The Karachi Stock Exchange (KSE) benchmark 100 index is likely to stage a rally ranging from 250 to 300 points on Monday following the high bid received from Etisalat for Pakistan Telecommunication Company''s 26 percent strategic sale. On the weekend, a new chapter opened in the country''s history as the Privatisation Commission received the highest amount of proceeds through the sale of Pakistan Telecommunication Company, receiving the highest bid of $1.96 per share, realising over $2.5 billion from Etisalat.
China Mobile Telecommunication offered $1.063 per share, and SingTel, which disappointed the lot of local punters, place a bid of $0.88 per share.
However, the stocks traders and punters were of the opinion that the market, on the first day of the new week, would stage a handsome rally as PTCL sell-off would have spilled over its effect on other scrips in the privatisation block, such as Pakistan State Oil, Oil and Gas Development Co, Pakistan Petroleum Ltd, Sui Northern Gas and Sui Southern Gas Co. "The index rise is likely to range between 250 and 300 points, and there is a likelihood that several scrips would close on the upper circuit".
The mutual funds holding state-run stocks would also be in the positive zone, helping the KSE-100 index to close on higher levels.
In the kerb market, PTCL was trading around 68.50 rupees, OGDC 105 rupees, Pakistan Petroleum Ltd, 216 rupees and PSO 380 rupees, as compared to Friday''s closing of 67.30 rupees, 103.65 rupees, 213.50 rupees and 375.60 rupees, respectively.
The privatisation of the ''blue-eyed boy'' is to bring windfall gains in other sectors. "Foreign direct investment in the country would get a boost and we expect that the country''s rating would improve. Moreover, the economic wizards would have a comfortable position in the next fiscal year as they would get a fiscal space, and the proceeds would help reducing foreign debt and increase spending on poverty reduction and development expenditure."
Despite the cynicism in some quarters, which believe that privatisation of PTCL is anti-nationalistic, analyst at AKD Securities strongly favour the privatization process and believe that not only is PTCL strategic sell-off is the need of the hour, given the competitive scene emerging as a result of deregulation, but also because it is one of the few ways to attract foreign investors into the country to benefit from experience and reap the benefit of operating efficiencies post-privatization.
The anti-privatization lobby should also realise that in the light of hotting up competition in the telecom sector, the privatisation of PTCL would eliminate the red-tapism and improve the working climate of the company. "We feel that the new buyer would already have taken into account the large cost of VSS, which it would have to bear in the post-privatisation era, but that should have a larger impact on cash flows than the company''s profitability as the one-time VSS cost is likely to be amortised over 3-5 year period.
"Contrary to perception being created that the government was making a bad deal, ie post-privatisation the inflow to the government would reduce substantially, we feel that this is entirely not the case. The net gain would still be higher. The government would continue to be a recipient of dividends (based on its post-privatisation stake of 59.4 percent) and taxes. The receipts from the sell-off can be utilised to pay off the more expensive debt that Pakistan is currently laden with."
Assuming further that cost of this debt is about 8 percent annually, the GoP would incur interest savings of about $138-212 million, depending on the amount received from this divestment and the percentage of cash utilised for debt repayment.