The long-anticipated $1 billion PTCL Ufone Telenor Merger has been put on hold due to a series of regulatory lapses by Pakistan Telecommunication Company Limited (PTCL). The Competition Commission of Pakistan (CCP) has raised serious concerns regarding PTCL’s compliance record, market dominance, and lack of transparency.
Missing $1 Billion Investment Plan
A key factor behind the stalled deal is PTCL’s failure to submit its $1 billion investment plan. This document was required to demonstrate how the merger would generate efficiencies, enhance services, and benefit consumers. According to the CCP, without such a plan, the transaction cannot be evaluated against legal thresholds.
Concerns Over Market Dominance
The CCP noted that PTCL has historically challenged regulatory oversight, particularly rulings by the Pakistan Telecommunication Authority (PTA). By contesting its designation as a Significant Market Power (SMP) in court, PTCL has limited PTA’s ability to regulate tariffs and interconnection terms. This dominance, if extended to the merged entity, could raise entry barriers for smaller operators and potentially reduce consumer choice.
Issues of Cross-Subsidisation and Transparency
PTCL holds a Long Distance & International (LDI) license, while Ufone operates under a Cellular Mobile Operator (CMO) license. Legally, both must maintain separate accounting systems to avoid cross-subsidisation. However, the CCP highlighted PTCL’s non-compliance with this rule, creating risks of unfair competitive advantages. Additionally, PTCL has been slow in sharing crucial information with regulators, further undermining confidence in the merger.
History of Regulatory Penalties
The company’s track record also includes penalties for anti-competitive practices, such as its role in the International Clearing House (ICH) case, where fines were upheld. Meanwhile, Ufone, under PTCL’s management, has consistently reported financial losses, raising doubts about the group’s capacity to manage a larger merged entity.
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CCP’s Next Steps
Under the Competition Act, the CCP has the authority to either prohibit the transaction outright or grant approval with strict, enforceable conditions. The regulator has warned that without corrective measures, the PTCL Ufone Telenor Merger could lead to substantial lessening of competition, higher entry barriers, and reduced consumer benefits in Pakistan’s telecom market.
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