that was signed in 2006 when the then government sold 26% stake of the company in return for $2.6 billion.
Etisalat – a multinational UAE-based telecommunications services provider operating across Asia, the Middle East and Africa – is withholding $800 million, saying that the Pakistan government has failed to live up to its commitment of transferring all the 3,248 properties under PTCL’s ownership.
The government has asked Etisalat to adjust $24 million of the $92.4 million, equivalent to the company’s 26% shareholding in PTCL, and transfer the remaining amount. However, there is a wide gulf between the valuations of both parties.
Zubair said Etisalat did not share its valuation with Pakistan but, according to information, it was over $450 million. He said Etisalat submitted its valuation to the Escrow Account agent of HSBC Bank, London. The $800 million is deposited in the Escrow Account and will be transferred to Pakistan only after a resolution of the properties dispute.
Under the revised Sale Purchase Agreement, in case of dispute over the value of non-transferable property, both parties will appoint qualified independent property valuators and the highest evaluation will be the final price of the property, said Zubair.
“The government will have to fulfill its obligations, as we cannot raise alarm bells among prospective investors who are to invest in upcoming privatisation transactions,” he added.
The government wants that Etisalat should deduct the amount equivalent to 26% shareholding, which, according to even Etisalat valuation, comes to around $125 million, leaving the remaining balance of $675 million free to be given to Pakistan.
According to the agreement, after submission of valuation by both parties, Etisalat will pay the amount within seven days by adjusting the cost of non-transferable properties.
Etisalat offered $2.6 billion – the highest among the three bidders. The second highest was China Mobile that offered $1.4 billion. The initial Sale Purchase Agreement (SPA) was signed in 2005, which was to mature in September 2005.
After seeing that its bid was higher, Etisalat indicated withdrawing its offer and agreed to proceed further only after it got major concessions. The then government had agreed to stagger the remaining $1.2 billion payments into nine bi-annual installments, starting from September 2006 till September 2010. However, after paying $400 million, Etisalat has withheld the remaining $800 million.
It was a very poorly run privatisation transaction, said the PC chairman. He said the properties were shown as PTCL’s assets despite them not being transferred to the entity’s ownership.
Zubair said the National Accountability Bureau was already investigating the PTCL privatisation deal and the government would not have objections to any new investigation.
The NAB official told the committee that the PTCL deal was a faulty transaction and recommendations have been sent to NAB chairman for follow-up action.
Published in The Express Tribune, May 21st, 2015.