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Etisalat was given concessions which caused loss to the national exchequer to the tune of more than One billion Dollars.

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ISLAMABAD ( PAKISTAN)The National asemble committee of information technology and telecom observed that “The transaction was only salvaged due to sovereign intervention involving the offices of the Prime Minister and the President”.

      The Committee noted with a sense of regret that EIP was given concessions which caused loss to the national exchequer to the tune of more than One billion Dollars.  Here is complete reports of committee.

NATIONAL ASSEMBLY SECRETARIAT

(STANDING COMMITTEE ON IT AND TELECOM)

                                                                                                                                                                               

SUBJECT:     REPORT ON PRIVATIZATION OF PTCL

 

The Standing Committee on IT & Telecom at its meeting held on ———— while discussing the performance of PTCL decided to review the Privatization of PTCL in the light of the reports appearing in a section of the press alleging malpractices in the process of PTCL privatization by the then government. The issue of corruption in the privatization of PTCL was also pointed out by an honorable member of the House which supported by a couple of other Members during discussion in the House. The Honorable Speaker taking note of the allegations expressed the view that as the Standing Committee on IT and Telecom was already looking into the issue, the members should await the report of the Committee.

 

2.         The Committee held a number of meetings to look into the various aspects of the  process of Privatization of PTCL with a view to ascertain whether there existed any weight in the allegations of corruption and malpractices  or not ? The Committee not only sought the reports from Privatization Commission but also asked the  then relevant authorities to apprise the Committee on different points which came into lime light during  discussion in the Committee meetings.

 

3.         The members of the Committee are of the unanimous view that  it would be pertinent to  briefly apprise the House of the salient points  about the Privatization of PTCL as provided by the Privatization Commission which are given below:-

 

PRIVATISATION OF PTCL­­­­­­­­–– BACKGROUND

 

4.         Privatization Commission (PC) reinitiated the formal marketing process for the privatization of Pakistan Telecommunication Company Limited (PTCL) through the sale of 26% “B” class shares and transfer of management control by inviting Expressions of Interest (EOIs) for acquiring a stake in PTCL, through advertisements in national and international newspapers in November 2004.

 

5.         In response to the advertisements and marketing efforts, 18 parties submitted their EOIs or reiterated their interest by the cut off date, i.e., by 28th January 2005. Twelve parties subsequently submitted their Statement of Qualifications (SOQs). Eight of these parties were pre-qualified and one party was conditionally pre-qualified to participate further in the process. All the pre-qualified bidders were allowed equal access to conduct their own due diligence process for the privatization of PTCL and were facilitated access to especially established data rooms, provided on line digital information about PTCL, given presentations and provided an inter-active mode of question and answer sessions starting in April and continuing until the bidding on 8th June 2005.

 

6.         All of the bidders were provided draft transaction documents for review and comments. After a long deliberations the transaction documents were finalized in consultation with all the bidders. A series of pre-bid conferences were also held between the PC and the bidders in order to answer their queries and allay any concerns that they had with the privatization process itself. The culmination of all of this dialogue was the holding of a pre-bid conference on May 25, 2005 wherein all the bidders were invited jointly and their queries addressed. Qualified Bidders were required to review all issues relating to transaction with due diligence (including legal, financial and technical issues). Qualified Bidders were required, if they so chose, to provide their comments on the draft transaction documents in writing to the PC. It was clearly stated that the PC/ GOP might modify any/ all of these documents at their discretion in the light of comments received by this cut off date. The revised and final documents were then provided to Qualified Bidders prior to the Bid Date.

 

7.         Qualified Bidders who completed the following steps were deemed to be eligible to bid (“Qualified Potential Purchaser”).

 

Qualified Bidders were required to submit their Application Forms to the PC along with the Earnest Money (US $ 40 Million) two business days prior to the bid date.

