KARACHI, Nov 11: Excuse the irony of it all, but as much as Pakistan’s Minister for Privatisation and Investment Mr (Hafeez) Sheikh is chasing the (UAE) Sheikhs to make them buy Pakistan Telecommunications Company Limited (PTCL), the more the latter could be suspecting that something might be amiss with the asset.
And to confound the confusion, the government is willing to cede as much ground as it can. What else could drive a buyer away, if the seller is willing to negotiate an already concluded deal?
Etisalat (Emirates Telecommunication Corporation), the UAE government-owned telecom giant, had offered $2.598 billion for a 26 per cent stake in PTCL along with management control in an auction on June 18 this year. Etisalat’s offer of $1.96 per share was higher than what the other two rival bidders — China telecom and SingTel — were willing to pay, combined. But if Etisalat bid that amount, they must have found value while conducting the long ‘due diligence’ exercise prior to the auction.
Etisalat has paid 10 per cent ($260 million) of the total bid money, which includes the $40 million earnest money. The UAE telecom, nonetheless, has not for once, admitted that it was pulling out of the deal. On the contrary, top officials of the company have been asserting that they had ‘signed a contract’ and would abide by it.
But having said that nothing has come to pass. The ongoing negotiations are believed to be centred on deferred payment structure; ability to pledge the acquired shares; allowing dual listing of PTCL shares in the UAE; management agreement; exemption from withholding tax; waiver of duties and taxes; customs duty waiver and the ability to transfer acquired shares. It would look preposterous if the government is willing to go as far as to facilitate the buyer to raise a bigger portion of the funds from within Pakistan.
But what makes the government so anxious to sell the country’s jewel in the crown that forces the highest office in the land to establish direct communications with the rulers of the UAE? The public does not know if the heavens would fall in the event that the Pakistan’s biggest privatization deal falls apart. The obvious impression is that the country would be at a loss of $1.2 billion, lest it is able to close the deal with the highest bidder. The amount is incontrovertibly large, but instead of making itself a laughing stock by agreeing to sell at any cost, the government could call off the sale and pocket $260 million.
‘Islamic brotherhood’ has obviously not held a greater significance over the pros and cons of a commercial deal. The asset could be offered latter after improving its image, by pulling it out from under the shadow of state-control, inducting private management and increasing its ability to cope with the challenges posed by cellular operators.
The argument that the failed sale of PTCL would jeopardize the privatization of upcoming transactions — PSO, PPL, NIT and others — also does not hold much water. Each of those assets has their own independent, intrinsic worth and the government might learn a lesson from PTCL’s debacle to strike upcoming deals under watertight contracts.
And why must the stock market plunge? Corporate earnings of almost all sectors have been phenomenal, including those of banking, cement, fertilizer and automobiles. The long-term value investor would undoubtedly keep his portfolio intact in the face of tremendous earnings growth ahead.
For investors in equities a bad news is not as bad as ‘uncertainty’. And the fact that timely ‘material information’ has not been provided to the investors by PTCL is a violation of the ‘code of corporate governance’. Corporate monitors — KSE and SECP — would do well to look into it.
