This is a real concern that needs to be addressed before we give them more time or concede the buyers' post facto demands. A commercial deal has to be based on business interests alone and not on any emotional or political considerations.
The question that remains unanswered is: why is Etisalat dragging feet on the deal and why is the government so keen to close it at any cost?
It is well known that the Etisalat bid for PTCL was much higher than the reserve price or much more than the market expectations.
Their bid price at $1.96 per share exceeded the bids of the other two competitors, China Telecom and SingTel, if these were to be added up. Understandably, there must have been some red faces in Etisalat, when the bids became public knowledge.
Etisalat's financial exposure at that point was $40 million. If a mistake was made in the valuation of PTCL by Etisalat, they had the option to walk away. However, they deposited another $220 million as required under the privatisation process. But then something went wrong within the UAE entity.
The Chairman along with CEO (International) were removed. The consultants for the deal were changed. The new management since then is trying to extract further concessions from the Government of Pakistan on various pretexts. Etisalat as a government entity is used to a royal mind set where a ruler is only answerable to himself and can take unilateral decisions.
It cannot happen in Pakistan - despite a President in uniform. Due process has to be followed. Therefore, the termination notice was issued to them last Friday. It has to be done despite a parallel process in place.
The two heads of state have talked on the subject on telephone. The Prime Minister of Pakistan and his ministers have been holding negotiations with Etisalat representatives and providing them comfort of all sorts.
We have indeed a close relationship with UAE. They have been of help in our time of need and our nationals in large numbers work in UAE. So let us not be hard nosed businessmen and forfeit the $260 million.
Instead we should issue shares in PTCL at $1.96 per share worth $260 million to Etisalat. And, then start afresh. There are a number of options. The privatisation process does permit the second highest bidder, ie China Telecom to match the highest bid in case of a default by Etisalat.
Refusal by China Telecom would entitle SingTel to the same option. The process also allows the PC to suggest an alternative proposal to the Federal Cabinet for considerations and approval. This is indeed the process being followed in case of Al-Jummiyah offer for KESC.
There are lessons to be learnt from this process and we must work to correct the flaws. We should have thought of timely amendment in Telecom Act legislatively instead of relying on an ordinance. This is the pivotal point on which Etisalat is said to be demanding a refund.
Even though an ordinance carries the same force as the law, an ordinance can also lapse. And, Presidential assurances do not seem to be acceptable to Etisalat.
We have the option to give them more time and rush the legislation. But that may still not be the decisive factor to complete the transaction. There may be other commercial demands before Etisalat remits the balance due under the contract. Critics may argue that by giving more time the Privatisation Commission is setting a bad precedent for future transactions, and also that other bidders may not be able to match the Etisalat offer.
Yet they could be given an opportunity to improve on their last bid in a two-way match. SingTel has already indicated that it is keen to enter the Pakistan market.
As a last resort, we could float GDR's internationally.
And, until we can get a good price for the management stake, let PTCL have a autonomous board consisting of professionals so as to remove the corporation from the clutches of the Ministry of Telecom & IT.
Had we run public sector entities as a business on commercial lines and not as an appendage to the government ministries, national companies like PTCL, PSO, HBL, etc would have been acquiring entities abroad instead of being sold to the private sector.
After all, the three bidders wanting to acquire PTCL are all government entities. Their strength lies in the professional way they have all been allowed to operate and grow to a point where they can fan out overseas.
Unlike the private sector which enjoys the luxury to undertake the best available economic choices under any circumstances, unfortunately the government has to faithfully adhere to a pre-announced transparent procedure and strictly observe the rules under the statutes.
Also the government has to be more sensitive to the desires of the citizens than a company is to its clients. In a country of 150 million, PTCL has only five million land lines; this is less than the cellular leader in Pakistan ie Mobilink (6.5 million).
In the last five years PTCL has been forced to focus more on clients in the I.T. sector. It could not face the competition and expand its client base in the cellular field through its affiliate Ufone. Still the I.T. companies are dissatisfied.
The delay in PTCL privatisation by a year was mainly on their demand to break the company into pieces with the government entity retaining the national fibre optic backbone, on the ground that a private monopoly is worse than a public monopoly.
Buyers are attracted to companies on a growth trajectory and value it on the basis of future potential. Experts in this field are confident that if PTCL is in the right hands, not only it can dominate the telecom field but also the make rings out the competition.