Bids were only accepted from Qualified Bidders who submitted to the PC completed and properly notarized and authenticated Power of Attorney confirming the identity of the individual authorized to submit the bid, and the terms set forth below:

 

Confirm that the terms of the SPA and SA are unconditionally acceptable, each Qualified Bidder were, in addition to the statements made in the completed Application Form, required to submit a copy of the SPA and SA with each page signed by its duly constituted attorney, as an indication of acceptance, together with the duly completed Application Form.

 

Bidding

 

8.         On the day of the bidding the Qualified Bidders were required to submit bids via a Bid Letter (“BL”) in a sealed bidding envelope. The bidding for 26% B class shares in PTCL along with transfer of management control was held publicly and in front of media on 18 June 2005. Three pre-qualified bidders namely Etisalat (United Arab Emirates), China Mobile (China), Singtel (Singapore) participated in the bidding after having deposited earnest money of US$ 40 million each. Etisalat (UAE) gave the highest bid of US$ 1.96 per share (equivalent to PKR 11.01 per share) which translates into US$ 2,598,960,000 or PKR 155,157,912,000 for the 26% strategic stake. Subsequently upon the acceptance of Etisalat’s bid by the Board of the PC and the CCOP a formal Letter of Acceptance was issued to Etisalat requiring them to submit 10% of the bid amount and sign the SPA by 30th June, 2005.

 

 

Post Bidding

9.         A letter was received from Etisalat on June 22, 2005, which, inter-alia, laid down the request for consideration of the several matters including (a) Deferred payment structure (b) Ability to pledge acquired shares (c) Right to increase shareholding via a call option for additional “A” Class shares (d) Allowing dual listing of PTCL shares in UAE (e) Management Agreement (f) Exemption from withholding taxes (g) waiver and of duties and taxed (h) Customs duty waiver, and (i) Ability to transfer acquired shares.

 

10.       The PC responded to EIP via its letter dated June 24, 2005, which expressly required an unconditional payment of the first installment by June 30, 2005. EIP wrote another letter on June 23, 2005 in which they asked for certain modifications to the Share Purchase Agreement (“SPA”) and Shareholders Agreement (“SHA”). Meetings were held in Islamabad between representatives of EIP and the Privatization Commission in Islamabad between 28-30 June 2005 to discuss various matters. It was made clear to EIP that other than facilitating EIP’s request to effectuate shariah compliant mudarba (this itself was a major concession from the GOP), no other changes would be made in the SPA, prior to the execution on 30th June, 2005.

 

11.       As per EIP’s request, a Letter of Comfort was issued by the PC to EIP on June 30, 2005 which provided EIP a non-binding understanding on the following matters.

 

 

12.       The amended SPA was executed on June 30, 2005 upon the receipt of the First Installment of the consideration. Subsequent to meetings with EIP, the PC Board in its meeting on 5th August decided on various requests of EIP. The decisions of the Board were communicated to EIP, subsequent to which a meeting was held with EIP on 11 August 2005. Another meeting was held between PC and EIP on August 29, 2005. During this discussion they reiterated their position for the pledge, acquisition of “A” shares, sell down of EIP’s shareholding and listing of “A” shares on the UAE Stock Exchange.

 

13.       PC Board meeting was held on August 31, 2005 during which the following was recommended to the CCOP for its approval:

 

The transaction documents for PTCL transaction be modified thereby allowing EIP to pledge their holding of “B” shares 18 months after completion subject to the safeguards which were laid down for pledging after 36 months.

Additional 8.5% “A” Class shares in PTCL be offered through a block sale through a competitive bidding process in the next 3-4 months on the terms to be determined by the GOP. A right to match the winning bid (right of first refusal), resulting from the competitive process, be given to EIP provided they participated in the competitive bidding process.

As and when the GOP decides to offload additional “A” class shares (beyond 8.,5%), Etisalat may be provided an opportunity to share the benefits of the efficiencies it will bring to PTCL, by allowing it to purchase additional “A” class shares. In that case, the EiP would have the right to receive an equal quantity of “A” class shares on the same terms of divestment as and when determined by the GOP.

