Flag insists that the shortfall in revenue due to reduction in tariff by the PTCL should be absorbed by the phone utility itself, and it would not bear the loss.
The refusal to this effect has arrived following the federal IT and Communication minister of cut in bandwidth rate from $3,950 to $2,000 in December last.
The reduction in bandwidth rate would increase the revenues of the PTCL in the longer run and cut the Internet charges in the country.
Under the agreement, Flag agreed to keep the tariff at par with the PTCL, in which the formula of revenue remains the same that is 55 percent Flag's share while 45 percent of the PTCL, even if the phone utility reduces the bandwidth rates (now after announcement is $2,000 per E-I of 2 MB monthly) by the IT and Telecom minister in December last.
On the other hand, the PTCL provides domestic transportation of the Flag circuit maintained up to the customer premises and above all it provides alternative from Al-Fujera of United Arab Emirates (UAE) to Karachi.
Experts believe that "Flag has dragging its feet from agreement with the phone utility, and have suggested that the PTCL should compensate the reduction for its share of revenue of 45 percent to its customers."
In view of this, the PTCL is not agreed to change the revenue sharing from 45 to 25 percent.
They said the PTCL should not get 'blackmailed' by Flag, instead the phone utility should explore other alternatives, such as Singtel of Singapore, who have infrastructure on South East Asia Middle-East Western Europe-3 (Seamew-3).
Another option is Dubai Telecom's "Etisalat" that offers the same quality, features of service as well as price through Emix "Emirates Internet Exchange", they said.
The experts appreciated the nice gesture comes from the PTCL that in case, Flag fails to reduce the tariff, the PTCL has offered free shifting of Flag customers to the PTCL's bandwidth circuits.
At present, the total capacity of Flag used in Pakistan is little over one Stem (abbreviation) 155MB at $3,950 per E-I of 2 MB monthly.
The experts said: "If any body loses this deal, it would be Flag, because the projected demand of PTCL's requirement in next one to two years is more than six-Stem."
It may be mentioned that in October 2003, an Indian company, Reliance Gateway, that acquired Flag for the acquisition of 100 percent fully diluted equity at a value of $207 million in a major amalgamation deal.
Flag without considering the consequences this could entail if Flag goes for any other business proposition ie dis-investment, acquiring of controlling stake by other companies or amalgamation it had not informed the PTCL.