The ongoing merger between Pakistan Telecommunication Company Limited (PTCL) and Telenor Pakistan faces significant delays due to the mounting financial losses incurred by PTCL’s subsidiary, Ufone. Industry insiders reveal that Ufone’s deteriorating accounts have become a key obstacle to securing regulatory and government approval for the merger, with intense scrutiny now underway.
PTCL has historically subsidized Ufone’s operations to cover its losses. However, the government now demands a thorough audit of Ufone’s financials before giving the green light to the merger proposal. Sources within the telecom ministry informed The Express Tribune that Ufone’s losses have been absorbed by PTCL, which has negatively impacted dividend payouts to shareholders. Meanwhile, Ufone’s management and board members have reportedly continued to enjoy perks and privileges despite the ongoing financial downturn.
Adding complexity, government nominees sit on Ufone’s board but have not publicly questioned the sustained losses. The Competition Commission of Pakistan (CCP), the country’s antitrust regulator, has also requested Ufone’s accounts to assess the financial discrepancies and cross-subsidization claims. Although Ufone submitted its financial documents, officials described them as complicated and difficult to analyze, prolonging the review process.
IT and Telecom Minister Shaza Fatima Khawaja recently acknowledged that Ufone has not been sharing its balance sheet transparently with the government. She clarified that since Ufone is operationally controlled by Etisalat, the government does not hold responsibility for the losses. The minister highlighted that other telecom companies like Zong and Jazz have shown profit growth, underscoring concerns over Ufone’s financial health.
As part of the merger review’s second phase, the CCP sought an evaluation of PTCL’s market position from the Pakistan Telecommunication Authority (PTA) to ensure that the proposed consolidation would not hinder competition or lead to market dominance. The PTA’s submitted documents indicated that PTCL management responded to regulatory objections by challenging notices in the Sindh High Court, further complicating the merger process.
PTCL initially filed its merger application with the CCP on February 29, 2024, correcting flaws in the submission by March 6, 2024. However, Ufone’s competitors opposed the merger, arguing it would create a monopolistic environment within Pakistan’s telecom sector.
When approached for comments, a PTCL spokesperson stated that Ufone’s financial performance is disclosed as part of the overall PTCL Group’s quarterly and annual financial reports, adhering to regulatory requirements. The spokesperson emphasized that PTCL and Ufone operate as separate legal entities with no cross-subsidization between them. Dividend decisions, they explained, are made by PTCL’s board based on shareholder interests and long-term sustainability, not solely on the performance of any subsidiary.
The spokesperson confirmed that the CCP is actively reviewing the merger application and that PTCL has provided all requested information promptly and transparently. “We do not comment on ongoing regulatory proceedings,” the statement added.
The resolution of Ufone’s financial transparency issues and regulatory concerns will be crucial to advancing the PTCL-Telenor merger, which has the potential to reshape Pakistan’s telecom landscape but currently remains stalled amid these challenges.
