Etisalat, the buyer of Pakistan Telecommunication Company (PTCL), has withheld $799.3 million until the Government of Pakistan (GoP) transfers properties in Sindh and Punjab in favour of PTCL, reported Business Recorder, citing sources in Privatisation Commission.
PTCL was privatized through sale of 26 percent shares for $2,598,960,000.00, to be paid in nine equal installments, payable on biannual basis. As per Share Purchase Agreement (SPA), GoP is required to provide clean titles of 100 percent of PTCL properties (3384 in number) by January 12, 2008. Payment of balance sum of $1.198 billion was contingent upon transferring titles to the properties in question.
Three further installments of $133,000,000 ($133 million) were paid by the buyer upon transfer of the corresponding number of properties. In the event of non-fulfillment of this obligation, GoP is obliged to nominate a list of non-transferred properties to the buyer whereafter GoP and buyer will separately appoint property valuators to determine the value of such properties. The valuations have been procured.
Following such valuations, the buyer has the option to surrender its right to the use of non-transferred properties and deduct the estimated value from balance payments or withhold such payments till the titles to the properties are transferred.
In order to ensure timely completion of transfer of title and possession of the properties in question, GoP constituted a steering committee headed by Secretary, Ministry of Information Technology, (who is also Chairman of the PTCL Board of Directors).
However, to date, a balance of 161 non-transferred properties (including 71 in Punjab and 45 in Sindh) remain outstanding and consequently the installments ($133.218 million each), due on March 12, 2008 and September 12, 2008 have been withheld by the buyer. Etisalat has now paid a total of $1.799 billion and the balance of $799.3 million remains, which Etisalat intends to adjust against the value of non-transferred properties, sources said.
The Privatization Commission (PC), on its part, has followed up the case of transfer of properties with earnestness and various meetings have been held with the Provincial Chief Secretaries/Senior Members, Boards of Revenue for resolving the issue. The Minister for Privatization and Advisor to Prime Minister on Finance have also written letters to the Chief Ministers of Punjab and Sindh to help facilitate the transfers but no progress has been made.
The Punjab government has conveyed that it proposes to charge the current market price plus 10 percent surcharge for transferring the properties to the federal government or the PTCL. Sindh government has, however, agreed to charge fees at amenity rate (50 percent of the commercial rate). In this regard, Sindh government has asked for Rs 11.4 billion, whereas Punjab is demanding higher figure.
Sources said that meetings were also held between Secretary Privatization Commission, Chief Secretary Sindh and Senior Member Board of Revenue Sindh to discuss and finalize valuation of these properties. “We are very close to arrive at a figure for payment to Government of Sindh for transfer of the properties in that province,” sources added.
They said that Chairman and CEO Etisalat was kept updated by Secretary PC through personal meetings, telephonic discussion, and letters assured of GoP’s full support at all levels.
However, his letter dated 10-3-2009, the Chairman and CEO Etisalat, in a letter on March 10, informed the PC that EIP has decided to exercise its rights under clause 2.8(a) of the SPA which allows the buyer to instruct PTCL to surrender the right to eleven high value properties, together with a surrender of EIP’s corresponding payment obligations in respect of such surrendered properties. The aggregated value of these properties was far in excess of Pakistan’s own assessment, carried out by our external valuator, sources said.
A Privatization Commission team headed by the Secretary visited Abu Dhabi on May 4, 2009 at the invitation of CEO, Etisalat, to discuss the process of transfer of properties. In the meeting it was discussed that subject to the approval of the GoP, PC/ GoP would expedite the process of transfer of properties and Etisalat agreed to a period of three months for this purpose.
However, payment of balance sale considerations and release of shares would automatically happen at the end of this period. Payment would be released in full by Etisalat, outstanding amounts subject to deduction for those properties not transferred at the end of the three-month period.
Privatization Commission also held a meeting with Chief Secretary Punjab on May 22, 2009 to discuss the transfer of outstanding properties on the pattern of the arrangement agreed with the Sindh Government. It was agreed in this meeting that clean titles and possession of properties should be transferred to PTCL in the shortest possible time.
The properties would be valued at market price by the District Price Committees under the supervision of senior member Board of Revenue Punjab. The Punjab Government would transfer titles @ 50 percent of the market price for all the 71 properties, located in that province within a period of one month, provided the payments of valuated price was made to them.
Update: Prime Minister tells Punjab, Sindh to transfer properties’ title in name of PTCL
Prime Minister Syed Yousuf Raza Gilani has directed Punjab and Sindh governments to immediately transfer the title of all properties in the name of Pakistan Telecommunication Company Limited (PTCL) without formal procedures. Prime Minister in a letter to the Chief Ministers of Punjab and Sindh has stated that the most of the properties are already in possession of the PTCL and the titles of ownership and possession thereof have been transferred to the PTCL.
There are 71 properties in Punjab and 45 in Sindh, which now need to be transferred in the name of PTCL (Etisalat). “Such transfers are vital to facilitate payment of $799 million to the GoP and help the country improve its financial position,” the sources quoted the Prime Minister as saying in the letter. He is of the view that all other modalities/procedures can be completed/settled later between the federal government and provincial governments with mutual consent.
Official sources told Business Recorder that Etisalat had taken a notice on GoP that in case all the balance properties are not transferred by December 31, 2008, it will surrender its right to these properties together with a surrender of corresponding payment obligations in respect of such surrendered properties.
The sources said, both the Privatization Commission and the Punjab government have to negotiate the value of the properties and if the deal is finalized, title of the said properties will be transferred to the PTCL after 50 percent payment.
As per the agreement, federal government is responsible for payment of the value of the said properties to the provincial governments. On June 8, 2006, the federal government had constituted an inter-provincial committee under the chairmanship of Secretary Information Technology and Telecom to settle the issue but it failed to fulfil its responsibilities.
Recently, the Prime Minister formulated another committee, comprising Mian Raza Rabbani (the then Minister for Inter Provincial Co-ordination), Qamar Zaman Kaira, Raja Pervez Ashraf and the Secretary IT and Telecom. This committee did its best to resolve the issue but failed.
As per Share Purchase Agreement (SPA), GoP is required to provide clean titles of 100 percent of PTCL properties (3384 in number) by January 12, 2008. Payment of balance sums of $1.198 billion was contingent upon transferring titles to the properties in question. Three more instalments of $133 million were paid by the buyer upon transfer of the corresponding number of properties.
Via Business Recorder