Under the leadership of Senator Shammim Afridi, the Senate Standing Committee on Privatization examined the issue of Pakistan’s inability to recoup debts of $800 million from e& (Etisalat) nearly 17 years after the corporation bought a managing stake in PTCL.
The committee was notified by the secretary of the Privatization Commission (PC) that e& had only made 3 payments while there are still 6 installments due. He continued, “To date, there is pending a total of $800 million.”
Up until 2007, Etisalat promised to pay up to $1.8 billion for the PTCL takeover. However, e& never made a payment and instead held onto about $800 million, claiming that the Pakistani government had not yet transferred certain properties to PTCL.
The Privatization Commission stated that e& was required to pay $2.6 billion in exchange for a 26% ownership investment and controlling powers in PTCL.
When given the choice, e& chose to pay the $2.6 billion in installments, paying $1.4 billion in a single payment and the remaining $1.2 billion over the course of nine installments.
Agreement Between Etisalat and Govt. of Pakistan
According to the 2004 sale and purchase agreement (SPA), the Pakistani government was compelled to give the PTCL ownership of 3,248 properties. The federal government owned, leased, and rented the properties.
Since the pending payments have accumulated over the past 12 years, Etisalat has not delivered $800 million and is still holding onto more than 407 million shares. Relevantly, since its privatization in July 2005, PTCL has declared dividends and collected technical service agreement fees.
Pakistan has repeatedly asked Etisalat to settle its debts by subtracting the amount of the unpaid balance, but Etisalat claims that it will only do so after the entire transfer of properties.
Despite this, the Privatization Commission has repeatedly stated since that an agreement with Etisalat has been reached and that payment will be made in the near future, but nothing has happened as of yet.
To read our blog on “Pakistan & Etisalat Intl. have agreed to resolve all remaining issues,” click here.