On Tuesday, Pakistan rejected an offer from Etisalat to settle a privatisation issue with a payment of $263 million, which represented only one-third of the unpaid debt, and demanded that the United Arab Emirates (UAE) corporation increase the sum by two times.
The price that UAE telecom giant Etisalat is willing to pay today is significantly less than what it was willing to offer six years ago. To resolve the 17-year-old privatisation disagreement, a group from Etisalat met with Finance Minister Ishaq Dar twice in two months.
The Pakistan Telecommunication Corporation Limited privatisation proceeds are owed to the company in the amount of $800 million (PTCL). However, no Pakistani government has brought the buyer before a foreign arbitration court.
According to the Ministry of Finance, “both sides agreed to go on with the resolution of any outstanding issues between Etisalat and the Privatisation Commission in a spirit of goodwill.” But it kept the terms of the deal a secret.
The team from Etisalat International was led by its CEO, Mikhail Gerchuk. The delegation included Kamal Shehadi, Chief Strategy International, Hatem Bamatraf, President and CEO of PTCL and Ufone, and Abdulrahim Abdulla Abdulrahim Al Nooryani, CEO of Etisalat Pakistan.
Due to Pakistan’s failure to transfer the remaining 33 properties that the government had promised to transfer in the name of PTCL in 2005, the UAE company has withheld money. However, out of the remaining $800 million, Pakistan has already transferred over 3,000 properties, and Etisalat has made no payments.
Ishaq Dar was reportedly willing to resolve the conflict for about $500 million in cash, according to a government official. However, Etisalat took some time to reply to the minister’s counter-offer. Inferred from this is that the government is prepared to write off at least $300 million of the unpaid debt. Numerous Pakistani cabinet ministers have submitted counteroffers over time, but the situation is still open.
According to a recent independent assessment by two economists, the PTCL purchase was illegal in Pakistan because the company’s management was transferred for only 26% of the company’s shares.
At a cost of $2.6 billion in July 2005, Etisalat acquired 26% of the management-controlled shares of PTCL. The UAE firm attempted to withdraw the offer after learning that the second proposal was far lower at $1.4 billion.
Then, Privatization Minister Abdul Hafeez Shaikh enticed the firm by promising it a $1.4 billion down payment and the balance $4.4 billion over nine instalments until September 2010. Additionally, he pledged to give Etisalat ownership of the properties owned by PTCL. However, PTCL and the federal government did not own many of the sites. Some of these belonged to the local authorities. Two significant properties, with a combined worth of billions of rupees and located in Karachi and Multan, are the subject of the dispute.
The worth of the contested properties, according to Pakistan’s assessment, was not greater than $88 million, the then-privatisation secretary claimed in 2018. However, according the agreement, the properties will only be sold for the maximum value established by either of the two parties.
According to the privatisation secretary, Pakistan sent a second shortfall notice on Etisalat in September 2015 warning the business that it could not transfer the remaining 33 properties and that it would have to settle the debt by increasing the value of those assets.
The Public Accounts Committee (PAC) was previously notified by the Privatization Commission that Etisalat did not disclose its valuation to Pakistan, but that it was over $450 million. HSBC Bank, London’s escrow account agent has received Etisalat’s value.