Is it better for the country and the Pakistan Telecommunications Limited to split the telephone and telegraph conglomerate into three units before its privatization instead of keeping it as a single unit as proposed hitherto?

Twelve per cent of its shares were sold to the public, including foreign buyers, at a very high premium ten years age with a great deal of fanfare here and abroad but only to see the share prices crash hopelessly and the foreign buyers scurrying to sell them at low prices quick.

Eighty-eight per cent of the shares now remain to be sold. Initially 26 per cent of the shares were to be sold along with transfer of management control for about a billion dollars to a strategic buyer. About 30 companies, big and small, are interested in the deal following official invitation to them to voice their interests in the deal.

But following the final de-regulation of the sector and before privatization of the PTCL the Minister for Privatization, Dr Abdul Hafeez Shaikh, says: "we want to avoid the situation where we have a public monopoly going into the hands of the private sector, especially in an environment where the government regulator may not have the strength to deal with the private monopoly."

He said, "division of the telecom company before its sale is a key part of the government strategy to increase competition in the sector and prevent a single private company cornering a deregulated telecom market."

But the question is: will major companies like Sing Tel of Singapore or Vadafon be interested in picking up the separated pieces instead of the conglomerate as a whole as it exists, or will they opt out of the bargain? Or will other companies come in to bargain for the smaller pieces with their limited resources or reduced capital they are willing to invest in Pakistan? What is proposed now is to have separate companies for cellular telephones, for foreign operations and fixed land lines. Creating three such compact companies out of one and making them legally sound may take two years from now.

That means its privatization may have to be delayed to that extent in the face of the World Bank and the Asian Development Bank urging Pakistan constantly for early privatization of the PTCL.

The PTCL has now four million fixed lines, and to them are to be added 690,000 more lines within two years. In spite of that addition, Pakistan will have a low percentage of telephones 2.7 lines for 100 persons, compared to India which has 6.48 lines for 100 persons.

The financial advisers to the PTCL have been advising against breaking the company up, but the government is haunted by the fear of a mighty private sector monopoly overwhelming the official regulator or disregarding him.

Most of the old telephone lines are decayed and prone to develop faults which are not repaired quick. Hence a great deal of investment has to be made on the infrastructure to make the system upto date.

Meanwhile, instead of waiting for long for the PTCL to sanction a telephone line and installing the same at high cost, the people are going for cellular phones the prices of which have been coming down.They are much too handy compared to the fixed lines with all their hassles in Pakistan.

There are four mobile phones services with a total of 2.8 million lines, including Mobilink, Instaphon, Ufon and Pak Tel. And the government or PTA has approved the opening of two new services and 33 national and international companies have applied for the licence.

Seventeen of them are domestic companies and 16 foreign companies and bidding for them will take place in April and within six months after that the new companies will start functioning.

Mr Awais Ahmad Leghari, Minister for IT and Telecom, says mobile phones have reached saturation point in the West and hence Western companies are showing keen interest in developing countries like Pakistan.

A delegation of SingTel which has a market capital of $20 billion led by its president Lee HsienYang met Mr Leghari last week and discussed investment prospects in Pakistan.

Whether Sing Tel would be interested in bidding for the trifurcated PTCL is not known now. That may depend on the terms of sale and operation of the three companies thereafter.

It is also not clear by now whether one foreign company or local outfit with foreign collaboration can bid for all the three units and try to manage them all separately after privatization.

One of the deterrent for the faster spread of the mobile phones is the fixed tax of Rs 2,000 imposed by the government on each connection. The PTA has taken up this issue with the government strongly. The whole issues of the privatization of the PTCL is in the melting pot and what may emerge finally remains to be seen.

Privatization of the PTCL or sales of its shares to the public has been quite a mess right from the beginning. Before the two per cent of its share were offered to the public at home in 1994 the number of shares of the company was increased five times without addition of capital in the form of cash and then the shares were sold for Rs30 instead of the face value of Rs10.

That meant an old share of Rs10 were being sold for Rs150 after revaluation of its capital too high. The company's assets were vastly exaggerated and so were the prospects of profits at 50 per cent. But as the slump came in the stock exchanges of Pakistan the price went down and down.

Prior to that 10 per cent of the shares of PTCL were sold abroad for Rs55 a share. The buyers included a number of Pakistanis overseas. And as the prices crashed abroad most of the buyers sold the shares hurriedly and got out of the market.

That gave Pakistan's privatization a bad name and took a long-time for the country to recover from that. But now prices in the stock exchanges of Pakistan have been soaring and touched giddy heights. But the rise in the prices of PTCL's shares has been modest Rs39.

The same kind of mistake was committed by multiplying the number or shares of Sui Northern Gas Company without adding to its capital. Hence its shares crashed heavily and the Muslim Commercial Bank which underwrote its shares sustained a heavy loss.

So even now when the index of the Karachi Stock Exchange is touching almost 5000 and creating history, Sui Northern shares are selling for only Rs57 against its original sale price of Rs40.

Hence the Privatization Commission was prudent when it came to pricing the shares of Sui Southern Gas Company and fixed it at a reasonable Rs26. Will the same kind of prudence prevail in respect of the prices of the shares of PTCL if offered again for sale to the public, while the principal buyers is offered 26 per cent of the shares initially along with management control?

If the Privatization Commission now sells the shares of PTCL to the public below the Rs 30 at which it offered two per cent of the shares to the public initially, and at Rs 55 at which it sold the shares to overseas investors the people who still own those shares after suffering heavy losses will ask for a refund corresponding to the difference between the three prices.

Hence the government may choose not to offer any more of the PTCL shares to the public and escape creating an unpleasant controversy or undergo small losses through the refund process.

It is a tricky business the government is in completing the privatization of the PTCL. It has to move cautiously and yet deftly in this area so that it does not get its fingers burnt.

If the PTCL is split into three units the government has to quote different prices for the shares of each of the units, as all of them are not uniformly profitable. That too can be an exacting task, which can invite varied kind of criticism from financial circles.

The ten per cent shares of PTCL were sold to foreign buyers at $900 million - at Rs 55 a piece. But we are told 26 per cent of the shares to be sold to strategic buyer will bring in one billion dollars. How is the difference in the two incomes so large, although Rs 55 a share was too high a price?

Now when the two financial advisers of the PTCL are reportedly telling it not to split it up before its sale what is the advice of other stake-holders and financial interests?