"The PC wanted to give Etisalat the right to match the winning bid, providing it opportunity to share the benefit of efficiencies it will bring to PTCL. But, the proposal was rejected by CCoP," sources added.
They said that the PC board had recommended to CCoP that advantage should be taken of current sentiment in the telecom sector, and Etisalat's acquisition of PTCL 'B' class shares and future price appreciation of PTCL be developed and executed. When the issue was placed before the CCoP, it was observed that since PTCL was yet to be handed over to EIP, the option of divestment of additional 8.5 percent 'A' shares should be considered after the handover.
The PC, however, clarified that the sale of additional shares was a separate transaction, and if the government wanted to sell additional shares, it was time to avail the opportunity through transparent competitive bidding process, sources said.
The PC argued that EIP had justifiably felt that since it would own all 'B' class shares, it would not benefit from the potential upside stemming from acquisition of PTCL without enhancing the stake through additional acquisition of 'A' shares.
A question arose as to why EIP did not buy additional shares from the market, which was responded by PC representative that only 11.88 percent 'A' class shares were currently available in the market, and that the shareholding was too fragmented.
A member of the Committee even opined that no right of matching should be given to Etisalat, as it would impact the competition, but this observation was set aside.
It was also clarified that 'B' class shares do not have the same voting right as 'A' class shares, and the EIP had already paid management premium. It was pointed out that in case of Kapco, 26 percent shares had been sold as strategic stake, and 10 percent additional shares were sold at a lesser price after adjustment of strategic sale premium and the same principle may be applicable here.
Sources said some CCoP members stressed that the government should ensure transparency of the process and determination of fair value for divestment of the shares.
"There should be a reference price, below which GoP should not sell the shares, and this should be under the GoP control," it was pointed out, according to sources.
The CCoP also rejected a proposal which said that instead of going for open auction, a selected group of bidders be allowed to purchase 8.5 percent 'A' class shares. After detailed discussion, the Committee decided that 8.5 percent 'A' class shares should be sold through 'block sale' in transparent competitive bidding process on modalities to be determined by the GoP in line with relevant regulations.
Besides this, the modalities to be determined should include pre-qualification of professional investors (excluding telecom sector) and the right of EIP to match the winning bid through competitive bidding process, provided it participated in the process. It was also decided that as and when the GoP decided to offload 'A' class shares (beyond 8.5 percent), Etisalat may be provided opportunity to share the benefits of the efficiencies it would bring to PTCL by allowing Etisalat the ability to purchase additional 'A' class shares.
In that case, the EIP would have the right to receive an equal quantity of A' class shares on same terms of divestment as and when determined by the GoP, sources said.