PTCL buyer withholds $799.3 million till transfer of properties

[LahoreEstate]

MUSHTAQ GHUMMAN
ISLAMABAD (May 28 2009): 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, sources in Privatisation Commission told Business Recorder.

PTCL was privatised through sale of 26 percent shares for $2,598,960,000.00, to be paid in nine equal instalments, 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 fulfilment 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 instalments ($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 Privatisation 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 Privatisation 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 Privatisation Commission, Chief Secretary Sindh and Senior Member Board of Revenue Sindh to discuss and finalise valuation of these properties. "We are very close to arriving 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 and was assured of GoP's full support at all levels.

However, vide 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 Privatisation 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 of outstanding amounts subject to deduction for those properties not transferred at the end of the three-month period.

Privatisation 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 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.

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