Pakistan Telecommunication Company Limited

Pakistan Telecommunication
Company Limited
COMPANY analysis
COMSATS Institute of Information
Technology
COURSE: Seminar In Business And Public
Policy
Submitted TO: Dr. Irum Khan
Submitted BY:
Sana Munir
Midhat Batool
MBO-II
2
SEMINAR IN BUSINESS AND PUBLIC POLICY
TABLE OF CONTENTS
1 INTRODUCTION OF TELECOM INDUSTRY . . . . . . . . . . . . . . . . .
......................4
2 PTCL – PAKISTAN TELECOMMUNICATION LIMITED . . . . . . . . . .
................5
2.1 Introduction of PTCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
....................................5
2.2 Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..............................................6
2.3 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.............................................6
2.4 Core
Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...................................6
2.5 Organizational
Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..................7
2.5.1 Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..........................................................7
2.6 Products & Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
....................................7
2.6.1 PTCL Landline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......................................................7
2.6.2 PTCL V-
Fone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.............................................8
2.6.3
Ufone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
........................................................9
2.6.4 Paknet
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...........................................9
2.6.5 PTCL
Broadband . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...........................................9
2.6.6 Smart
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 ANALYSIS OF EXTERNAL ENVIRONMENT . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 11
3.1 Industrial
Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Market Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Market
Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Regulatory Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4 ANALYSIS OF INTERNAL
ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 15
4.1 Organizational Management Cycle . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Financial
Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2.1 Profitability
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2.2 Liquidity Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2.3 Leverage
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2.4 Activity
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2.5
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 HR Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3.1 Training and
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5 BUSINESS STRATEGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Fixed Line
Telephony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 22
5.2 Wireless Local
Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 23
5.3 Broadband and Value Added
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6 ENTREPRENEURSHIP – INNOVATION & INCENTIVE
PLANS . . . . . . . . . . . . . 25
6.1 Quality Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Free
Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 One Stop
Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7 SWOT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Strengths
............... .......................................
............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Weakness
............... .......................................
............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Opportunities
............... .......................................
............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4 Threats
............... .......................................
............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8 FUTURE OF
PTCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 Measures to achieve Set
Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 29
8.1.1 New
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.2 Cross Subsidization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.3 Price
Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.4 Vertical Price
Squeeze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2
1 INTRODUCTION OF TELECOM INDUSTRY
Since the independence of Pakistan, basic telecom services were being
provided by a monopolist,
previously called as Telephone and Telegraph department (T&T). The
department was being run by the
government and played multiple roles as regulator, policy maker, operator
and service provider in the
country. The T & T department was later converted into a corporation.
Although the corporation was
earning huge profits from the services, it was re-investing the same profits
into the sector for the
provision of more telecom service but the investment was not enough.
Further, with the technological advancement, more and more telecom
services were becoming available
but there was not enough money available with the corporation to install new
telecom systems for the
provision of modern services. Resultantly, a digital divide prevailed in
Pakistan keeping it behind its
neighbors and other comparable countries in terms of telecom access.
Cellular mobile services in Pakistan
commenced in 90s when two cellular mobile telephone licenses were
awarded to Paktel and PakCom
(Instaphone) for provision of cellular mobile telephony in Pakistan. Currently
there are six cellular
players in the market. The Telecom Sector has contributed 2 percent towards
the overall GDP growth with
revenues of over PKR 235bn.
2 PTCL – PAKISTAN TELECOMMUNICATION LIMITED
2.1 Introduction of PTCL
PTCL is the largest telecommunications provider in Pakistan. PTCL also
continues to be the largest
CDMA operator in the country with 0.8 million V-fone customers. The
company maintains a leading
position in Pakistan as an infrastructure provider to other telecom operators
and corporate customers of
the country. It has the potential to be an instrumental agent in Pakistan’s
economic growth. PTCL has laid
an Optical Fiber Access Network in the major metropolitan centers of Pakistan
and local loop services
have started to be modernized and upgraded from copper to an optical
network. On the Long Distance
and International infrastructure side, the capacity of two SEA-ME-WE
submarine cable is being
expanded to meet the increasing demand of International traffic.