 

14.       Subsequently, the CCOP was held on September, 2005 in which it approved the following:

The GOP may at a appropriate date in the future, consider the dual listing of a part of its “A” class shares in PTCL on the UAE stock exchange.

The GOP will not unreasonably withhold its approval to a request by the shareholders of Etisalat International Pakistan (“EIP”) for the prposes of undertaking an Initial Public offering proved that in each case Etisalat continues to retain management control and continues to hold a minimum of 51% of the outstanding share capital of EIP or the SPV (as the case may be).

GOP’s will divest up 433,500,000 “A” class shares in PTCL in the next four months, The divestment will be conducted via a transparent competitive process in which EIP shall be granted a right to match the highest bid received, provided that; the highest bid received by a bonafide party is higher than the reference price set by the GOP, and EIP participates in the competitive process.

Etisalat will be provided full access to PTCL even prior to the management transfer.

 


Dispute on CPs  

 

15.       On September 3rd 2005, the GOP served EIP with a Notice for payment on the basis that the Conditions Precedents (CPs) had been completed. The Completion date was set as September 16, 2005. EIP responded to this Notice for payment through a letter dated September 7, 2005 in which they stated that the CPs were incomplete due to the fact that the amendments in the PTCL Act and the Public Investment (Financial Safeguards) Ordinance 1960 were not in the form of an Act of Parliament. They also wanted the CPs in notarized form by September 8, 2005. The FAC notarized and dispatched all the CPs via scanned documents and courier to EIP on the evening of September 7, 2005. PC then wrote a letter dated September 8, 2005 to which they attached 2 opinions on the validity of the change in law by Ordinance. EIP responded on September 14, 2005 stating that they were reviewing the GOP’s letter dated September 8, 2005 and that they did not accept the validity of the CPs under clause 3.2 of the SPA.

 

Issue of CP’s

 

16.       The SPA laid down certain tasks for the seller (the Government of Pakistan), which were to be completed prior to the closing. These were as follows:

 

CP

Details
1. The amendments in the Agreed Form are made to Pakistan Telecommunications (Reorganization) Act, 1996 (VIIof 1996)
2. The amendments in the Agreed Form are made to the Public Investment (Financial Safeguards) Ordinance, 1960 (XLVI of 1960)
3. The disapplication of the Public Procurement Regulatory Authority Ordinance, 2002 (XXII of 2002) to the Company
4. The amendments in the Agreed Form are made to the Articles
5. The amendments n the Agreed Form are made to the License
6. Written confirmation from the State Bank of Pakistan that the investment made by the investor under SPA shall qualify for the full repatriation rights as to the divestment proceeds and divided payments under the Foreign Exchange Regulation Act, 1947 (VII of 1997)
7. Approval from Pakistan Telecommunication Authority that the change of substantial ownership interest in the Company as a result of the transfer of the Sale Shares from the Seller to the Purchaser will not adversely affect the ability of the Company to provide its licensed telecommunication services.

 

17.       In the meanwhile the Board of Directors of Etisalat was changed and the chairmanship of the Board was passed on to Mr. Mohammad Hassan Oran. The new management may not be fully aware of the entire process and dynamics of this transaction and the context of negotiations, the concessions made thereto and the underlying spirit of the provisions of the Agreements to be signed before takeover of PTCL. For Instance, despite the fact that the GOP fulfilled all Conditions prior to the closure of the deal within the stipulated time, which amongst others included promulgation of two ordinances to amend the Pakistan Telecommunications (Reorganization) Act and the Publics Investment (Financial Safeguards) Ordinance, the management of Etisalat insisted on the enactment of the amendment by the Parliament – which was not possible then, as the Parliament had not been in session during that period.

 

18.       On 24 September 2005, EIP wrote that as per their view CPs have not been fulfilled and accordingly the obligations of the parties under the SPA have lapsed. Not only that their insistence is incongruous to the requirements of the bid documents, any delay in the consummation of the transaction on such grounds is fought with danger of exposure of the transaction that could lead to derailment of the deal and thus giving a blow to the entire privatization program. Any negative exposure or outcome would not only substantially reduce the chances of immediate inflow of a large sum of foreign exchange on account of Bid money; it may also impact on the credibility of Etisalat and the UAE.

