UAE buyer granted extension till Oct 28; PTCL transaction
By Our Staff Reporter
ISLAMABAD, Sept 28: The government has granted an extension to Etisalat of the UAE till October 28, 2005 to complete the transaction of Pakistan Telecommunication Company Limited and take over the entity.
The request for extension was made by an Etisalat delegation led by its chief executive officer at a closed-door meeting with Privatization and Investment Minister Dr Abdul Hafeez Sheikh held on September 26.
The request was formally accepted by Prime Minister Shaukat Aziz in view of difficulties being faced by Etisalat in completing the financial requirements owing to re-composition of its board of directors and some other post-privatization conditionalities, a senior official at the Privatization Commission told Dawn.
A spokesman for the Privatization Commission confirmed that following the meetings between the Etisalat CEO and senior government officials, Pakistan had agreed to extend the completion period until October 28.
“The interceding period will be used to finalize the privatization of PTCL for which a high-level team from Etisalat is arriving Pakistan,” the spokesman said but did not elaborate when.
Privatization Commission Secretary Tehsin K. Iqbal when approached was not aware of the reasons for the delay but said it was a big transaction involving a lot of money and issues and it was decided through mutual understanding.
The privatization minister was not available for comments.
Etisalat had won the 26 per cent stake in PTCL along with management control on June 18, 2005 at a total bid price of $2.6 billion. It was required to make a 25 per cent down payment within 14 days and the remaining 75 per cent in 60 days. As such, full payment by Etisalat and handing over and taking over of Pakistan’s largest company should have been completed by August 28, 2005.
Officials said the Privatization Commission had also granted a favour to Etisalat by reducing the time from 36 months to 18 months to pledge 26 per cent PTCL ‘B’ class shares for raising necessary funds, a relaxation refused to other bidders during the due diligence phase.
The officials said when the issue of PTCL privatization was placed before the Cabinet Committee on Privatization (CCoP) for discussion in its meeting on September 1, it was told that Etisalat had requested a permission to pledge its ‘B’ class shares 18 months after the completion of transaction, instead of 36 months envisaged in the bid documents, to enable it to arrange necessary financing.
A Privatization Commission official confirmed that other bidders had also sought similar relaxation to pledge PTCL shares during due diligence, but their requests were turned down.
He, however, explained that at the time of formulation of bid documents the global telecom sector was undergoing structural changes.
“There were other large acquisition transactions in the sector available to international bidders and in order to attract qualitative bidders it was deemed appropriate that there should be some period of restriction on the ability to pledge the shares for raising funds,” sources said.
The CCoP was informed that giving Etisalat the ability to pledge its shares would have no financial impact on the government, as it would have got the full consideration upfront.
Further, it would not impact the government’s strategic interests, as there were sufficient safeguards available to mitigate any potential adverse effects as a result of pledging of ‘B’ class shares.
The CCoP had also approved amendments in the Shareholding Agreement (SHA) and Share Price Agreement (SPA), as recommended by the Financial Advisory consortium. The committee had also allowed the Privatization Commission to offload 8.5 per cent ‘A’ class shares, but refused to give matching rights to Etisalat, which the company demanded to enhance its voting powers.