With the promulgation of Telecommunication (Re-Organization) Act 1996, the
Pakistan
Telecommunication Authority was established as the Telecom Regulatory
body. Following the open
licensing policy in BUY @ PKR 45.40 accordance with the instructions of
Government of Pakistan and in
exercise of powers conferred by Pakistan Telecommunication (Re-
Organization) Act 1996, the basic
telephony was put under exclusivity and PTCL was given a seven years
monopoly over basic telephony
which ended by December 31, 2002. The year 2006-07 in the telecom sector
witnessed a phenomenal
growth in the mobile phone sector in Pakistan, which doubled its subscriber
base to 60 million. The
Teledensity increased from 26% to 40%, helping to spread the benefits of
communication technology
across the country. PTCL's mobile phone subsidiary Ufone's subscriber base
grew by more than 87%,
from 7.49 million to 14 million.
The year also witnessed the entry of major telecom companies, most notably
China Telecom and Singtel,
into the market. Restructuring and re-engineering are in their final stages
along with the implementation
of ERP system. From the end customer's perspective, a major initiative was
put in place in the shape of
'Broadband Pakistan' service launch as a first step towards providing its
customer with more value added
service and convenience. With this offering, the PTCL not only bringing the
benefit of high speed Internet
access to subscribers in major cities but will also generate new revenue
streams for future growth. The
company also continued to invest in infrastructure development and addition
of network capacity with a
view to enhance services and to expand its reach across the country.
2
2.2 Vision
To be the leading Information and Communication Technology Service
Provider in the region by
achieving customer satisfaction and maximizing shareholders' value'.
The future is unfolding around us. In times to come, we will be the link that
allows global
communication. We are striving towards mobilizing the world for the future.
By becoming partners in
innovation, we are ready to shape a future that offers telecom services that
bring us closer.
2.3 Mission
To achieve our vision by having
• An organizational environment that fosters professionalism, motivation and
quality
• An environment that is cost effective and quality conscious
• Services that are based on the most optimum technology
• "Quality" and "Time" conscious customer service
• Sustained growth in earnings and profitability
2.4 Core Values
• Professional Integrity
• Customer Satisfaction
• Teamwork
• Company Loyalty
• Corporate Information
2.5 Organizational Structure
2.5.1Bankers
• Askari Bank Limited
• Citibank N.A.
• Faysal Bank Limited
• Habib Bank Limited
• MCB Bank Limited
• National Bank of Pakistan
• Standard Chartered Bank Limited
• United Bank Limited
2.6 Products & Services
2.6.1PTCL Landline
Since the deregulation of the telecom sector, a large number of foreign
investors opted for
licenses in LL, LDI and cellular operations, identifying Pakistan as an
emerging market. Investors
entered the market forcefully in the cellular segment, introducing heated
competition for PTCL.
In this situation PTCL's counter strategy for landline service, during the year
2007-08 was aimed
to increase ARPU, acquire new subscribers and contain churn.
President
&
SEVP Finance
SEVP
HR & Admin
SEVP Corp
Development
SEVP
Operations
SEVP
Commercial
SEVP
Technical
CIO
GM North Zone GM South Zone
2
To increase operations, PTCL shifted from its conventional duration based
charging system to
value based options, like 'Pakistan Package' that offered 5,000 minutes for
on-net nationwide calls
at Rs. 199/month. PTCL also launched 'International Plus' package to facilitate
cost effective
international calls at unmatchable rates alongside offering Voice messaging
and Phone n Net
services, adding more value to the landline service. To increase customers'
base, 'order on phone'
was introduced, allowing customer to apply for a new connection by simply
calling 0800-80800.
To tackle the churn PTCL established an outbound call center to reach out to
potential customers
with an objective to attain higher level of brand loyalty.
