Etisalat Says It Is Entitled to Withhold Payments in Pakistan Telecom Deal

Emirates Telecommunications Corp., the United Arab Emirates' biggest phone company, said it could withhold payments to Pakistan for failure to transfer some properties under a $2.6 billion deal to acquire a stake in Pakistan Telecommunication Company Ltd.

"Under the agreed terms of the transaction, Etisalat is entitled to withhold payments until the property titles were transferred to PTCL," Etisalat Chairman Mohammed Omran said in an e-mailed statement from Abu Dhabi today. Etisalat aims to ensure that PTCL gets a clean title to the properties, he said.

The deal requires the transfer of properties to Pakistan Telecommunication, and not to Etisalat, Omran said. The Government of Pakistan owns 62 percent of PTCL and will be the biggest beneficiary from the transfer of property, he said.

Etisalat agreed in 2006 to buy a 26 percent stake in Pakistan Telecom, the nation's biggest phone service provider, for $2.6 billion. Etisalat withheld payment of $800 million and the sale of the stake to the U.A.E. phone company by the previous government headed by military ruler Pervez Musharraf government was "unfair," Pakistan Privatisation Minister Waqar Ahmed Khan said March 31.

Etisalat also said its board of directors had obtained a legal opinion from international and external counsel that all steps for the sale of the asset had been followed and the acquisition was legally valid under Pakistani law.

The sale of the PTCL stake to Etisalat "was full of flaws and legal advisers had asked the then government to scrap it," Pakistan's asset sale agency said in a statement March 31. "Otherwise, it would be considered contrary to rules." Privatisation minister Khan requested lawmakers to form a committee to probe the transaction.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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