Tuesday, January 5, 2010

LDI licence to China Mobile

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ISLAMABAD : The government has decided to approach Dubai-based firm Etisalat International, which owns 26 percent of the shareholdings of the Pakistan Telecommunication Company Limited (PTCL), to seek its consent for the issuance of long distance international (LDI) licence to China Mobile, sources close to Privatisation Minister told Business Recorder on Monday.

Etisalat has already withheld payment of last tranche of about 780 million dollars because, according to it, the government of Pakistan failed to transfer the property in the Punjab and Sindh in favour of the PTCL. Etisalat is contesting the anticipated award of LDI licence to China Mobile as a breach of the shares purchase agreement (SPA) and guarantees given to it, the sources added.

Sensing the situation, the Federal Cabinet, in its meeting on August 5, 2009, constituted a ministerial committee, comprising Minister of Privatisation, Minister for Interior, Minister for Overseas Pakistanis, Finance Minister and former Advisor to Prime Minister for Petroleum and Minister of State for Law and Justice and Secretary of Ministry of Information Technology as Secretary of the committee, to look into the matter.

In August, the Ministry of Information Technology, in its summary to the Cabinet, had apprised that Etisalat International had agitated that, (in the light of SPA schedule-6 clause-g), issuance of subject licence to China Mobile Pak would be voilative of the SPA concluded between the government of Pakistan and Etisalat on March 12, 2006. The issuance of licence was approved by the Cabinet on September 24, 2008, but the decision has not been implemented, thus far, due to such concerns of Etisalat. On the other hand, China Mobile Pak is pressing hard for implementation of the decision.

Keeping in view the sensitivity of the issue, the Minister of Information Technology (MoIT) had proposed that (i) the government of Pakistan may take up the issue with Etisalat for seeking one-time consent for issuance of LDI licence in favour of China Mobile PAK; and (ii) If deemed necessary, fresh policy directive for placing a moratorium on issuance of fixed line (LL and LDI) and cellular licences for the remaining time of commitment with Etisalat may be issued.

The sources said the committee held a meeting to discuss the issue, holistically, and examine legal ramifications of the SPA. The subject issue was thoroughly deliberated and it was resolved that since this issue is likely to cause legal implications, including invoking of arbitration clause, therefore, the mechanism proposed by the MoIT and endorsed by Ministry of Law and Justice and Board of Investment (BoI) may be adopted.

However, it was decided that the final draft of both the letters, be sent to Etisalat for seeking consent and the new policy directive for the PTA, would be cleared by the Minister for Privatisation, who is also convenor of the committee. The sources said the Law and Justice Division on the MoIT's request for vetting had opined that such "non-statutory instruments in nature of official correspondence "do not need legal vetting by the Law Division."

According to the sources, the Federal Cabinet is expected to give green signal to the concerned ministry to approach Etisalat for seeking one-time consent for the issuance of LDI licence to the China Mobile Pak through a draft letter to be approved by the Minister for Privatisation; and if deemed necessary, fresh policy directive for putting a moratorium on issuance of fixed line (LL & LDI) and cellular licences for the remaining time of commitment with Etisalat may be issued.

The background of the subject issue springs from the fact that while the SPA was negotiated and signed by the Privatisation Commission and Etisalat on March 12, 2006, the MoIT through a summary on the subject of 3-G cellular mobile and fixed line licensing, submitted to CCRB on March 18, 2006, proposed that in the wake of development like privatisation of the PTCL and future prospects of growth of telecommunication sector, the process of grant of new LL, LDI and cellular licences be put on the watch-hold for the next seven years and the PTA be asked to submit periodical reports in terms of growth and absorptive capacity of the markets.


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