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FAILURE OF CORPORATE GOVERNANCE: CASE STUDY

PRIVATIZATION OF PTCL PAKISTAN


Corporate governance is at the centre of attention in todays business world. This is greatly due
to the large number of stakeholders whose wealth and interests are at stake in the business. What
has further highlighted corporate governance today has been the increasing influence and
awareness of these stake holders. Without sound corporate governance a business cannot survive.
Pakistan Telecommunication Company Limited (PTCL) is considered as one of the most rapidly
growing telecommunication companies in Asia. It comprises of cellular company: Ufone &
internet provider PakNet. It was privatized in 2006.
The privatization of PTCL was also a big corporate scandal. An ex-Senior Vice President has
claimed the privatization as Pakistans Biggest Financial fraud. PTCL former official further
commented that the deal was closed on 2.6 billion dollars including U-fone & Paknet, however
only U-fone had enterprise value of more than 6 billion dollars which does not include assets of
U-fone. Moreover, pricing decisions were made through old records instead of determining
current market value, which means, it was like Buy One Get 2 Free offer. It has been reported
further that in September 2006, when Etisalat had refused to honor the deal, they were offered a
secret price discount of 394 million dollars along with commitment to lay off 20,000 employees
and to bear the 50% cost of layout. Supreme Court of Pakistan has already given decision against
the privatization of PSO and Pakistan Steel and if PTCLs privatization gets challenged on true
facts, it will bring horrifying results.
A number of issues have been provided for poor corporate governance such as; reduced the
Government liability but management powers & control was sold, financial performance was
poor, market value decreased etc.

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