 

19.       Keeping in view the gravity of the situation, high level intervention was requested, pursuant to which the President of Pakistan made a personal telephone call to the leadership of UAE. On 26th September, Mr. Omran the CEO of Etisalat visited Pakistan and met the Minister and the Prime Minister. It was indicated in these meetings that the parties would extend the Completion date under Clause 7.1 (ii) (b) to 28th October 2005. Pursuant to the above, Etisalat requested that their team comprising of their advisors be allowed to revisit PTCL and continue with their integration exercise. In the interest of facilitating the transaction, the PC allowed them access to PTCL. The team spent more than two weeks at PTCL afterSeptember 28, 2005.

 

20.       The Cabinet Committee on Privatization considered the summary dated 4th January 2006 submitted by the Privatization Commission on “Update on Privatization of PTCL” and took the flowing decisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

Chronology of Events Post 06 January 2006:

 

21.       Pursuant to the above decisions, the Financial Advisor (FA) contacted the other bidders i.e. Singtel and China Mobile and apprised them of the salient revised terms and conditions as offered to Etisalat with a view to ascertain their continuing interest in the transaction. FA vide its letter of January 26, 2006informed the PC that neither of the above two bidders indicated that they would be interested to enter a new bidding process (although it may kindly be noted that this was prior to the subsequent revision on the revised terms and conditions e.g. warranties and indemnities to be provided as per the Agreed Position, the mechanism for adjustment of properties value in the sale consideration, for which clean titles cannot be effectuated etc.)

 

22.       Etilsalat vide its letter dated January 30, 2006 requested provision of information regarding PTCL since June 2005 i.e. date of bidding. The same was procured from PTCL and forwarded to EIP. A team from Etisalat visited Pakistanon February 1, 2006 to discuss further transactional issues in the light of the CCOP decisions of 6 January 2006 communicated to them earlier. Pursuant to the above discussions, PC sent a letter to EIP dated 3rd February, 2006 reflecting the minutes of the discussions of the above meeting. PC also sent another letter containing EIP’s views on various administrative and financial issues regarding PTCL including payment of dividends for the FY ending June 2005. PC received a letter from Etisalat dated 6 February, 2006 setting out their point of view and their version of the minutes of the meeting of 1 February, 2005, which reflected divergence of views of both the parties on same issues.

 

23.       On 11th February, 2006 I.T & Telecom Division intimated vide their letter that the Amended Telecom Act 2005 was passed by the Senate. It may be recalled that the non-passage of the Act and the difference in the substance of that Act was cited as one of the reasons by Etisalat for non fulfillment of the Conditions Precedent (CP) by the Government Etisalat vide their letter of February 15, 2006 wrote another letter on the Conditions precedents and other concerns. PC vide its letter dated 16th February, 2006 sent a reply to Etisalat clarifying the status of the CPs and other related issues.

 

24.       With a view to partially fulfill another CP, the Finance Division wrote a letter warranting the disapplication of the Public Investment (Financial Safeguards) Ordinance 1960 to PTCL and subsequent passage of amendment in the Act.

 

25.       A team form Etisalat visited Islamabadfrom 20-22 February, 2006 to discuss the issues. The Secretary, PC chaired the first round of discussions. During this visit Secretary I.T & Telecom, President PTCL and Member (Telecom), I.T & Telecom the representatives of the FA and PC and H.E, the Ambassador of UAE also attended the meetings as observer / facilitator. The second round of discussions was chaired by the Secretary I.T & Telecom division as the Secretary; PC had gone to Englandin view of his prior official engagements.     