2.6.2PTCL V-Fone
PTCL V-Fone (WLL Service) was another major area of focus for PTCL during
the year. A few
prominent measures taken in this area during the year were launching of free
home delivery
service. No line rent package was launched in September 2007. In June 2008,
30 seconds billing
was introduced contributing as an effective customer retention tool. PTCL has
expanded the
network to provide coverage in all large and small cities including over
10,000 villages in rural
areas of Pakistan.
As Vfone becomes the Wireless substitute to landline in un-served areas, it
will be a robust line
for voice, data and fax services for use at home and in the office. In business
markets it will be
positioned as the CDMA tellular extension to add trunk lines to the ever
expanding business
PABXs. Vfone will be spearheading the launch of the new postpay and pre-
pay tariffs with no
line-rent to meet the market demand. The tariff will include new post-pay
unlimited local and
nationwide calling packages to bring traffic back to PTCL’s networks to
stabilize the revenues.
After the initial launch, the Company aims to retain the momentum by
offering different bundled
packages for voice to increase the subscriber base, including specifically
targeting the rural areas
where copper infrastructure does not exist. On Wireless broadband front, a
major upgrade of
PTCL WLL CDMA network is underway to provide Wireless broadband services
in 17 major
cities by end 2007. Currently technical trial is in progress which will be
followed by a pilot
project on WiMax technology. This will enable PTCL to maintain its
competitive edge.
2.6.3Ufone
(Pakistan Telecom Mobile Ltd) a wholly-owned subsidiary of PTCL commenced
its operations
on 29th January 2001 as a GSM 900 service provider. Since the outset, it has
expanded its
coverage and customer base at a rapid pace and established itself as one of
the leading cellular
service providers in Pakistan. Ufone is now considered to be one of the most
active, aggressive
and innovative players in the mobile sector of Pakistan.
The growth of the cellular industry is a direct result of the successful
implementation of the
telecom deregulation and cellular mobile policy by the Ministry of IT and
Telecommunications
(MOIT&T) and the support, guidance and timely enforcement of regulatory
process by the
Pakistan Telecommunication Authority (PTA).
Ufone's operational performance has been very encouraging despite stiff
competition in Pakistan
telecom market which has led to reduction of prices to bare minimum level.
Ufone managed to
improve its revenue and operating profit by 35% and 47% respectively, as
compared to the last
year through aggressive policies and exercising strict control over expenses.
2.6.4Paknet Limited
Paknet was incorporated in year 2000 for providing internet related services
in the country is
being wound up. However, PTCL has developed its own voice, data and video
infrastructure and
services. Paknet's operations have been closed and liquidator appointed for
completing the
formalities involving the company closure. All customers, assets, liabilities
and capital stand
transferred to PTCL in accordance with the special resolution passed in
General Meetings.
2.6.5PTCL Broadband
The first major product initiative taken towards a changing PTCL during the
year 2006-07, was
the launch of PTCL’s Broadband service under the theme of ‘Broadband
Pakistan’ by the Prime
Minister of Pakistan. The service was launched on PTCL’s new state of the art
Broadband
infrastructure that was added to our network during the last three quarters of
2007 with the initial
capacity of over 100,000 subscribers.
PTCL achieved unprecedented success as it added over 10,000 customers
within the first 120
days of its launch while historically it had taken four years collectively for all
the other operators
to achieve 30,000 customers in Pakistan! The hallmark of PTCL service was
the removal of the
traditional barriers such as the upfront costs of installation and customer
premises equipment and
2
added bandwidth download. This high customer take up also reflected on the
Company’s trusted
image in the eyes of the nation. The service is already available in the five
largest cities of
Pakistan and will be expanded into another dozen cities during the coming
year.
2.6.6Smart Services
In March 2008, PTCL introduced a trial service that put PTCL on the path of a
paradigm shift.
