Etisalat misses stage payment in buyout of Pakistan Telecoms

Pakistani officials have moved to damage control mode following revelations that after four solid months of negotiations, the government of Pakistan has failed to lock down an agreement for the US$2.56 billion sale of the Pakistan Telecommunication Company Limited (PTCL) to Etisalat of the United Arab Emirates (UAE).~ ~ In a statement, the Pakistan Privatisation Commission (PPC) announced that Etisalat has failed to meet a key payment deadline, thus effectively nullifying the sale agreement announced in late June. The PPC added that it has passed the matter on to the Cabinet Committee on Privatisation for “guidance on the next steps of the transaction.”~ ~ While analysts and the media have interpreted the announcement as a serious breakdown in negotiations between the two parties, Pakistani officialsare playing down play down the delicay of the situation.~ ~ In a report published by the Khaleej Times in the UAE, an anonymous `official` said that discussions are continuing and a `positive outcome` is likely within the week. He added, “neither the Pakistani government nor the UAE firm is willing to cancel the deal.”~ ~ Etisalat bid almost double its nearest rival for PTCL and its success in the tender process was widely welcomed in Pakistan.

The agreement, that would would see Etisalat take a 26% equity stake in, and have full management rights over, PTCL, was initially hailed as a precursor to closer investment ties between the UAE and Pakistan.~ ~ However, things are now changeing. A spokesman for the Privatisation Commission said, “In spite of the necessary facilitation within the transaction framework, Etisalat has failed to make payment of the balance bid amount within the mutually agreed and extended time line.” Etisalat had been required to pay 90per cent of its bid total by October 28.~ ~ Some reports suggest that internal dissent within the upper echelons of Etisalat over the sheer size of the bid is delaying matters – and that this is being exacerbated by recent reports of a marked downturn in PTCL`s profits. A source says Etisalat needs mnore time to finalise finances.~ ~ Should the breakdoen in negotiations prove to be terminal, the door will be opened to the possibility of a re-newed bidding war for PTCL.~ ~ However, Pakistani government officials have repeatedly assured international investors that the sale, the lynchpin of its competition strategy, would go through as agreed; but this is beginning to sound like empty promises.~ ~ Before Etisalt was named the winner, those other companies bidding for PTCL included China Mobile, Singapore Telecom, Telekom Malaysia, MTC Kuwait, Saudi Oger, Turkcell and Saudi Telecom.