PTCL soldiers on with sale of 26% stake

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When international suitors line up on Friday in Islamabad to make final offers for a 26 per cent controlling stake of Pakistan's fixed line telecom incumbent, Pakistan Telecommunications Corporation Ltd (PTCL), this time at least there will be no military presence.

Only one week after the government took the un-precedented step of placing the military in PTCL's key installations to thwart a strike, there has been a rapid return to normality.

“This [military] action was very selective; it was meant to prevent people from causing damage and it underlined our seriousness about privatising PTCL,” said Owais Ahmed Khan Leghari, Pakistan's telecom minister, in an FT interview.

Mr Leghari says troops including military telecoms engineers were deployed at 115 of PTCL's 3,600 facilities, including the main exchange where the company's international gateway is based.

The move appears to have deterred PTCL's 14 unions from successfully pressing for a further delay of the privatisation a strike called last Saturday led to the postponement of a previous deadline for seeking bids on June 11.

Analysts believe the sale could fetch at least US$1.5bn, which would make it Pakistan's largest privatisation. The government is to retain 62 per cent of PTCL - but will hand over management rights while the remaining 12 per cent is already in public hands.

PTCL has total assets of about Rs141bn ($2.36bn) while its net profit in the financial year ended June 2004 was Rs29.2bn.

The unions are afraid a new management might implement large-scale redundancies. Telecoms analysts believe PTCL's present workforce of 61,000 people needs to be cut by one third to improve efficiency.

But so far it appears Pakistan's gamble on sending in the military has paid off. Pakistani officials expect the prospective bidders to put in bids despite the intervention.

The bidders include Singapore Telecom, China Mobile Communication Corporation, Telekom Malaysia, Saudi Oger, Saudi Telecom, Turkcell, Etisalaat of the United Arab Emirates and Egypt's Almail consortium.

The Pakistani government has persuaded 11 out of PTCL's 14 unions to withdraw their threat in return for agreeing that the successful bidder will offer one 10th of the 26 per cent stake to employees at a discount.

The government has also agreed to give benefits of Rs5bn to PTCL's workers.

Mr Leghari says large-scale redundancies are not likely under a new management. PTCL's network of 5m fixed telephone lines is projected to reach more than 7.5m in two years.

“With more lines, the current work force is likely to be accommodated,” he says.

Some analysts however warn it is too early to conclude industrial action will not recur. Aaliya Dosa of Karachi brokerage Arif Habib Securities said: “The military going in to take charge of PTCL is the immediate auction which seems to have paid off. But there's a large work force which would press for its job security.”

Mr Leghari agreed that there would be challenges ahead but added that Pakistan had no option other than to carry through a privatisation that was first touted in 1992.

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