 

26.       Pursuant to the above meetings draft minutes of the meeting reflecting the discussions held were circulated. After discussing the issues and the position of both parties with the Minister of Privatization & Investment, I.T & Telecom Division (it was informed by the Secretary I.T & Telecom that PM was also consulted in the matter) the minutes were signed (“Agreed Position”) and sent to Etisalat. It may be noted that the PC’s position on some of the matters such as giving warranties and indemnities (e.g.. on transferability of properties, distribution of dividends from sale of properties, regulation, legality, transparency etc.) differed from its normal stance on such issues to facilitate the transaction given its importance and value. Furthermore on certain other matters such as allowing GOP’s to link the payment of full sale consideration to transfer of property titles and payment of GOP’s share for a VSS was also a departure from the earlier CCOP decisions.

 

27.       Notwithstanding the above, given that Etisalat were to provide the formulations on several items reflected in the Agreed Position, EIP proposed that they would mark up the SPA and SHA and forward the same to PC for review. The marked up versions of the SPA and SHA were forwarded by EIP to PC on 1st March 2006. Upon review, the marked versions sent by EIP were found to go beyond the understanding reached as per the “Agreed Position”.

 

28.       After further protracted discussion between EIP and GOP (the discussions between the two parties while primarily between the PC and EIP also involved inter-action at the highest levels between the two Governments, the Ambassadors of the two countries and representatives of all the relevant ministries (including the Finance Division & I.T & Telecom Division). A meeting was also held on 11th March, 2006 in the Prime Minister’s office to thrash out the details of the agreement which was attended amongst others by the Prime Minister, Minister for Privatization & Investment, Advisor to the Prime Minister on Finance & Economic Affairs, UAE Ambassador inPakistan and Mr. Omran from Etisalat final.

 

29.       The PC Board and the CCOP discussed the finalized revised terms and conditions of the transaction. The CCOP in its meeting held on 11th March, 2006, approved the revised terms and conditions of the transaction. Pursuant to the approval by the CCOP, the revised terms and conditions have been incorporated in a revised SPA and the Shareholders Agreement (SHA). In view of the foregoing and keeping in view the transaction as it has elements of negotiations, the CCOP, inter-alia, also decided that in consideration of Rule 6(2) of the Privatization (Modes and Procedure) Rules, 2001, the matter may be placed before the Cabinet for ratification and approval. The salient revised terms and conditions were as follows:

 

 

 

 

 

 

30.       Given the gravity and importance of the issue, it may be noted that the PTCL privatization process was handled at the highest levels in the Governments of Pakistan and UAE. In fact the Prime Minister whiling chairing the meetings of the CCOP emphatically stated that the transaction was only salvaged due to sovereign intervention involving the offices of the Prime Minister and the President. Pursuant to the above CCOP decision, the revised “SPA was signed on 12th March, 2006. Pursuant to the signing of the SPA, EIP subsequently made the full initial payment of US $ 1.4 billion. The Cabinet in its meeting of 12th March 2006, ratified and approved the PTCL privatization transaction. The Shareholders Agreement was signed between the GOP and EIP on 12th April, 2006 and management transferred to EIP.

 

Views of officials engaged in the Privatization Deal

 

31.       The committee, as pointed out above , invited a number of officials  / authorities involved in the process of privatization  and almost all of them explicitly expressed the views  that the terms of the bidding process as detailed in the “Instruction to Bidders” and to which the EIP  had unconditionally and irrevocably committed to   and  the post bidding request of Etisalat for  various concessions were examined, keeping in view the fact that the offer from the Etisalat was too high and beyond their expectations and  they were of the firm view that  in case the deal is not finalized , we may be deprived of a   golden deal  and in future we may not get any such attractive offer from any side.

 

32.       In reply to a query whether Privatization Commission ever entered into any post bidding negotiations for giving such concessions in the past, the reply was in the negative. The then Minister for Privatization, who presently happens to be the Minister for Finance, while briefing the Committee, expressed similar views.  In reply to various queries, the Minister for Finance made a firm commitment that he would like to apprise the Committee on various points including the queries raised by some members in an “in camera meeting. But despite several reminders, the Minister for Finance failed to honor his commitment for reasons best known to him. The official invited by the Standing Committee included:

Mr. Abdul Hafeez Shaikh, Ex-Minister for Privatization.

