The United Arab Emirates' state-owned phone company, Emirates Telecommunications Corp., bid $2.6 billion for a 26% management stake in Pakistan Telecommunication Co. in Pakistan's largest privatization deal ever, beating out rivals from China and Singapore and underscoring Pakistan's attractiveness as a growth play.

The bid by Emirates Telecommunications, known as Etisalat, far outstripped a $1.4 billion offer from China Mobile Communications Corp. and a $1.17 billion bid by Singapore Telecommunications Ltd., known as SingTel.

Federal Minister for Privatization Abdul Hafeez Shaikh described the transaction as "the biggest event in Pakistan's economic history." The Pakistani cabinet is expected to approve the sale, which will leave the government with a 62% stake in the company, Monday.

Analysts were as surprised by the size of Etisalat's bid, which was almost double the reserve price fixed by the Pakistani government, as they were by the laggard bid submitted by SingTel, widely seen as the front-runner before the sale.

Protests by labor unions opposed to the privatization may have affected the offer by SingTel and scared away other bidders, analysts said. Labor unrest delayed the sale by two weeks. Army and paramilitary troops were deployed to guard and oversee the telecommunications system in Islamabad, Karachi, Lahore and other key cities after about 7,000 workers went on strike.

PTCL, Pakistan's largest telecommunications company, has about five million fixed lines in service. It also owns Pakistan Telecommunication Mobile Ltd., one of five mobile-phone operators in Pakistan, and an Internet-service provider. It employs about 65,000 people. The company earned about $490 million in the 2003-04 fiscal year.

SingTel declined to comment on whether the labor unrest or other risk factors had weighed on its bid. "We believe SingTel's bid price is fair," said Peter Heng, SingTel's spokesman.

Originally, seven foreign bidders had been selected by Pakistan's government. Four of them, including Telekom Malaysia Bhd., didn't present a bid. The lack of competition indicated to analysts that many companies still see large risks to operating in Pakistan.

The unrest didn't deter Etisalat. Its $1.90-a-share offer for the stake was higher than expected, analysts and privatization officials said. The government had initially hoped to raise $1.5 billion to $2.5 billion from the sale.

Etisalat, 60%-owned by the government and the sole phone company in the oil-rich UAE, has some advantages over other bidders. A large number of top company officials are Pakistanis and are familiar with that market. There also is high call volume between the two countries because many Pakistani nationals work in the UAE. "The company is confident of handling the labor problem," said Muazzam Malik, a financial analyst and director of BMA Capital.

The stake sale should smooth the way for other privatizations planned by the government. Pakistan plans to privatize some of its biggest state-owned companies this year as part of an effort to open up its economy and attract more foreign investment.

Among the enterprises marked for disinvestment are Oil & Gas Development Corp., Pakistan State Oil Co., Pakistan Steel and a number of financial institutions. The planned divestments are the biggest since Gen. Pervez Musharraf's government kicked off a privatization drive five years ago. Analysts and government officials said the country's economic performance has opened the way for more foreign direct investment.

Last year, Pakistan received $1 billion in foreign investment. This year, the government expects to garner $5 billion to $8 billion through privatizations alone.

Ishrat Hussain, governor of the State Bank of Pakistan, said the expected increase in foreign investment would help reduce the government's fiscal deficit and enhance foreign-exchange reserves.

Write to Cris Prystay at cris.prystay@wsj.com