CCP Questions PTCL’s Bid for 5G Amid High Losses

By Salman Khan

ISLAMABAD: The Competition Commission of Pakistan (CCP) has questioned the capability of Pakistan Telecommunication Company Limited (PTCL) to participate in the auction of 5G technology.

PTCL had informed the CCP that its entities, including Ufone and PTCL itself, were incurring losses. Yet, it went ahead and acquired Telenor Pakistan, surprising both the regulator and market experts about how PTCL could move forward with the acquisition while facing financial distress. PTCL Faces CCP Scrutiny Over $1bn Merger Investment Plan

During a hearing on Tuesday, CCP officials raised concerns about how PTCL would fund participation in the 5G spectrum auction given its financial challenges.

A PTCL team attended the hearing to elaborate on its business development plan—one of the prerequisites for acquiring Telenor Pakistan.

PTCL had earlier submitted this plan to CCP, which had agreed to consider the acquisition of 100% shareholding in Telenor Pakistan (Private) Limited and Orion Towers, subject to certain conditions.

CCP had previously raised objections to PTCL’s acquisition proposal, citing its negative financials. However, the merger was conditionally allowed, requiring PTCL to commit investment into the country’s telecom sector.

In response to the objections, PTCL submitted a revised business plan, and during the proceedings, gave a detailed briefing on its proposed investment, claimed operational efficiencies, and regulatory accounts.

The hearing was conducted by a CCP bench comprising Chairman Dr. Kabir Ahmed Sidhu, Member Salman Amin, and Member Abdul Rashid Sheikh. The Commission sought further clarity on critical matters to properly assess the merger’s impact on competition and consumers.

The CCP bench raised questions about the source of investment and expansion strategy for the merged entity—Telenor Pakistan and Ufone.

It was informed that the merger would allow PTCL Group to gain efficiencies through economies of scale and consolidation of infrastructure such as towers and offices.

The CCP also raised concerns over restrictions imposed by the Pakistan Telecommunication Authority (PTA), which has declared PTCL a significant market player in six out of 11 telecom segments. PTCL has challenged this decision in the Sindh High Court.

The issue of regulatory accounts also surfaced. CCP noted PTCL’s continuous negative revenues and asked why Ufone, unlike peers such as Jazz, Zong, and Telenor Pakistan, continued to post losses.

PTCL is expected to provide further documentation and clarifications to CCP. Ufone is PTCL Group’s cellular arm, while its other entity is Ubank—a microfinance institution.

The acquisition case has remained pending since December 2023, when the deal with Telenor was announced.

PTCL is a state-owned enterprise (SOE), with 62% shares held by the Government of Pakistan, 12% floated in the stock market, and 26% ownership (with management control) transferred to UAE-based Etisalat in 2006.

Interestingly, PTCL posted a net profit of Rs20.78 billion in FY2005-06, before the transfer of management. Since then, it has been running losses.

A recent report by the Finance Ministry ranked PTCL as the seventh-largest loss-making SOE in the first half of FY2023-24. The company also bears pension liabilities of Rs42.84 billion.

The report also flagged the complexities involved in integrating Telenor’s operations, systems, and workforce with PTCL and Ufone, cautioning about risks of disruption, cultural clashes, and potential customer attrition.

Outside Pakistan, Norwegian telecom giant Telenor owns 55.8% of Grameenphone in Bangladesh, 33.1% of CelcomDigi in Malaysia, and 30.3% of True Corporation in Thailand, with regional offices in Bangkok and Singapore.