Pakistan calls off $3.7b telecom sale

KARACHI - Pakistan cancelled a US$2.6 billion ($3.72 billion) deal on Saturday to sell the UAE's Etisalat a 26 per cent stake in Pakistan Telecommunication.

Emirates Telecommunications Corporation (Etisalat) agreed to buy 1.33 billion shares along with management control of PTCL in June following Pakistan's biggest privatisation sale.

"We have served the notice to Etisalat for cancellation of the deal because they have not paid the amount within the required time," a senior Pakistani Government official said.

The Privatisation Commission said in a statement that Etisalat had failed to meet a mutually agreed October 28 deadline to complete the deal.

The Emirates' firm had already been granted an extension as completion of the transaction had been expected in September. An Etisalat spokesman in Dubai declined to comment.

"I have no comments at this time. We will issue a statement within two days," said Ahmed bin Ali, Etisalat's manager of corporate communications.

Analysts said Etisalat raised several issues soon after its successful bid, including a deferred payment structure, permission to list PTCL shares in the UAE market as well as in Karachi, and various tax exemptions.

It may have been pressing for the concessions as it paid a price that exceeded market expectations and was far higher than other bids, they said.

Usually, in such circumstances, a stake would be offered to the second highest bidder, but the Government will have to decide how to proceed, officials said.

"The matter is being referred to the Privatisation Board and the Cabinet Committee on Privatisation for their guidance on the next steps of transaction," the Government statement said. It didn't say if Etisalat had cancelled its bid.

The second-highest bid unveiled last June was lodged by China Mobile, which offered $1.409 billion. Etisalat also outbid Singapore Telecommunications, Southeast Asia's biggest phone company.

Etisalat bought the stake in Pakistan's biggest phone company at a June 18 auction in an effort to gain a foothold in a market of more than 150 million people where only one in 10 has a phone. Pakistan sold its stake in the company as part of an asset-sale plan to repay US$36.7 billion of overseas debt.

The cancellation of the Etisalat deal is the second setback for Pakistan's aggressive privatisation agenda this year.

Saudi group Kanooz al Watan had agreed to acquire a 73 per cent stake in the Karachi Electric Supply Corporation but failed to deposit the required money.

- REUTERS, BLOOMBERG