Islamabad is keen that the the sale of a controlling stake in Pakistan Telecommunications to Etisalat of the UAE should not fail, partly because of concerns it could affect relations between the two states.

The government should consider trying to salvage the deal – which is on the verge of being cancelled – by softening some of the payment terms, said Pakistani officials on Tuesday, ahead of a telecoms conference in Islambad.

“We have a history with the UAE. If we can work around our difficulties, a deal with Etisalat could be in our best interest,” said one official, who declined to be named.

Pakistan’s telecoms sector has been growing furiously in recent years, with the country’s six mobile phone companies signing up 18m subscribers by the end of last month, up 170 per cent over the past year.

For this reason, government efforts to sell a 26 per cent stake with management rights in Pakistan Telecom (PTCL) attracted a range of strong bidders, with cellular operator Etisalat emerging the winner with a $2.6bn offer in July.

The deal was hailed as Pakistan’s largest privatisation. But Etisalat has since missed two deadlines to pay the outstanding 90 per cent owed, prompting Pakistan’s privatisation commission to begin proceedings to cancel the deal.

Since then, Abdul Hafeez Shaikh, Pakistan’s privatisation minister, has flown to Dubai to meet senior UAE government officials in an effort to salvage the deal.

Pakistani officials say privately the talks centre on demands from Etisalat for more time to settle.

Shahzada Alam Malik, chairman of the Pakistan Telecom Authority, refused to comment yesterday on the present state of the talks.

But other officials argue the issue could jeopardise the close ties Pakistan has built over the past three decades with the UAE, which hosts large numbers of Pakistani overseas workers.

More recently, the government of the oil-rich Gulf state has been at the forefront of offers of aid for last month’s devastating earthquake in parts of Pakistan.

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