Etisalat said to stall $800m Pakistan payment

Etisalat has told Pakistan it will not pay the $800 million it owes the government from buying a stake in the country’s state telecom operator until a property dispute is entirely resolved, two senior finance ministry sources said.

The money owed, which dates back to last decade, would provide vital funds for Pakistan’s cash-strapped government, but Etisalat will not pay up until affiliate Pakistan Telecommunication Co Ltd (PTCL) receives ownership of the final 10 properties out of about 3,000 it is due, the sources, speaking on condition of anonymity, told Reuters.

Etisalat, the United Arab Emirates’ top telecom company, did not respond to requests for comment. PTCL’s chief executive Walid Irshaid could not be reached for comment.

An Etisalat consortium bought a 26-percent stake in PTCL for $2.6bn in 2005 that also gave Etisalat majority voting rights.

The UAE firm paid an initial 6.6 billion dirhams ($1.80bn) as per the deal terms, which also included transferring ownership of the properties to PTCL from the government.

Etisalat was to pay the remaining $800m it owed in six twice-yearly installments of $133m, but has withheld payment as the transfer of some of these properties stalled.

The dispute continues while PTCL’s mobile unit Ufone, the country’s No.3 operator, waits to hear if its bid for smaller rival Warid has succeeded.

The UAE firm has been working with various ministries including those for finance and privatization since July to resolve the dispute, the two sources said.

The government had hoped to reach a final agreement by November-end, but this was now unlikely.

“It is being carried out on a fast track basis and being followed up at the highest level,” said one source.

PTCL’s current market value is $858m, according to Reuters data, a little more than what Etisalat owes the government.

Etisalat owned 90 percent of the acquiring consortium, giving it a 23.4 percent stake in PTCL. The consortium’s bid was $1.2bn more than the next highest offer and Etisalat took an impairment of 2.37bn dirhams on PTCL in 2012.

Profits at PTCL, which is majority government-owned, have slumped since Etisalat took management control and the sector was opened up for more competition.

In the financial year ending June 30, 2005, the Pakistani operator made a net profit of 27.3bn rupees ($257.78m), according to Reuters data, but seven years later its annual profit was 11.4bn rupees.

Ufone had 24.8m subscribers as of September 30, giving it a market share of 19 percent, data from Pakistan’s telecom regulator shows.