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Etisalat and PTCL deal still intact

DUBAI — The multi-billion dollar telecom deal between Emirates Telecommunications Corporation and PTCL is still intact despite Etisalat failing to meet the deadline to complete the transaction by October 28, sources told Khaleej Times yesterday.

The sources further claimed that senior officials from both sides are still in close contacts to save the deal, which at present stands on the verge of collapse.

A six-member Pakistani delegation, led by Minister for Privatisation and Investment Dr Hafeez Shaikh, is due to arrive in the UAE soon to bridge the differences over the telecom deal. The delegation includes Dr Hafeez Sheikh, Secretary Privatisation Commission Tehsin Iqbal and four others.

"The issue is being discussed at the highest level and both sides are still optimistic that the deal may go through before the Cabinet Committee on Privatisation (CCOP) will take final decision possibly in next week," a senior government official seeking anonymity said. The Privatisation Commission of Pakistan will meet next week to make certain recommendations to the CCOP.

"Neither the Pakistani government nor the UAE firm is willing to cancel the deal despite the impression being given in the media," he asserted and claimed that both the parties are trying their best to bridge the differences to reach settlement during next couple of days.

Etisalat International Pakistan (EIP), a subsidiary of Etisalat, could not meet its commitment to pay 90 per cent of the total bid amount of $2.598 billion by October 28 following the withdrawal of a key partner in the consortium. According to sources, the consortium partner opted out on the pretext that Etisalat offered too high a price for securing 26 percent PTCL stake with management control.

The UAE telecom firm now seeks more time to complete the transaction, the biggest privatisation deal in Pakistan. The sources added that EIP also requested the Pakistan government for a credit facility from a local bank to replace the consortium partner. However, the request was turned down.

"The persistent downward trend in PTCL profits was another reason that prompted the consortium partner to pull out," the sources added.

PTCL posted a nine per cent fall in annual net profit during the financial year 2004-05 to Rs26.6 billion from Rs29.17 billion a year earlier. Its first quarter (July-September 2005) profits for the financial year 2005-06 also recorded 12 per cent decline to Rs5.53 billion ($92.63 million) from Rs6.28 billion in the same quarter last year.

Sources say Pakistan will invite the second highest bidder China Mobile in the event of CCOP cancelling the deal.

China Mobile has offered a bidding price of $1.06 (Rs63.48) per share or $1.409 billion (Rs84 billion) for the 1.326 billion 'B' class shares representing 26 per cent of the total 5.1 billion shareholding in the PTCL.

The third bidder, SingTel of Singapore had offered a bid price of $0.88 (Rs52.54) per share or $1.16688 billion (Rs69.663 billion) for 26 per cent PTCL stake with management control.

On Friday, PTCL’s share price closed Re0.60 down at Rs60.20. Today when stock market will open, this price is likely to fall further, which may cause crash like situation on the local market.

According to analysts, both second and third bidders quoted the bid price, which was very close to the market price for second largest listed company of Pakistan.

Etisalat was the highest bidder and it offered $2.598 billion equating to $1.96 (Rs117) per share, which is almost double the market price of PTCL. Analysts say in case the government decided to hold another round for bidding following cancellation of deal with Etisalat, both China Mobile and SingTel unlikely to make major difference in their previous bid price for PTCL.

Despite repeated attempts, Etisalat's official spokesman was not available for comment.