Mr. Tehsin Iqbal, Secretary Information Technology

Mr. Farrukh Qayyum, Ex-Secretary Privatization Commission

Mr. Aamir Qawi, Consultant Privatization Commission

Findings

 

33.       There was almost a general consensus among the members of the Committee that the process of Privatization, in the beginning was almost transparent and the officials of the Privatization Commission need commendation for signing the Agreement with Etisalat in accordance with the terms and conditions laid down in consultation with the pre qualified bidders before opening of the bid. It was noticed that despite  the fact that the PC fulfilled all the commitments made in the agreement within stipulated time,  Etisalat  did not make the balance payment . The Committee noted with satisfaction that  PC  management to have pre-bid detailed consultation with the bidders and all those issues which could arise after the completion of the bidding process were settled to the satisfaction of all concerned and an agreement (SPA) was signed between Government of Pakistan and EIP, the highest bidder,  on June 30, 2005. This agreement was to be implemented by September 16, 2005.

 

34.       The EIP raised the objection that as per SPA dated 30th June, some CPs have not been fulfilled. The Privatization Commission, cognizance of the fact that Etisalat was reluctant and trying to delay the payment on flimsy ground gave them one month grace period for making payments in line with the terms and conditions laid down in the agreement. The PC at this stage rightly issued agreement termination notice to Etisalat on 28th October 2005.

 

35.       The members of the Committee wanted to know the circumstances which forced the Privatization Commission / Government of Pakistan to re negotiate with Itisalat after the termination of the agreement. The PC authorities  informed the Committee that  although Etisalat was not ready to make payment as per  requirements of the agreement high level intervention  took place and the then President  of Pakistan made a personal telephone call to the UAE  leadership pursuant to which a summary was prepared which was considered  by the  Cabinet Committee on Privatization on Jan 6,2006 where in the demands of EIP, over and above the terms of the SPA, were accepted. These included:

 

 

 

 

 

 

 

 

 

 

 

 

 

36.       The Committee felt that high level intervention resulted in giving additional concessions to EIP as was evident from the  decisions of CCOP dated 11 March 2006.These included :

 

 

 

 

 

 

37.       The Committee noted with a sense of regret that EIP was given concessions which caused loss to the national exchequer to the tune of more than One billion Dollars. Some of the concessions which badly hit the country alongwith their financial impact are listed below:

 

Concessions/ Demands

Financial Impact to GOP

(In million}
Staggered Payments

  $ 167.40Technical Services Agreement$ 250 .00Cot of Voluntary Separation Scheme (VSS$ 283 .00Transfer of property$ 300.00Taxes exemption$  76.00

 

 

38.       Last but not the least, the Government ofPakistangave a firm commitment that no new license would be given to any Telecom Operator during the next seven years. As a result of which the country was continuously being deprived of the foreign investment in the Telecom Sector amounting to millions of dollar per year. Beside the above, this restriction blocked the prospects of development and improvement of the telecom industry in the public sector so much so that National Telecommunication Corporation could not even set up its Gateway exchange. As result of this restriction,Pakistanwas also deprived of the income worth millions of dollars in the shape of foreign exchange.

 

39.       The change in the PC’s stand on matters such as giving warranties and indemnities (e.g on transferability of properties, distribution of dividends from sale of properties, regulation, legality, transparency etc) speaks volumes about the transparency of the entire privatization process of PTCL. The Committee pointed out that as a result of the revision in the terms and conditions, Pakistanhad to suffer a huge loss amounting to billions of rupees. Moreover, the handling of the privatization process of PTCL at the highest levels in the Government of Pakistan seems to be the main cause which resulted in the revision of the terms and conditions as, according to Privatization Commission, the then Prime Minister while chairing the meetings of the CCOP emphatically stated that “the transaction was only salvaged due to sovereign intervention involving the offices of the Prime Minister and the President”.

