#Etisalat offers $267m to settle proceeds row

By Shehbaz Rana

ISLAMABAD: The UAE-based Etisalat – that owns 26% stake in the Pakistan Telecommunication Company Limited (PTCL) – has offered $267 million to settle a decade-old dispute.

The offer is one-third of the total outstanding dues amounting to $800 million.

If the Pakistani government accepts the Etisalat offer, the total value of the privatisation transaction would come down from $2.6 billion to $2.07 billion.

The Dubai-based firm has proposed to cut roughly $533 million on account of properties that Pakistan has not transferred in the name of PTCL due to various reasons, according to sources in the finance and privatisation ministries.

An inter-ministerial committee on Thursday discussed the Etisalat’s proposed settlement framework.

Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh chaired the meeting regarding the issue of pending payments by the company, according to a handout issued by the finance ministry after the meeting.

Minister for Information Technology Khalid Maqbool Siddiqui was also present in the meeting.

In the presence of all stakeholders – IT Secretary Shoaib Siddiqi, Privatisation Secretary Commission Rizwan Malik and Finance Secretary Naveed Kamran Baloch – pending matters regarding the final settlement were discussed in detail, stated the finance ministry.

The ministry handout quoted the adviser on finance as saying, “we want to move beyond the status quo maintained on the issue for over a decade and bring the matter to a final settlement [that is] beneficial for our country and our long-term business interests”.

The adviser directed the participants of the meeting to come up with the final proposal for the resolution of the pending payments before the end of this month, according to the ministry.

It was the second meeting of the inter-ministerial committee in the past five weeks aimed at concluding the ten-year-old dispute.

In July 2005, Etisalat bought 26% shares in PTCL with management control at a price of $2.6 billion.

After knowing that the second-lowest bid was actually $1.4 billion, the UAE-based firm tried to backtrack from the offer.

Shaikh, who was privatisation minister at the time, had tried to lure the company by offering it to make an initial payment of $1.4 billion and the remaining amount in nine installments until September 2010.

Pakistan decided to offer more incentives to Etisalat – including transferring properties in the name of the PTCL and giving it 3.5% of the revenues in technical service fee.

However, Etisalat again stopped making payments in 2010 on the pretext that Pakistan did not fulfill its contractual obligations by not transferring all the properties in the name of PTCL.

The sources said a few weeks ago Pakistan received the offer from Etisalat that quoted $267 million as the final settlement price.

The sources said some participants expressed the view that Pakistan should accept the offer to resolve the lingering issue.

But the $267 million value is 33.4% of the total outstanding dues of $800 million. Etisalat has proposed to retain $533 million on account of the value of the properties whose titles could not be transferred in the name of PTCL.

A senior government official told The Express Tribune that the government has certain reservations regarding the offer. He said the government would like to see the base value that Etisalat has used to work out the value of 33 non-transferable properties.

According to Pakistan’s assessment, the value of those properties was not more than $88 million. But according to the agreement, the highest value determined by any of the two parties would be the final price of the properties.

The government will now either send its response to Etisalat in writing or invite its delegation to visit Pakistan.

The PTCL is also passing through difficult times as the company’s market share are going down, standing at nearly 13.5%.

PTCL’s revenues for January-September 2019 stood at Rs53.77 billion against Rs53.55 billion in the same period of last year, according to the company’s balance sheet.

Its gross profit stood at Rs13.1 billion for January-September 2019, down from Rs13.7 billion.

The sources said the government wanted to settle some of the outstanding issues, like the technical service agreement (TSA), outside the scope of the $800 million settlement deed.

The government has suspended the TSA agreement a few years ago and wants that its renewal should not be linked to the privatisation payments issue.

Pakistan has blocked the annual technical service assistance fee after Etisalat withheld the privatisation dues. The company’s balance sheet showed that PTCL owed Rs20.2 billion to Etisalat till September 2019 on account of the fee.

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