The Telecom sector is considered to be highly efficient and effective since the 19th century. The industry has gained enormous fame in terms of digitizing the country. By seeing the many benefits in the sector, almost each advanced and emergent state is in the race of Privatization to get more profit. Pakistan has also been involved in Privatization since the 1990s. By the end of 2000, about US$ 2.0 billion Privatization was made, and nearly half of the involvement was from the telecom sector.
By the end of 2000, about US$ 2.0 billion Privatization was made, and nearly half of the involvement was from the telecom sector
PTCL has a long history in terms of being privatized. It has gone through many good and bad times during its whole life. By 2005, PTCL was considered as a telecom giant in Asia. The Privatization of PTCL was completed in 2006. At first, three companies were involved in the bidding, i.e., Etisalat (UAE), China Mobile (China), and Singtel (Singapore). Among them, Etisalat won the bid with a substantial margin. Pakistan’s government then sold out 26% shares and managerial control to Etisalat in just US$2.6 billion. In 1994, 12% of shares were sold to the general public worth more than $900 million. At the same time, the government retained 62% of its total portion.
Etisalat paid an initial amount of $1.80 billion, which also included transferring ownership of the properties of PTCL. The company needs to pay the remaining $800 million in six twice-yearly installments of $133 million.
Pakistan’s government sold out 26% shares and managerial control to Etisalat in US$2.6 billion. In 1994, 12% of shares were sold to the general public worth more than $900 million
Over a Decade Long Dispute
More than a decade long deal has not been finalized yet because of not fulfilling the clauses made by both parties. Etisalat has been withholding the payment because Pakistan did not transfer a number of the 3,400 properties destined for PTCL as per the deal terms. The disputed features turned out to be non-negotiable due to ownership difficulties.
Etisalat has been withholding the payment because Pakistan did not transfer 3,400 properties destined for PTCL as per the deal terms
In January 2015, the Pakistani government informed Etisalat about the transfer of 3,214 properties, expecting that the corporate pay the remaining amount after deducting the worth of the nontransferable assets. The dispute is only on 34 properties. However, Etisalat said to cut around $500 million from the remaining payment.
Pakistan’s privatization ministry, in 2018, hinted it might take the matter to the international court of arbitration to recover the dues from Etisalat. To settle a decade-old dispute, Etisalat has now offered $267 million. The offer is one-third of the entire outstanding dues amounting to $800 million.
To settle a decade-old dispute, Etisalat has now offered $267 million. The offer is one-third of the entire outstanding dues amounting to $800 million
The government has not made any decision regarding the offer given by the Etisalat. If the Pakistani government accepts the Etisalat offer, the entire value of the privatization transaction will come down from $2.6 billion to $2.07 billion. The Dubai-based firm has proposed to chop roughly $533 million on the properties that Pakistan has not transferred within the name of PTCL for various reasons.
With the profit margin of the PTCL decreasing each year, accepting the deal by Etisalat will drop the value of the company more. Moreover, it will also bring a loss of $533 million to the government
With the profit margin of the PTCL decreasing each year, accepting the deal by Etisalat will drop the value of the company more. Moreover, it will also bring a loss of $533 million to the government.
The bright side of the Privatization
There are many examples in the world where public units have performed enormously well to prove themselves as global firms. Some examples of these companies are Emirates Airlines, Haier, China National OFFSHORE Oil Corporation (CNOOC), Dubai Ports, and Malaya Petronas. These global companies have been evidenced as best companies in terms of customer satisfaction, employee retention, and boosting the country’s economy.
Remarkably, all these giant companies are state-owned organizations that have made a tough decision to shift ownership from public to private sectors to certify higher performance. Making a firm private and expanding it globally, opens the way for new opportunities and experience. The Privatization of PTCL has put some positive effects on the economy, and the society of Pakistan. The Privatization has opened up the ways for foreign investments. It has made the company more advanced by introducing the new technology and providing a variety of services with ease of provision.
Moreover, it also enabled the company to offer competitive rates of services and improved customer services. For quite some time, PTCL has introduced a variety of affordable packages across the land. Because of the low-cost packages, people prefer using PTCL than any other company. PTCL now has more than 1.3 million satisfied
customers across Pakistan.
The Privatization has opened up ways for foreign investments. It has made the company more advanced by introducing the new technology and providing a variety of services with ease of provision
Because of the new management, PTCL has partially decentralized its structure for better operations and reduced human resources by replacing it with a more qualified overseas technical workforce who provided the necessary training to local staff to improve their skills. Due to the advanced technology, PTCL has managed to expand its network in 2000 towns and cities of Pakistan.
Although the graph of profitability is getting down each passing year, however, 2018 proved to be a fruitful year for PTCL Group, with an 8% increase in revenue. The company gained profit because of the positive contribution of all the operating companies and a significant increase in the Group’s profitability.
One significant benefit of working with foreign staff is skill enhancement. The local human resource is getting more skilled while using up-to-date technology and getting more experienced while working with trained and professional staff from Etisalat.
The dark side of the Privatization
On the downside, it proved to be disastrous in some areas. Before Privatization, the profit of PTCL aftertax deductions was Rs.26.606 billion in 2005 and Rs. 20.777 billion in 2006. Whereas, after the Privatization of PTCL, the profit dropped to Rs. 15.639 billion in 2007 and reduced to Rs 8.760 billion until 2015.
Before Privatization, the profit of PTCL after-tax deductions was Rs.26.606 billion in 2005 and Rs. 20.777 billion in 2006. Whereas, after the Privatization, the profit dropped to Rs. 15.639 billion in 2007 and reduced to Rs 8.760 billion until 2015
It also brought a loss of national assets because more than 3200 properties of PTCL in prime and commercial locations in all big cities of Pakistan have been given to a private multinational company with full management, equipment, infrastructure, and experienced workforce and installations.
Loss in national value occurred after the Privatization of PTCL. The corporation’s profit is now going to personal investors’ pockets, which was getting in the national treasury before the Privatization.
The Privatization of PTCL increased unemployment in the country. More than 50,000 employees have lost their jobs after the Privatization of PTCL, rising unemployment, and poverty within the state. Also, the public sector is different from the private sector concerning values and objectives.
The objective of the public sector is to provide services to the entire public equally without any discrimination. On the contrary, the private sector’s aim is profit expansion. So to impose the private industry to perform as the public sector makes no logic. The deal has been long done, so there is no point in crying over spilt milk.
The government and Etisalat should work this out and devise a policy that should emphasize the positive side of Privatization. In an era of digitization, PTCL can play an essential role in taking the country further in the new era of connectivity and digital enhancement.