40.       The standing Committee came to the unanimous conclusion that though Pakistanowed

$2.59 billion from the deal, we were deprived of nearly One billion dollars. EIP succeeded in snatching concessions amounting to more than one billion dollars and the bid price was virtually reduced from $2.59 billion to nearly $1.59 billion. Etisalat did not even pay, as per record provided to the Committee, the money amounting to 799 million dollars for linking the matter with the issue of transfer of properties. The linking of the issue of transferability of properties, prior to the resolution of the issue of transferability, paved the way for Etisalat to withhold payment of the balance amount for an indefinite period.

41.       The Committee strongly protested over the non cooperative attitude of the Finance Minister, Mr. Abdul Hafeez Sheikh and all the members were of the unanimous view that Mr. Abdul Hafeez Sheikh failed to present a true picture of the case to the Committee despite the fact that he himself had categorically promised to apprise the Committee of some of the hidden realities in the deal but he did not honor his commitment. Non-fulfillment of the promise created the doubts among the members that he was avoiding to attend the Committee meeting as, being a close confident of the then President / Prime Minister; he was himself a party to the issue or was trying to conceal some facts so that the Committee is unable to reach to a conclusion that could give a safe passage to their masters.

42.       Another interesting aspect of the deal which gave credence to the reports of corruption malpractice as well as high level intervention can be judged from the fact that the Privatization Commission opposed giving a number of concession to Etisalat as is evident from the summary considered and approved by the CCOP in its meeting on March 11, 2006, which were, for reasons best known to the than PC authorities & the CCOP members, approved by reversing its earlier decisions. A some of the paragraphs included in the March 11 Summary which were approved by CCOP in the beginning but were rejected later on led the Committee conclude that PC was being influenced by the authorities at the highest level. These paragraphs are reproduced below for consideration by the House.

a.         “FA vide its letter of January 26, 2006 informed the PC that neither of the above two bidders were willing to enter into a new bidding process (this was prior to the recent additional amendments of certain terms and conditions e.g. warranties and indemnities agreed to be provided as per the Agreed Position, the mechanism for adjustment of properties value in the sale consideration, for which clean titles cannot be effectuated etc)”

b.         “It may be noted that the PC’s position on some of the matters such as giving warranties and indemnities ( e.g. on transferability of properties, distribution of dividends from sale of properties, regulation, legality, transparency etc) differed from its normal practices and precedence on such issues to facilitate the transaction given its importance and value”

c.         “It may also be noted that certain matters such as allowing EIP to link the payment of full sale consideration to transfer of property titles and payment of GOP’s share for a VSS is a departure from the earlier CCOP decisions”.

43.       There existed complete unanimity among the Members that even as EIP did not pay the balance amount and after grant of grace period, the deal should have come to an end and earnest money as well as the first installment deposited by EIP, as per agreement, should have been confiscated. The Committee was of the firm view that the acceptance of the influence, whether it was from outside or withinPakistan, created conditions thatPakistandid not get the actual bid prize i.e. $2.59.

44.       The Committee, while discussing the issue referring to the CCOP decision dated 06 January, 2006 observed that had the Financial Adviser contacted the other two bidders that is Singtal and China Mobile and apprised them of the salient features of the revised terms and conditions as offered to Etisalat with a view to ascertain their continuing interest in the transaction the possibility of the bidders to reconsider their offer and they could have come with new offer.

45.       The committee was of the view that the legal status of transaction, after the termination of the agreement on 28th October, 2005 was very doubtful. Complete unanimity existed, among the members that the transaction, followed termination of the agreement, provided the authorities a gray area that was used to meet the nefarious designs of the looters/ plunders of national wealth.

46.       The committee appreciated the stand taken by the Ex-Minister for Privatization Mr. Waqar Ahmed Khan who was bold enough to acknowledge not only in the House but also in the meeting of Standing Committee that he suspected the transparency in the Privatization of PTCL. He did not rule the possibility of corruption at the highest level.

Recommendations:

 47.       Given the importance of the issue, the committee recommends that those responsible for this shabby deal must not be allowed to go Scott free and a reference be made to National Accountability Bureau to investigate the deal and take appropriate steps to recover the losses.

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