years after first announcing the transaction, the Pakistan government
finally sells a strategic stake in its leading telco.
Pakistan government finally announced the sale of a 26% equity stake
and management control in Pakistan Telcommunications Company Limited
(PTCL) on Sunday (March 12). The stake has been sold to UAE's Etisalat
(also known as Emirates Telecommunications Corporation), which
currently operates in UAE, Saudi Arabia and the Sudan.
Sachs and JPMorgan advised the government on the sale, which has been
ongoing since June 2001. The government will continue to hold 62% and
retail investors the remaining 12%.
won PTCL through an auction in June 2005. However, it has been subject
to a series of delays since then. Having paid a first
instalment of $260 million, Etisalat was unable to follow through with
a second instalment in October 2005, which prompted concerns the deal
would fall through.
But in December, the company
reached an agreement with the government whereby it would pay $1.14
billion on transfer of PTCL and the remainder of its $2.598 billion bid
price in nine equal instalments over a five-year period. One month
later, Pakistanís Minister for Privatization Dr. Abdul Hafeez
Sheikh told the Senate that the government chose to re-negotiate terms
with Etisalat rather than invite in another bidder as the latter had
bid $1.2 billion more than the second highest bidder.
performance has been under pressure since the country ended the
companyís 56 year monopoly on fixed lines in 2002 and
competitive pressures forced it to drop tariffs. It operates more than
4.5 million fixed lines and has two wholly owned subsidiaries, Pakistan
Telecommunication Mobile Company (known as Ufone) and Paknet.
is one of six cellular service providers in the country. Competition in
Pakistanís mobile sector intensified in 2005 with both
Telenor, Norway and Al-Warid (backed by Abu Dhabi based investors)
launching services within weeks of each other.
is one in a series of investments from the Gulf countries in Pakistan,
signalling how the rich oil producing nations are looking to expand
their geographical reach . Others which have shown interest in
acquiring the stake at different stages in the PTCL privatization
include: Oger and Saudi Telecom both from Saudi Arabia; SingTel; Mobile
Telecom Kuwait; China Mobile; MTN, South Africa and Telekom Malaysia.
China Mobile and SingTel were in the fray until the very end. Telecom
majors were all keen to acquire an established based in a country where
tele-density was forecast to stand at only 10% at the end of 2005 hence
showing tremendous potential for growth.
launching the privatization process for PTCL in 2001 Pakistan was
forced to delay the sale in 2002 citing the depressed telecom sector
situation globally. Other reasons attributed to the delay at the time,
which the government denied, included inadequacy of telecom regulation
in the country and border tensions with neighbouring India.
Cabinet Committee on Privatization, which approved the transfer to
Etisalat has also been discussing upcoming transactions for Pakistan
State Oil, Pakistan Steel Mills and State Life Insurance. This had led
a number of observers to hope that PTCL's sale could be just the first
in a series of disinvestment