Branded under 'PTCL Smart Line', the service included Interactive Television,
Broadband and
voice Telephony all at the same time on PTCL's telephone line. The 'Smart
TV', for the first time
offered TV viewers the power to control the TV channels interactively. This
included the ability
to rewind and pause live TV channels, block / unblock any TV channel for
parental lock and
search through video on demand content. The Commercial launch of the
PTCL Smart Line
services across the three largest cities in Pakistan was arranged on the 14th
of August 2008 which
will be expanded to the other cities during the course of the year.
3 ANALYSIS OF EXTERNAL ENVIRONMENT
Pakistan followed a gradual approach to liberalize its telecom market. During
1990s, as a first step,
market was opened for value added services and competition was introduced
in cellular mobile sector as
four licenses were issued (Mobilink, PTML, Paktel and Instaphone). The
government monopoly was
retained in fixed line services, however, PTCL legal monopoly ended with
effective from 31st December
2002. The government announced Telecom Deregulation Policy and Cellular
Mobile Policy in 2003 and
2004 respectively. The telecom regulatory, issued new licenses for Long
distance International (LDI) and
Local Loop Fixed (LLFixed), Wire Local Loop (WLL) and Cellular Mobile. With
the issuance of new
licenses the market is now open for full competition in all segments of the
sector.
3.1 Industrial Structure
Pakistan’s telecom sector has finally begun moving and looked set for an era
of phenomenal growth. The
sector has witnessed tremendous growth in recent years with Teledensity
depicting major expansion after
deregulation. The primary purpose of deregulation of the sector was to
encourage healthy competition
while providing better quality products and services to customers on lower
prices as well providing best
technology available worldwide.
Current Teledensity in Pakistan has expanded exponentially from 4.3 percent
in 2002-03 to stand at 48.4
percent in 2006-07 with currently standing at over 52 percent, with better
services and competitive rates.
Also, increasing inflow of foreign investment in the telecomm sector has
resulted in the introduction of
new cut throat technologies for provision of various telecom services
including cellular, wireless and
internet services. In recent times, the focus has increasingly shifted from
Fixed Lines to Cellular and
Wireless Fixed Lines (WLL), with better portability and convenience. WLL has
shown an improvement
from 0.7 percent to 1.1 percent in 2006- 07 from last year with subscribers of
2 mn.
Cellular segment remained the vital player with increase in total Teledensity
contributing 48 percent. In
the urban markets introduction of Broadband internet services by various
Telecomm giants such as PTCL,
WorldCall and Wateen has further benefited the consumers to access timely
information over the internet
with competitive rates. The broadband penetration however has not depicted
as much growth as expected
growing with 3.5mn subscribers in 2007 against 2.4mn subscribers in 2006.
PTA estimates broadband
subscribers to grow to over 5mn by 2010. WorldCall has initiated cable
television services with PTCL
expected to follow suite by providing IPTV services through its Triple Play
services, ensuring
diversification of products and services. Recent conducive environment
provide by PTA has resulted in
increased FDIs in the sector with investments of USD2.7 bn during the last
five years making it the
2
largest recipient of highest FDI during the past few years. The future for
telephony lies amongst
unexplored rural regions of Pakistan with all major telecom operators looking
forward to tap these
markets with a major contribution by WLL and Cellular segments due to
cheaper installation costs. With
healthy competition instigating lower local and international tariffs and
availability of alternative services
has progressively benefited the consumers overall.
3.2 Market Operation
Pakistan Telecommunication Company Limited, or PTCL, keeps callers
connected from Karachi to
Islamabad. The communications services provider offers consumers and
businesses with basic landline,
DSL broadband, interactive television, and IP telephony services. The
company also provides wholesale
services such as traffic routing and call termination to other carriers. PTCL's
subsidiaries include wireless
phone services provider Pakistan Telecom Mobile, which operates as Ufone.
In 2006 Emirates
Telecommunications (Etisalat) acquired a 26% stake in PTCL and assumed
management control of the
company.
Demand is driven by technological innovation and by growth in business
activity. The profitability of
individual companies depends on efficient operations and good marketing.
