ISLAMABAD: Pakistan on Thursday asked Etisalat International to take immediate steps for the settlement of outstanding sale proceeds of Pakistan Telecommunication Company Limited (PTCL) and take part in future investment opportunities in the country, particularly in information technology (IT) and telecom sectors.
Etisalat has been holding back $800 million out of $2.6 billion bid proceeds of majority stakes in PTCL for almost 16 years now on the premise that Pakistan did not transfer titles of all the properties owned by the privatised entity.
Minister for Finance Shaukat Tarin had a meeting with Etisalat International Group CEO Hatem Dowidar at his ministry. Minister for Privatisation Mohammadmian Soomro, the Privatisation Commission chairman, finance secretary and other senior officials also attended.
Mr Tarin “underscored the significance of resolving outstanding issues between Etisalat and the Privatisation Commission and moving ahead for a sustainable solution,” said an official statement. “Fair evaluation of properties should be completed at the earliest,” the minister said.
UAE firm expresses readiness to invest further in IT, telecom ventures
Mr Tarin told the visiting delegation that his entire focus would now be on the telecom sector, including new transactions and foreign direct investments in IT and 5G services. He highlighted the prospects of foreign investment in Pakistan, especially in the IT and telecom sectors which are growing rapidly. He expected Etisalat to benefit from the conducive environment and attractive incentives.
Sources said Etisalat had suggested some evaluation numbers for the outstanding properties which had been taken at the current market price without taking into account the financing costs of $800m outstanding amounts for 16 years. There has to be the same principle for properties and foreign exchange proceeds, the official statement said, adding that the two sides agreed to complete the fair value of properties within a month.
Mr Dowidar reaffirmed to have evaluation of properties completed soon and expressed readiness to further invest in the IT and telecom sectors in Pakistan. “Both sides agreed to proceed ahead for resolution of all outstanding issues between Etisalat and the Privatisation Commission in a spirit of goodwill,” the finance ministry statement said.
Mr Tarin concluded that the United Arab Emirates was one of the major economic partners of Pakistan and Islamabad attached great value to the brotherly relations between the two countries and wanted to further strengthen business and trade linkages.
Sources said that some 18 months ago, Etisalat had offered about $275m payment against $800m proceeds of the sale of PTCL but the matter could not be settled.
Pakistan had previously asked Etisalat to deduct about Rs9bn ($60m) out of the total $800m. After detailed interactions, Etisalat had come up with a final counter offer of no more than $275m. The company is estimated to have earned almost Rs100bn profit since the takeover.
Etisalat has held back $800m in PTCL sale proceeds although it won 26 per cent shareholding along with management control of the-then telecom monopoly for $2.6bn in June 2005.
The dispute between the government of Pakistan and Etisalat had come down to the 33 properties whose titles could not be transferred in the name of PTCL. The sale deed required the dispute over properties to be settled through valuation of assets by both sides. In case of difference over valuation, the valuation by Etisalat has the preference under the deed, unless the matter is taken up for arbitration.
The technical services agreement (TSA) of PTCL with Etisalat also did not have a legal life after it expired in 2011 and revised up to 2014. The PTCL’s asset management department had originally provided inaccurate and fundamentally flawed records on its properties as it owned only 3,248 properties but had mentioned 3,384 in the privatisation agreement finalised in 2006.
The government, which still had 62pc stake in the PTCL, has provided a list of all 3,248 properties to Etisalat with details why the remaining 33 properties could not be transferred to the PTCL. Etisalat had made upfront payments of $1.4bn in a couple of installments but then stopped the remaining amount of $800m on the premise of non-transfer of all properties in the name of PTCL.
According to Etisalat, the number of non-doable properties was not 33 but 363 based on the list provided by the asset management department of the PTCL as part of sale-purchase agreement. The properties could not be transferred in the name of PTCL because they were either partially owned, rented out, owned by the provinces but occupied by the federal government, or were not owned by the PTCL in the first place. Some of these properties, including a big chunk at Gizri, are beyond retrievable.
Published in Dawn, February 11th, 2022