The Financial Advisory Consortium for sale of strategic management stake in the Pakistan Telecommunication Company Limited has strongly advised the Privatisation Commission to continue along the path of selling PTCL as in integrated entity.
The advice is based on the existence of strong investor interest at this stage and the fact that all the fears expressed by Technical Advisory Group (TAG) of the Restructuring Committee formed under the Minister of Privatisation, Dr Hafeez Shaikh, have been adequately answered.
It may be recalled that some successful Pakistani entrepreneurs in the Silicon Valley have advocated the break-up of PTCL and also its use as a vehicle to make the country achieve a breakthrough in internet technology.
As a consequence, under the Military government, the control of PTCL was shifted from the Ministry of Communication to the Ministry of Science and Technology.
The record shows that Safi Qureshi had held a series of meetings with Dr Ata-ur-Rahman in this regard but his proposal did not find favour with PC under Altaf Saleem.
Meanwhile, PTCL was used as a vehicle to energise internet growth in the country. This was only possible because the entity was in government control. Initially, the privatisation process remained on hold because of the geo-political situation and Military government in Pakistan and later telecommunication industry world-wide went into a tail spin along with the dotcoms and started suffering huge losses after a period of unprecedented expansion.
On his last visit to the US, President Musharraf met leading Pakistanis and he was again advised that the US experience in breaking the telecom sector on regional basis had not met with success.
However, the opening up of long distance to competition had been a boon for the consumer as far as international call rates were concerned because of enhanced competition from MCI and sprint.
Thus the ending of the AT&T monopoly was indeed a success. The President decided to form a Technology Advisory Group (TAG) on restructuring of PTCL. TAG has recently presented a 40-page report.
It says that due to a weak regulatory regime it is not advisable to have a private monopoly and, therefore, PTCL should be broken into different entities with its 'non-core' assets identified as Ufone, Paknet, Carrier Telephone Industries, TIP, to be sold separately.
Further, five baby PTCL's be created for domestic loop, besides one service company and one company to operate domestic and international infrastructure ie the back-bone which will be used by all operators.
It needs to be recognised that PTCL's privatisation as an integrated entity has so far not met with success for various extraneous reasons.
World's leading telecom operators have not shown any interest. But lately, the scene has changed and there is renewed serious interest from mid-level operators because of improvement in Pakistan's economic conditions as well as geo-political conditions.
Singtel (Singapore), Telekom (Malaysia) and Turkeell have reportedly expressed interest in PTCL's privatisation.
The question staring us in the face is whether to take advantage of this renewed interest or delay the privatisation process under the garb of carrying out more studies on restructuring.
World's leading telecom advisors such as Goldman Sachs and J.P. Morgan, have strongly advised PC to delay the process and have explained their reasons for opposing the break-up of PTCL.
Fresh opinion from consultants having operational experience in the telecom field is now being sought.
However, there are objections on involving the Regulator - Pakistan Telecommunication Authority - in the fray.
The Regulator only plays a role when the Board of Directors of the company are suspended and the Regulator takes control of the company.
Secondly, objectors say, why should we not involve the Board of Directors of PTCL on the TAG report?
As it is, the World Bank's technical experts have already given their view on the TAG Report and reportedly declared it a feasible proposition.
If PC feels that Goldman Sachs and J.P. Morgan are mere financial advisors and, that there is indeed a need for an expert opinion from operational consultants like McKinsey, Booz Allen or Bain and Company, it was for the PC and not PTA to seek the consultancy.
Thirdly, PTA has now invited applications from parties interested in local loop and long distance international fixed line telecommunication service licence as the PTCL monopoly is coming to an end.
The licence fee is $10 million. Therefore, the question of PTCL functioning as a monopoly does not arise. But due to huge investment in the infrastructure PTCL will remain a dominant player.
The main points for consideration now are;
-- Will the regulators be powerless in front of dominant players when PTCL is privatised;
-- Are the regulators really powerless in front of a monopoly, public or private;
-- How much time will be consumed in implementing the TAG proposal;
-- Whether it is technically possible to divide PTCL into five local loop-companies on basis of technology and not regions ie Siemens Exchanges in Karachi, Lahore, Islamabad etc in one company and ALCATEL exchanges in another;
-- Whether the hierarchical nature of an organisation like PTCL basically helps or is an obstacle in breaking it into pieces.
In the private sector, such issues are basically decided by the Board of Directors of the company since they represent the shareholders.
Since PTCL is a large national asset, the Cabinet Committee on Privatisation must ask both the Financial Advisory Consortium and the Technology Advisory Group to debate the issue before them and the PTCL's technical and financial experts, and then a final decision be quickly arrived at.
Nine months have elapsed since TAG put forth their proposals. Let us take a clear decision one way or the other.
The renewed interest of reputed telecom operators will not last forever. Nothing is worse then indecision.