Pakistan hesitant to approve PTCL-Telenor merger amid competition concerns

Pakistan is hesitant to approve the merger of Pakistan Telecommunication Company Limited (PTCL), controlled by Dubai-based Etisalat, with Telenor Pakistan due to concerns over market competition and regulatory compliance.

PTCL, the country’s leading landline communication provider, was privatized in 2006, with 26% of its shares and full management control sold to Etisalat for $2.6 billion. However, nearly 19 years later, Etisalat still owes the Pakistani government $800 million in pending payments.

Recently, Finance Minister Muhammad Aurangzeb informed the National Assembly that the Competition Commission of Pakistan (CCP) has completed Phase I of its review of the proposed PTCL-Telenor merger. The commission determined that the transaction poses a risk of substantially lessening competition in the telecommunications sector.

PTCL has submitted a pre-merger application to the CCP, seeking approval for acquiring 100% shareholding in Telenor Pakistan. The application, filed under Section 11 of the Competition Act, 2010, and Regulation 6 of the Merger Control Regulations, 2016, triggered the commission’s evaluation process.

As the review moves into Phase II, the finance minister noted several challenges, including difficulties in data collection, concerns over market dominance, increased market concentration, and the impact on competition.

“The CCP has conducted multiple hearings and engaged in extensive consultations with industry stakeholders. It is now undertaking a thorough analysis to determine the necessity of regulatory interventions,” he said.

Transparency and regulatory challenges

The CCP has faced difficulties obtaining PTCL’s financial data, as the company does not provide separate accounts to the Pakistan Telecommunication Authority (PTA) for transactions between PTCL and its subsidiary, Ufone. This lack of transparency raises concerns about potential cross-subsidization, requiring a more rigorous assessment, the finance minister said.

Additionally, PTCL holds a unique integrated license, enabling it to offer a full range of telecommunication services—an advantage that other operators lack. This discrepancy further exacerbates competition concerns in the sector, prompting the CCP to conduct a comprehensive review to assess potential regulatory measures.

The finance minister said the CCP is conducting an in-depth analysis of the telecommunications sector, focusing on market power concentration, competitive dynamics, and the potential impact of the merger. The review process remains inclusive, allowing all stakeholders to present their submissions. The CCP is also considering remedies to address market concentration and prevent the abuse of dominance.

Spectrum allocation and market safeguards

The finance minister also highlighted concerns regarding spectrum allocation, stressing the need for fair distribution to prevent PTCL from gaining an undue advantage in network coverage and service quality.

“The regulatory framework must ensure that PTCL’s expanded market position does not harm consumers. The CCP is also assessing the impact of the acquisition on market share dynamics to maintain a competitive telecom landscape,” he added.

The final decision on the merger will depend on the CCP’s detailed analysis and regulatory considerations, which aim to balance market competition with the telecom sector’s long-term growth.