Large companies have big
economies of scale in providing a highly automated service to large numbers
of customers, and have the
financial resources required building and maintaining a large network.
Smaller companies can compete
effectively only in small markets or by providing specialty services.
Top PTCL Competitors
• China Mobile
• Orascom Telecom
• Telenor
3.3 Market Structure
Wireless Local Loop (WLL) is growing at a rate of about 100 percent per
annum as its teledensity has
reached to 1.34 percent by end of December 2007. The quarterly addition of
WLL subscriber is
approximately 0.14 million on an average.
PTCL is leading in terms of traffic on WLL in Pakistan, which has about 54
percent market share of total
traffic of WLL segment. Two major players, PTCL and Telecard have lost
market share in WLL traffic in
quarter ending December 2007 when compared with the same quarter of the
last year. PTCL share came
down to 54 percent from 57 percent while Telecard share in total traffic has
come down to 22 percent
from 30 percent. WorldCall has gained 100 percent and its share reached to
22 percent at the end of 2007
compared to the same quarter last year.
PTCL, the incumbent operator in fixed line in Pakistan has also emerged as
market leader with 57 percent
market share followed by Telecard and Worldcall with 19.6 percent and 20.2
percent market share at the
end of December 2007.
Great Bear International share is reported to be 3 percent, while Wateen
Telecom share is 0.2 percent,
which started their services during the quarter. PTCL has gained over 1
percent market share compared to
the same quarter of last year while Telecard added over 5 percent market
share during this period. Great
Bear International though a smaller shareholder in WLL market but its share
is increasing due to its
quality of service as it reached to 3 percent as compared to 2 percent in
December 2006.
It is believed that fixed-line tele-density will recover with WLL taking off due
to its cost effectiveness and
in particular this technology suits for the hilly areas and far-flung regions in
the country. The estimated
WLL per line cost is around US$ 100-150 in comparison to wire line cost
which still remains to be more
than US$ 250-350 per line.
PTCL has already covered over 11,500 cities/towns/villages while other major
operators like Worldcall,
Telecard and Greatbear are increasing their coverage too.
WLL system is used when low to medium subscribers densities are located
apart from each other and
deployment of primary or secondary copper network is difficult. WLL system
is best suited for rural, sub
urban areas and very congested metropolitan areas.
3.4 Regulatory Environment
The local telecom market has altered significantly since the creation of PTA
as an independent regulatory
agency and had enjoyed sizeable success to open up the local market to
competing operators. With the
governments deregulation policies, Etisalat, the UAE based telecom player
being the highest bidder
emerged as the buyer of the 26 percent share in PTCL in April 2006. PTCL,
despite being a giant, had to
face many bottlenecks in its operations with such large network.
PTCL has recently taken an initiative to right size itself by introduction of VSS
for its employees where
about 28000 employees are accepted under the scheme. Introduction of
various diversified products and
services to sustain its market share, Implementation of ERP solutions to
provide integration of various
2
departments through acquisition of SAP software and state of the art billing
and customer service
software, translates PTCL’s long term goals of operational effectiveness into
practice. The telecom giant
PTCL has observed cutthroat competition from various service providers after
the implementation of the
deregulation policies by the PTA. However, through the vast infrastructure
and being the carriers’ carrier,
PTCL with diversification of its various services has enjoyed well-built position
and posses immense
potential for growth, while need for telecom services is on rise as economy
continues to grow on the right
track.
The telecom De-regulation and Cellular Mobile Policies announced by the
Federal Government place
certain obligations on Pakistan Telecommunication Company Limited (PTCL)
to facilitate market
liberalization. PTCL is bound to comply with these obligations within a
stipulated time frame. These
obligations are of paramount importance for successful implementation of
the policy and failure or any
deviation thereof may result in substantial damage to the deregulation
process/liberalization program.
Similarly Defense, NTC and SCO also depend on PTCL for many facilities.
