State of Telecom Industry in Pakistan

The Etisalat-PTCL deal has been controversial since the days when privatization talks began. In the 4 years after the deal, PTCL went through a transformation with many changes impacting its employees including layoffs. But the issues associated with Etisalat-PTCL deal are not over yet. Recently news has surfaced that Etisalat is still in dispute with Pakistan Government over US$1 billion (Dh3.67bn) payment. Etisalat agreed to pay $2.6bn to the government in installments for a 26 per cent stake in PTCL in January 2006. But it has withheld payments for more than a year because of a dispute over the ownership of several properties in Pakistan that were part of the deal.

“Transfer of land is part of the contract. It says if it doesn’t happen we can stop the payments,” said Mohammed Omran, the chairman of the UAE’s largest telecoms operator. A committee that is led by Waqar Ahmed Khan, the Pakistani minister for privatization, and includes two other federal ministers has been established to negotiate with Etisalat.

“The Pakistani premier has assured the Etisalat delegation of his full support, but at the same time he has expressed concern over the payments owed to Pakistan’s government,” Mr Khan said.

“We will do all we can to assist Etisalat but we want this issue resolved and cash transferred to the exchequer as soon as possible.” Mr Khan added that formal negotiations would start “within days”.

Mr Omran said in April that Etisalat was considering plans to raise its shareholding in the Pakistani operator by another 25 per cent, giving it a controlling stake.

Etisalat hopes to boost its customer base in the country by expanding into rural areas, where most of Pakistan’s population of 170 million lives. It also hopes to bid for a coming 3G licence in the country.

“There are a lot of opportunities with PTCL,” said Irfan Ellam, a telecoms analyst at Al Mal Capital in Dubai.

“PTCL, when Etisalat bought its stake, was overstaffed but things changed after they gave voluntary redundancies to reduce their cost base. The revenue line has been impacted by the competition but it’s still a very good growth story.”

Etisalat has recently stepped up its involvement on the subcontinent. This month, it became the controlling stakeholder in its Indian subsidiary, Etisalat DB, with an additional investment of 3.8bn Indian rupees (Dh298.4 million). It also bought the Sri Lankan operator Tigo for $155m in October.

Mr Omran said his company’s future investments in Pakistan would hinge on a satisfactory resolution to its existing disputes.

“We have informed the Pakistan government that we are interested in the next licence and are willing to work with them on a majority stake,” he said. “But we need to resolve the issues before we could think of more investments.”

PTCL is Pakistan’s third-largest mobile operator, with more than 20 million mobile subscribers, and also offers broadband and landline services. But increased competition within the market has affected its earnings.

The company reported third-quarter revenues of 14.5bn Pakistani rupees (Dh632.6m), a decrease of 13 per cent compared with the same quarter last year.

Via National, AE