A decade later, the $800 million ghost refuses to rest in peace. It is fair to say that the UAE-based Etisalat has given its Pakistani interlocutors a run for their money. The Emirati telco still owes the Pakistani government $800 million from its 26 percent management-stake-buyout in PTCL back in 2005-06. Since then, two different governments have tried to get the remaining money back, but in vain.
A reminder to dust off that pending payment saga came up last week. The National Assembly’s standing committee on Information Technology and Telecommunication has reportedly asked the IT ministry to give a timeframe to Etisalat to pay the long-held dues. Failing that, the parliamentary body warned, PTCL would be put up for sale again. The committees fireworks may not alarm Etisalat. For one, the payment matter is between Etisalat and Pakistan’s Ministry of Privatisation. The IT ministry has no truck with the transaction. In the last few years, Privatisation Commission has been able to transfer most of the 3,000+ properties identified as real estate belonging to PTCL. But not all – and that’s apparently the bone of contention in the moneys release. The threat to auction PTCL again rings hollow, too. If the government were to follow that leverage, it would invite litigations and counter-litigations, turning away any imagined benefit or likely suitor. Needless to say, it may also sour environment for future privatisation transactions in the country.
Indication is that the government is catching up with the reality that until every single property on the list is transferred in PTCL’s name, they don’t stand a chance to recover a penny. (A handful of remaining properties are reportedly a tough nut to crack). Negotiations over valuation of those properties and deduction from the withheld amount have also gone nowhere.
The government made no mention of the pending dues from Etisalat in this years budgetary documents – a significant break from the fantasy ritual repeated in previous years. Its been a long while since any government official spoke about these dues. Back channel negotiations may well be going on, but its hard to see why Etisalat would budge, given its strong hand. Context is the key here. Observers may rue the unpaid $800 million, but the non-payment has come to signify the unhappy cost that had to be paid to save the deal with Etisalat in 2006. Sources say that it hadnt pleased Etisalat to find out that their $2.6 billion bid for PTCL in the June 2005 auction was far more than the $1.4 billion offered by China Mobile and $1.16 billion by Singapore Telecommunication.
When Etisalat threatened to back out from the deal over the vast difference in first and second bid values, the Pakistani government at the time asked Privatisation Commission officials to save the deal, come what may, according to a reliable source. The Shaukat Aziz government at the time feared that a failed deal would deliver a blow to their ambitious privatisation program. From then on, it became political.
The ensuing share purchase agreement considerably sweetened the deal for Etisalat. Etisalat paid $1.4 billion up front. It agreed to pay the remaining $1.2 billion in nine biannual instalments, contingent upon clean title transfer of all PTCL properties in PTCL’s name by January 2008. Payments dried up from 2008 onwards, the year of regime change in Pakistan. Pending property transfers were cited as the cause.
Essentially, Pakistan received $1.8 billion from the PTCL stake sale. Wanting more will remain a pipedream for some time. If anything, this fiasco should serve as a case study on how not to shoot oneself in the foot when privatizing a sprawling enterprise.
Courtesy…Business Recorder