Pakistan accepts Etisalat's $2.59 bln PTCL bid
By Aziz Malik - Pakistan Times Federal Bureau Chief

ISLAMABAD: Pakistan on Monday accepted an offer by Emirates Telecommunications Corp. to buy 26 percent of state-owned Pakistan Telecommunication Co. Ltd. [PTCL] for $2.59 billion.

Prime Minister Shaukat Aziz said the bid by the United Arab Emirates company, known as Etisalat, was a fair price for a management stake in Pakistan's biggest telecom company.

The country's biggest privatisation had been expected to raise $2 billion at best, but Etisalat far outbid China Mobile (Hong Kong) Ltd.'s $1.409 billion offer and Singapore Telecommunications Ltd.'s bid of $1.166 billion.

"We think the price received by the government reflects the true value of the company," Aziz told reporters after chairing a meeting of the Cabinet Committee on Privatisation, which approved the offer from the Middle Eastern company.

The government, which holds 88 percent of PTCL, offered 1.33 billion shares, or 26 percent of the total 5.1 billion shares.

Cabinet Committee accepts bid

Meanwhile, Federal Cabinet’s Privatization Committee formally accepted on Monday an offer by Emirates Telecommunications Corp, also known as Etisalat, to pay $2.59 billion for a 26 percent management stake in state-owned Pakistan Telecommunication Co Ltd (PTCL).

After the meeting addressing a news conference Prime Minister Shaukat Aziz said Pakistan would earn Rs. 155.158 billion from the PTCL privatization deal. “We have accepted a very good offer”, he said.

After the PTCL deal, PSO, NIT, Pakistan Steel Mills and PPL will be offered for privatization, he further said.

Acceptance letter for the bid will be issued to Etisalat today, Privatization Minister Dr. Hafeez Shaikh told a questioner.

Talking on Karachi Electric Supply Corporation (KESC) privatization he said the second bidder will be given offer after lack of interest shown by the bid winners Kannuz Al-Watan. Final decision on the matter however taken after the deadline, he further said.

Prime Minister Shaukat Aziz said employees working conditions will definitely be improved after the PTCL privatization, moreover consumers will be provided better services and the company will attract more investment.

He said Etisalat also operating in other countries, so the PTCL employees would hopefully get opportunity to work in overseas.

Participation by three major telecom companies in PTCL bidding express confidence on the government’s policies, Aziz added.

CEO Etisalat

Obaid Saeed Bin Mes'har, chief executive of Etisalat, told reporters in Dubai the investment would pay off within five years, hopefully sooner. His bid was about 40 percent above the average PTCL share price for the past six months.

"We feel this is the right value," he said, adding that the premium was fairly standard given that Etisalat was guaranteed management control.

The deal would be 25-percent financed through equity and 75-percent through bank lending. Dubai Islamic Bank will provide 10 percent of the equity and 10 percent of the debt component.

Mes'har has pushed Etisalat into neighbouring Saudi Arabia and into six West African states. The company is a leading contender to buy 55 percent of Turk Telekom.

Mes'har said Etisalat would have "no problem" raising the funds for both the Pakistan and Turk Telekom deals.

Etisalat shares traded in Abu Dhabi were down 3.9 percent at 42 dirhams in average volume. The stock has more than doubled this year.

Analysts

Analysts said differing perceptions of risk were crucial in the bidding, which was held on Saturday amid tight security after some of PTCL's 65,000 employees went on strike to protest the sale, fearing job losses. Troops were deployed to secure the company's installations and keep services running.

But Rana Tahir, secretary general of the PTCL Employees Union, said workers welcomed privatisation and that management had said there would be no job losses.

Of Troops

Ali Qadir Geelani, a spokesman for the management, told reporters troops would be withdrawn from PTCL installations in a few days.

PTCL has about 5 million fixed lines in service and owns Pakistan Telecommunication Mobile Limited, one of five mobile phone operators in Pakistan, as well as an Internet service provider.

It earned net profit of 29.169 billion rupees ($489 million) in the year to June 2004.

In 1994, the government sold 9 percent of PTCL on the international market via global depositary receipts, raising $900 million. It sold another 3 percent on the domestic market that year to list on the Karachi exchange.

Obaid on No PTCL Employees

Meanwhile, Chief Executive of Etisalat International Obaid Saeed Bin Mes'har has said that no PTCL employee will be relieved, the expertise, technical experiences and skills of PTCL employees would be utilized properly.

The new management will take steps for improving quality, reorganisation and extension of PTCL service to more areas, he remarked. Trained engineering and technical staff might be sent to Africa and other countries after imparting additional training to them.

CE Etisalat International said that investment in Pakistan is a well-thought out decision.

Replying to a question he said that enormous call traffic exists in Pakistan, Saudia and UAE. Etisalat is present in all three countries. It is hoped that rates in these countries could be reduced.●