Therefore, PTCL has
important obligations towards Defense of the country and other existing
operators. In addition, PTCL has
been declared SMP operator. Under the status of SMP also, PTCL has certain
obligations. PTA, as
regulator, has to ensure that new management of PTCL fulfils all these
obligations.
4 ANALYSIS OF INTERNAL ENVIRONMENT
Being a public limited company whose majority shares are controlled by the
Government of Pakistan,
PTCL is responsible to provide telecommunication services in the country on
affordable prices while
ensuring that the telecom services become accessible throughout the
country. Since exclusivity of PTCL
has ended on 1st Jan 2003, the telecom sector of Pakistan has entered into a
new era and PTCL is slowly
moving towards competition in the basic telecom services. The company’s
policy objectives are as
follows:
• Increase service choice for all consumers of telecom services at competitive
and affordable prices
• Increase private investment in the telecom sector and encourage local
telecom
manufacturing/service industry
• Enhance long run benefits to the Government’s financial position by
expanding the taxable
revenue base.
• Accelerate expansion of telecom infrastructure to extend telecom services
to unserved and
undeserved areas.
• Encourage fair competition among service providers, while maintaining
leadership in the telecom
sector
• Maintain consistency with the Pakistan IT and internet promotion policy of
low prices for
Bandwidth and Internet access.
2
4.1 Organizational Management Cycle
The cycle above describes the Organizational Management process at PTCL.
Yellow blocks describe the
core functions of the Company performed at all levels in the Organization.
Blue Blocks are the Strategic
functions which are performed at the Strategic level only.
4.2 Financial Aspects
The structural adjustments undertaken by the company in response to the
increased competition and
substitution impact of mobile expansion has adversely hit the profitability of
PTCL in the short run. The
first quarter of FY'08 recorded a drop in profitability of PTCL, as the
company's profit after taxation
declined 41.5% over the three months period to September 2007, as
compared to the same period last
year. Sales revenue dwindled during three months period, reaching Rs 14.4
billion, compared to Rs 16.9
billion last year, depicting a decline of 15%. A 6% rise in operating expenses
as a result of high
provisioning against doubtful debts and infrastructure development for high
speed DSL connections,
combined with a 32% increase in financial charges, provided a further blow to
the bottom line.
Consequently, operating profit declined 46%. However the effect on net profit
was somewhat diluted by a
14% increase in non-operating income of the company so that the company
posted profit after tax of Rs
3.01billion, compared to Rs 5.15 billion in1Q'07.
At the end of first quarter, the company stock was trading at a P/E ratio of
18.20. As illustrated by the
graph, the stock has performed remarkably well relative to the market. The
stock has shown consistent
performance over the three months, dropping only slightly as the rest of the
market dipped sharply during
August. As a consequence of the fading sales revenue for the period, the
profit after tax of the company in
FY06 declined by 21.91% over FY05. The net profit margin has also been
declining since the FY'04 and
the trend persisted in FY06. The decline in profit margin may be attributed to
a 5.25% increase in
operating expenses for the year.
2
Fig Below: 5 years Financial Analysis of PTCL
4.2.1Profitability Position
PTCL posted a net profit of Rs 15.64 billion (EPS Rs 3.07) in FY07 against last
year's figure of
Rs 20.78 billion. The declining trend in profitability continued during the
financial year ended
June 30, 2007 due to structural adjustments brought about in the telecom
sector by competition.
Although PTCL maintained its leading market share in the fixed line, there
was a decrease in
revenues by 5.5% mainly due to substitution impact of mobile expansion.
There was also an
increase in operating expenses by 11.7% mainly due to prudent provisions
for doubtful debts and
long term systematic improvements in operations and customer services.
