THE news that Etisalat has failed to make payment in spite of extension granted till October 28 is not unexpected. The way PTCL privatization was carried out in a hurry without taking into confidence the employees and the people opposing it, it was anticipated that it is not going to be so simple an affair. No doubt, June 18, 2005 was grand day in the history of Pakistan and specially Privatization Commission (PC) when in an open bidding, Etisalat purchased 26 per cent management shares at the rate of Rs117 as against the market price around Rs60.
It was considered a big breakthrough in bringing foreign investment. But the problem arose when Etisalat raised certain issues at the time came of final payment. According to the terms set out, Etisalat was to pay 25 per cent within 14 days and the remaining by August 28.
Once any bidder fails to deposit the balance amount in stipulated period, the part payment is confiscated and the deal stands cancelled. But in the case of PTCL, it has been the other way around where the Privatization Commission is running after Etisalat making efforts to save the deal from collapse. The recent visit of six-member delegation headed by the minister for privatization to UAE to save the deal speaks of the gravity of the issues involved.
Now Etisalat has been allowed to pay the balance amount in three instalments within next 20 months. The first instalment will be due after seven months from the date of signing of purchase agreement. This is a very big concession and departure from the original payment schedule.
The big question is, why this stage was reached where a giant company like Etisalat fully backed by the UAE government was getting out of the deal. It affected the stock market and there has been sharp decline in the PTCL shares as its price dipped from Rs71 to Rs58 causing substantial loss to investors. However with fresh negotiations, some positive signals have emerged.
Since the terms and conditions of deal were not made public, it is not possible to comment fully on the issue except to rely on the press releases that are issued from both sides from time to time. It appears that draft sale agreement was not prepared carefully. However, the arguments raised by Etisalat have weight in them.
In normal circumstances, once the deal is struck, the status quo is to be maintained. There can be no fresh hiring and all unwanted expenses are to be stopped. In fact, all major expenses are frozen. No fresh development work and new projects is undertaken except attending to immediate day to day issues.
According to reports, promises made by the PC have not been honoured; for example the appointment of new directors on the Board of PTCL and senior officers on huge salaries and unwillingness to extend the loan facility against PTCL assets.
Not the least one of the key stakeholders of the consortium has pulled out saying that Etisalat has over bid the 26 per cent shares. This is absolutely ridiculous as it was an open bidding and very rightly PC has rejected this plea. In spite of all these impediments, PC is making sincere efforts to save the deal from collapse.
The PTCL management was supposed to be moving cautiously because of strong unions, who all got united under one banner as they were all opposed to PTCL privatization. The major task before PTCL was to bring discipline in the work force and bring an end to protests by employees against its privatization and to ensure that the network that was to be handed over to Etisalat was in perfect order.
Instead, they were all busy in inducting their dear and near ones on contractual appointments. While hiring even a peon a lot of formalities are to be observed whereas in these contractual appointments, no such rule is applied.
Knowing fully well that they had to face cellular companies who continue offering different packages with reduced tariff as compared to PTCL also escaped their eyes.
The management of Etisalat was not sitting idle, they were monitoring all the activities of PTCL. Its profits also declined. As per PTCL balance- sheet, the net profit in the first quarter 2004-05 saw decrease of 12 per cent to Rs5.53 billion. The reason of low profit given by the management is the rise in the operating cost and reduced share in the market. If this is true who is to be blamed? Not the regular employees who are still being paid normal salaries with usual yearly increment.
The rise in operating cost has been mainly due to induction of contract employees and consultants over the years coupled with faulty planning on new projects. An honest comparison would reveal that the contract employees are handling very little work as compared to regular employees and some of them do not have specific industry experience.
The management has failed to improve the PTCL working and to mould the outfit in to a model customer-oriented company. In fact, it has deteriorated ever since it changed hands from professionals to non-professionals.
Despite many negative indicators, analysts believe that Etisalat may not pull out from this deal, as it is a gold mine and with the changed management things will definitely improve.
In view of different environment and culture in Pakistan, the UAE company must move slowly and take into confidence, the workforce that has spent their life in nourishing this great institution.
The existing work force is competent, dedicated and fully motivated. Instead of relying on consultants and contract employees, preference should be given to the staff who have given their sweat and blood for building this organization.
