Phone stock to give Pakistanis a taste of privatization

UP to 100,000 Pakistanis will get the first taste of telephone privatization when 1 percent of the total shares of the Pakistan Telecommunications Corporation (PTC) - the country's only telephone company - is offered to the public next month.

Prime Minister Benazir Bhutto's government is planning to off-load shares on the Karachi Stock Market, Pakistan's largest stock exchange, in ``an effort to give the general public a taste of privatization,'' some officials say.

The government has already decided to sell up to 26 percent of PTC's shares to a ``strategic investor'' - a term used to describe a large investor or consortium with technical and managerial experience in the telecommunications sector. The strategic investor will take over operation of the company, which currently serves more than 2.5 million customers. Plans call for another 25 percent of the shares to be sold through public offerings over the next two to three years.

But next month's public offering of just 1 percent of the shares comes in response to concerns of foreign aid donors and other economic experts, who have urged Islamabad to widen the scope of privatization. In recent years, some donors have urged developing countries to press ahead with privatization but have also warned against the possibility of creating new monopolies that would be controlled by only a few people.

``We want to give people the benefits of privatization,'' says Naveed Qamar, chairman of the National Privatization Commission. ``This move would get the public involved.'' The government promises to sell portions of the Water and Power Development Authority, Pakistan's largest power generation company, as well as two large gas companies.

Although share prices for the PTC offer are yet to be announced, the government has decided to limit each investor to 10,000 rupees ($334) worth of shares. Some stockbrokers say they expect the offer to be heavily oversubscribed.

After the PTC offer, the government will invite bids from ``strategic investors'' for the 26 percent sale of telephone company shares in September. A short list of leading investors is expected to be finalized by December. Government officials say they hope to ask those investors to make offers by early next year so that one of the candidates can be chosen by next summer.

If plans remain on track, PTC's management could be transferred to private hands by the end of next year. Government officials at the country's Communications Ministry in Islamabad, which is monitoring plans for the sale, say they expect international telephone companies - including AT&T, Alcatel, and Siemens - to compete in the offer. Some officials also say they expect next month's offer to set a base price for shares, which would eventually help remove confusion over PTC's net worth. According to the government's initial assessments, PTC could be worth approximately 120 billion rupees ($4 billion).

But ``placement of shares on the stock market is expected to raise share prices and the company's net worth by up to 100 percent,'' says one official, who adds that he expects the final figure to rise to well over $8 billion.