[governance] Pakistan to Takeover PTCL if Etisalat Fails to Pay $800 Million till June 2012

[Fouad Bajwa]

http://dawn.com/2012/04/09/pakistan-warns-etisalat-to-pay-800-million-or-face-hostile-takeover/

Pakistan warns Etisalat to pay $800 million or face hostile takeover

ISLAMABAD, April 8: Facing a serious financial crunch and fed up with
Etisalat’s inflexibility in paying over $800 million in PTCL sale
proceeds, Pakistan has asked the UAE-based firm to clear its dues
before June this year or face hostile takeover of the country’s
telecom giant by the government.

Sources told Dawn that the stern warning was conveyed a few days ago
to a high-level Etisalat delegation visiting Pakistan. The delegation
met a government team led by Finance Minister Dr Abdul Hafeez Shaikh.

The Etisalat delegation’s request for a meeting with Prime Minister
Yousuf Raza Gilani was turned down pending resolution of the dispute,
the sources said.

Keeping in mind Pakistan’s friendly relations with the UAE, the
Dubai-based majority owner and operator of the country’s largest
telecom firm has been told that it may keep a maximum of $150 million
— more than double the value of a couple of problematic properties —
but release the rest of the amount (slightly over $650 million)
upfront.

Etisalat has held back $800 million in PTCL sale proceeds for well
over five years now, although it won 26 per cent shareholding along
with management control of the-then telecom monopoly for $2.6 billion
in June 2005.

The Etisalat has been given a month to respond positively to the offer
“because the true value of the money for Pakistan is in May” because
Islamabad has to make a repayment of about $800 million to the
International Monetary Fund. Non-payment will adversely affect foreign
exchange reserves and impact Pakistan’s exchange rate negatively. The
economic managers have been showing $800 million PTCL proceeds in
their budget documents as financing items to bridge fiscal deficit
that is expected this year to cross a whopping 7.5 per cent of the GDP
owing to uncertainty over PTCL dues, auction of 3G telecom licences
and disbursements under the Coalition Support Fund from the United
States.

“Enough is enough” was the message conveyed to the Etisalat delegation
in the presence of Finance Minister Shaikh.

“If we do not hear a positive response in a month, we shall make sure
your flight does not land in Pakistan,” a furious participant was
quoted to have told the guests. Moreover, the Etisalat would be banned
from bidding in 3G telecom licences auction due in a couple of months
to raise about $1 billion.

Prime Minister’s Principal Secretary Khushnood Lashari and Finance
Secretary Abdul Wajid Rana who is also a government member on the PTCL
board of directors were among those who attended the meeting. The
strong position taken at the meeting, said the sources, had the full
backing of the president and the prime minister.

The Etisalat’s top executive, the sources said, suggested appointing
an independent auditor for the valuation of three properties and asked
the government side to wait till its conclusion but this was rejected
outright.

The sources said the finance minister told the delegation Islamabad
was not asking for a mark-up on $800 million the Etisalat utilised for
more than five years now but that it was unjustified to hold back such
a big amount against three properties having a total value of less
than $70 million. The properties are under the control of PTCL, but
their titles cannot be transferred in the name of PTCL owing to legal
complications.

Moreover, Pakistan has never disputed transferring property titles in
the name of PTCL and was earnestly making efforts to overcome legal
complications.

“They are ‘worthy foreign investors’ and some of us are overawed but
this cannot go on indefinitely to the extent of compromising
sovereignty,” a participant of the meeting said, adding that nobody
ever talked about the non-payment issue with Etisalat as was taken up
a week ago.

The unusual stern warning of an extreme threat came following a lot of
top level persuasions from Pakistan for the recovery of PTCL dues over
the last two years. The government had sold about 26 per cent shares
along with management control of Pakistan’s largest telecom operator
in June 2005 when Dr Abdul Hafeez Shaikh was privatisation minister in
the Musharraf government.

Soon after becoming the finance minister in the PPP government, Mr
Shaikh had taken up the matter with Sheikh Nahayan Al Mabarak, a
senior UAE minister and owner of the Abu Dhabi group, for payment of
the at least $500 million in June 2010 against transfer of about 98
per cent of government properties. There were a total of 3,298
properties that were required to be transferred to PTCL, of which all
except only three are currently not in the name of the PTCL owing to
legal complexities.

Later in February 2011, President Asif Ali Zardari also took a special
visit to Dubai to seek the intervention of the UAE leadership for
payment of $800 million that Etisalat owed to Islamabad for the
country’s largest privatisation transaction — Pakistan
Telecommunication Company Limited —, but in vain.


-- 
Regards.
--------------------------
Fouad Bajwa
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