While the dollar-hungry federal government has budgeted the receipt of $800 million in foreign inflows for FY14 from the buyer of Pakistan Telecommunication Limited (PTCL), Etisalat, market observers think otherwise.
According to a report published by Topline Research, the Pakistan Muslim League-Nawaz (PML-N) led government might not be able to address the reasons behind the prolonged deadlock between PTCL and the UAE-based firm, in their troubled deal regarding the organisation’s sell-off.
Topline analyst Zeeshan Afzal says one of the major barriers hindering the release of outstanding $800 million since 2008, is the transfer of PTCL’s properties. This equates to 26% of the utility, he added. Moreover, as part of the PTCL privatisation deal, the Government of Pakistan was obligated to transfer 3,248 properties to the buyer of PTCL. “However, due to some disputes, 131 properties remained outstanding since 2008. This prompted Etisalat to suspend remaining cash streams totalling $800m, out of the total amount of $2.6 billion,” added Afzal.
Furthermore, the analyst said that despite sincere attempts by the previous government to settle the issue, they had been unsuccessful. He added that he feared the same results for the new government, and that the transfer of all the properties looked extremely difficult, at least in the next few months.
The analyst deems it logical for Etisalat to be reluctant to clear the outstanding amount, arguing that, “Reluctance to pay makes sense considering the huge depreciation PTCL’s market value.”
The current valuations, he said, suggested that the company had a stake worth $330m out of $1.3b in PTCL. For these shares Etisalat had already paid $1.8b, while $800m were still outstanding, he said.
In his budget speech, Finance Minister Senator Ishaq Dar had vowed to release the outstanding millions of dollars to stabilise the country’s balance of payment position, partly due to weak foreign exchange reserves, having depleted to about $6b. The available dollar reserves, the analysts warn, are only enough to cater to 45 days of the country’s huge export payment.
The recent official-level approval, by the International Monetary Fund, of $5.3bn in extended fund facilities for the cash-strapped Pakistan, could provide the ailing, terrorism-hit economy with much needed relief to attract domestic and foreign investment. According to Afzal, the volatility of PTCL’s share prices is attributable to the expectation of better results and likely dividends in Q2, developments on transfer of properties and upcoming 3G auction.
Due to this, he said, the stock had appreciated by 12% during the current month.
Amid thin trading the benchmark KSE 100-share index gained 290 points to close at 23,037.32 points on Friday, the last trading day of the week.
“Speculation on expected receipt of $800m from Etisilat played the role of a catalyst in bullish activity at KSE despite security concerns in the city,” said Director Arif Habib Corporation, Ahsen Mehanti.
