Another fiscal year came and slipped by, yet the pending PTCL privatisation proceeds - a hefty $800 million - remained an unfulfilled dream. It is indeed not a mortifying exercise for the economic managers who have been budgeting the receivables from Etisalat for the last three years.
Etisalat bought a 26 percent management stake in PTCL for $2.6 billion in July 2005. It deferred the payment instalments for the first time in March 2008, citing delays in transfer of PTCL properties by Pakistani authorities.
Although the share purchase agreement (SPA) between Etisalat and the GoP is not a public document, news items suggest that the SPA restricted the GoP from issuing new licenses for seven years, for both existing services, like the Long Distance & International (LDI) telephony - and new technologies, like 3G.
There is little evidence to suggest that the 3G license auction has more to do with the nature of competition mobile network operators are currently involved in, their financial health, market feasibility and customer adoption; than with the regulatory issues stemming from Etisalat deal.
If an operator wishes to enter the LDI market, rather than buying a license it would be prudent for her to take over just one among the many financially distressed local LDI operators. However, there is a possibility that in recent years Etisalat might have used its bargaining chip and stopped the GoP from issuing new LDI licenses, to protect PTCLs lions share in the LDI market.
Speculating on the terms of the SPA would be frivolous. Both the Etisalat management and Privatisation Commission (PC) cite the delay in the transfer of properties as the underlying reason for the three-year-long payment impasse.
Out of over 3,000 properties, roughly a hundred are yet to be transferred in PTCLs name. Some of the remaining properties are with the private sector, some are with the public sector - including the provinces of Punjab and Sindh - and some are under litigation. A majority of these properties occupy prime locations, hence the reluctance to hand them over.
There have been some developments on this issue lately. A ministerial committee has been formed by the Prime Minister in this regard. This would be the third such committee for the resolution of this issue in as many years.
The official PC spokesperson told BR Research that after transferring 98 percent of the identified properties in PTCLs name, it has been decided by both parties that the market value of the pending 2 percent properties would be assessed and excluded from Etisalats outstanding dues.
For this purpose, Etisalat dispatched its team of valuators to Pakistan. The PC officials, however, were not impressed by the properties value estimated by the foreign valuators, and termed the valuation exaggerated, which would deflate the receivables.
The PC then conducted its own valuation whose report it sent to Etisalat. If Etisalat management now objects to local valuations, the matter could fall into an inconsequential rut once again.
Some analysts say that Etisalat overpaid for the PTCL deal, realised this only later, and has been using the real estate transfer as an excuse to withhold payments until both sides reach a compromise.
The finance minister - head of the third ministerial committee - would know better. He must know the importance of meeting budget targets better than many others sitting in the Q-block.
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ETISALAT PAYMENT SCHEDULE
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Installments Amount ($mn) Status
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Jun-05 260 Paid
Apr-06 1140 Paid
Sep-06 133 Paid
Mar-07 133 Paid
Sep-07 133 Paid
Mar-08 133 Deferred
Sep-08 133 Deferred
Mar-09 133 Deferred
Sep-09 133 Deferred
Mar-10 133 Deferred
Sep-10 133 Deferred
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Source: BR research
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