In spite of decline in profit, the PTCL managed to increase its operating cash
flows to Rs 35.54
billion compared to Rs 35.19 billion last year. Considering the cash
requirements for restructuring
and development plan, the company declared a final dividend of Rs 2.00 per
share for the
financial year ended June 30, 2007. The total revenue for FY 2006-07 stood at
Rs 65.28 billion
against Rs 69.09 billion of FY 2005-06. The decrease in revenue was mainly in
the domestic
segment due to competition and reduction in tariffs. However, PTCL is making
all efforts to boost
revenue by improving customer service and launching new services to turn
around the situation.
4.2.2Liquidity Position
The liquidity position of the company suffered a setback in FY06. This trend
has been witnessed
despite increasing current assets, as current liabilities grew more sharply.
The short term
borrowings of the company have been mounting for the last few years and
this has contributed to
the current trend of the current ratio. It may be noted that the company
holds large amounts of
cash and bank balances compared to the other companies in the business.
This may provide an
edge to the company over its competitors. Although the liquidity stance of
the company is fairly
satisfactory at the moment, but a continuation of the current negative trend
may spell trouble for
the company.
4.2.3Leverage Position
The debt ratios showed a decreasing trend in the FY07. The debt to asset
ratio of the company
had declined considerably in FY05 but the trend reversed in FY06, declining
again in FY07. It is
important to note that the company maintains a largely unleveraged capital
structure, with the
current trend in debt ratios bought about largely by changes in current
liabilities of the company.
2
This was brought about mostly due to a decline in current liabilities of the
company in FY05 and
an increase in the same in FY06. The absence of the dividends payable
portion of current
liabilities in FY05 and its coming back online in FY06 was an important
contributor to the trend.
Further, the FY06 also saw an increase in short term borrowings of the
company, complemented
by increases in other components of current liabilities. Increases in assets,
mainly arising from
higher cash and bank balances, could not prevent the trend of the debt
ratios.
4.2.4Activity Position
The DSO of PTCL witnessed an upward trend throughout the period under
analysis, except in
FY05 when an improvement was marked. The ratio jumped up considerably in
FY06, completely
nullifying the effect of the decline in FY05, and exacerbating the already long
collection period of
the company. However, DSO showed a decline in FY07 showing that
management of PTCL is
constantly striving for improvement and enhancement despite stiff
competition. As a result, the
operating cycle has also decreased in FY07. The total assets turnover and
sales to equity ratio of
the company also declined in the FY'06 as revenues shrunk during the period.
Sales/equity
declined with the increase in equity of the company.
4.2.5Dividends
PTCL has had a history of paying out significant portion of its earnings to its
shareholders.
However, with huge cash requirement for Voluntary Separation Scheme, PTCL
is unlikely to
announce any cash payout during FY08. Therefore, once the ongoing process
of VSS is through,
which requires a cash outflow of PkR23.2bn, dividend payout is likely to
resume to its initial
levels.
4.3 HR Aspects
The transformation from a legacy public sector organization into a responsive
and competitive enterprise
in the deregulated era could not have been possible without implementing a
forward looking Human
Capital development and management strategy. One of the most important
objectives of this new strategy
was to optimize the workforce which was implemented by offering the
voluntary option of separating
from PTCL in exchange for financial compensation. Around 29,920 employees
opted to pursue other
career opportunities after accepting terms of voluntary separation from PTCL.
The VSS marked the single largest most successful exercise in the history of
Pakistan. In the highly
challenging marketplace, PTCL HR wing stepped forward to facilitate the
emergence of new Corporate
Culture by becoming Equal opportunity employer, inducting fresh blood from
the market, improving the
way PTCL runs and reducing the number of employees having outdated skill
set. The Training &
Development wing of the HR Department also organized a comprehensive six
months “Urgent Training
Needs” program in technical and managerial fields to enhance soft skills. An
MoU was also signed with
Etisalat Academy to benefit from their experience in training programs.
Healthy improvements have been made in the area of Recruitment and
Retention as the whole
recruitment process has been redefined to cope with the changing business
requirements. Detailed
facilitation programs have been initiated for the orientation of newly hired
employees. PTCL employees
have been provided excellent international placement opportunities across
various Etisalat International
Business Operations.
