Etisalat and privatisation

The Chief Executive of Pakistan Telecommunication Company Limited (PTCL) Walid Irshaid stated in a recent interview that "we are very close to finalising" the deal that would enable Etisalat, the 26 percent stakeholder in PTCL, to release the 800 million dollars that it owes to the Pakistan government. This amount, out of a total of a 2.6 billion dollar deal, was pending due to the non-transference of 300 units of real estate within the federal as well as the provincial territory to PTCL as agreed in 2006.
The federal, Punjab and the Sindh governments have released the properties to PTCL, accounting for the majority of the land value that was to be transferred to PTCL, and the government of Pakistan is now arguing that Etisalat must release the amount due on these lands which, as per estimates, is in excess of 650 million dollars. However the government has offered to allow Etisalat to keep 150 million dollars in lieu of land that has yet to be released by the smaller provinces - an amount considered to be double the value of the remaining land.
What no doubt has complicated matters somewhat is the fact that PTCL's market capitalisation, defined as share price multiplied by the number of shares in issue providing the total value for the company's shares outstanding, has declined to 522 million dollars making Etisalat's stake worth no more than 120 million dollars. Net profit of PTCL plummeted from 27.3 billion rupees in June 2005 during its monopoly days to 8.4 billion rupees six years later. The reason for the decline in profits was unavoidable Irshaid stated as PTCL struggled to reduce reliance on plunging call revenues, "you cannot compare what we were doing in the monopoly days and the market now. We would have been wiped out if we hadn't started diversification."
Greater competition in the telecommunication sector has benefited Pakistani consumers accounting for the fact that this is perhaps one of the very few sectors in the Pakistan economy that continue to show profits. Be that as it may, Etisalat will pay the money that it owes Pakistan irrespective of its financial fortunes. There is no doubt that the Ministry of Finance has continued to actively pursue Etisalat to pay the amount due as per agreement.
The PTCL story does indicate the benefits of privatisation. Analysts argue with a great deal of credibility that had the PTCL remained in government control it would have become a loss-making venture by now joining the growing ranks of other state-owned entities (such as Pakistan Steel Mills, Pakistan International Airlines and NICL) registering ever-rising losses. Thus PTCL, too, would have required massive annual budgetary injections that the country's treasury would have been unable to support. They also point out that had our other loss-making entities been privatised, not only would the pressure on the budget have been significantly reduced in terms of annual bailout packages but the government would also have been able to free considerable resources to meet social sector requirements. And charges of nepotism and corruption would no longer have been levelled against the government to boot.