DUBAI  - Etisalat has told Pakistan it will not pay the $800 million it owes the government from buying a stake in the country’s state telecom operator until a property dispute is entirely resolved, finance ministry sources said.

The money owed, which dates back to last decade, would provide vital funds for Pakistan’s cash-strapped government, but Etisalat will not pay up until affiliate PTCL receives ownership of the final 10 properties out of about 3,000 it is due, the sources, speaking on condition of anonymity, told Reuters. 

Etisalat did not respond to requests for comment. PTCL’s chief executive Walid Irshaid could not be reached for comment. An Etisalat consortium bought a 26 per cent stake in PTCL for $2.6 billion in 2005 that also gave Etisalat majority voting rights. The UAE firm paid an initial $1.80 billion as per the deal terms, which also included transferring ownership of the properties to PTCL from the government. Etisalat was to pay the remaining $800 million it owed in six twice-yearly installments of $133 million, but has withheld payment as the transfer of some of these properties stalled.

The dispute continues while Ufone, waits to hear if its bid for smaller rival Warid has succeeded. The UAE firm has been working with various ministries including those for finance and privatisation since July to resolve the dispute, the sources said. The government had hoped to reach a final agreement by November-end, but this was now unlikely. “It is being carried out on a fast track basis and being followed up at the highest level,” said one source. PTCL’s current market value is $858 million, according to Reuters data, a little more than what Etisalat owes the government. Etisalat owned 90 per cent of the acquiring consortium, giving it a 23.4pc stake in PTCL. The consortium’s bid was $1.2b more than the next highest offer and Etisalat took an impairment of 2.37billion dirhams on PTCL in 2012. Profits at PTCL, have slumped since Etisalat took management control and the sector was opened up for more competition. In the financial year ending June 30, 2005, the Pakistani operator made a net profit of Rs27.3b ($257.78m), according to Reuters data, but seven years later its annual profit was 11.4 billion rupees. Ufone had 24.8 million subscribers as of Sept. 30, giving it a market share of 19 per cent, data from Pakistan’s telecom regulator shows.