4.3.1Training and Development
The role of training and development in a service involved organization is
many times more in
comparison with what it has in a manufacturing involved organization. This
role becomes more
significant in a situation where the need to transform organizational culture is
identified as the
most glaring problem and the most difficult impediment on the way to
organizational growth.
PTCL employees are a great asset not only for the company but also for the
country. Their
marvelous potential is yet to be exploited. Their skills need to be developed,
their expertise need
to be updated for which training and development department is at their
disposal to cater to their
training needs.
At PTCL, training and development team would never miss an opportunity to
contribute towards
the betterment of the company. Training and Developments is playing an
essential role in
changing PTCL from a government sector organization to corporate sector
company. PTCL
consider every employee of the company as our customer and firmly believe
that meeting their
expectation would help us achieve customer satisfaction. We look forward to
your input for
making our endeavors more effective. The Training and Development has a
clear road map of
activities and is committed to provide high quality trainings for the
development of every single
employee.
2
5 BUSINESS STRATEGIES
As part of the Company’s vision of maintaining and growing its position as
the leading ICT service
provider and a profit leader, a five year Strategic Master Plan for the
Company, with defined corporate
KPI targets, timelines and ownerships was developed by the PTCL
management. Defining yearly targets
on market shares for various voice and data services, introduction of a
corporate KPI based performance
measurement system, Restructuring of the organization, formulation of IPTV,
Triple Play and converged
services, migration to an end to end IP based network, Investment strategies
such as Assets Management
for risk diversification and improved Return on Investments, were all part of
the master plan. The five
year master plan will be reviewed and updated on an annual basis.
PTCL chose August 14th, the Independence Day, to launch its new logo and
theme of ‘feel the
difference’. To support the new spirit and to reinforce its commitment, PTCL
offered ‘free’ nationwide
calls to the people of Pakistan. The traffic on 14th August 2007 jumped to 4
times the level on a similar
holiday to give credence to our hypotheses that the ‘good old telephone’
Company is still the trusted
landmark of the people of Pakistan. This unprecedented response to free calls
on 14th August was a heart
warming experience as it reassured the faith of our customers in our
services, making us even more aware
of our responsibilities towards putting our customer first.
5.1 Fixed Line Telephony
PTCL’s fixed line segment has witnessed decline in numbers in 2006-07 as
against last year with a
decrease of 452K lines during the past year. The market for the FLL segment
has least amount of
penetration primarily due to the major inclination towards cellular and
wireless segments by users.
PTCL’s fixed line potential is anticipated to remain stable with its having the
largest network, coverage
and better quality service as compared to WLL and cellular networks. The
fixed line segment is
anticipated to cater the needs of the business community at large and as
expected is to be driven by the
country’s future economic growth.
5.2 Wireless Local Loop
PTCL’s WLL segment has depicted immense amount of growth, nevertheless
at a slower pace than
expected. It started its service from the northern regions slowly moving
towards the metro cities using its
CDMA wireless technology. WorldCall and Telecard were the other major
operators that introduced the
WLL services using CDMA2000 and CDMA technology to cater the needs of its
customers. Telecard
started its operations from Karachi, flowing into Baluchistan region while
WorldCall initiated its
operation in Lahore in Jun 2005 with aim of rollout its network to update its
capacity to 1.5 mn
subscribers in the years to come. PTCL has been facing stiff competition
however with vast presence and
infrastructural facilities across Pakistan, has the potential to outrun its
competitors in the segment.
5.3 Broadband and Value Added Services
PTCL through diversification and assorted products and services could retain
its fundamental presence in
the Telecom Sector. Introduction of DSL Broadband services across major
cities with plans to include
more cities in times to come will enhance the revenue base of PTCL. Stiff
competition from other cable
based broadband service providers and local cable operators still persists.
PTCL’s broadband services
were introduced in Jun 2007 with free installation service with an initial
capacity of 100,000 subscribers
by providing services in the five largest cities and had a decent start by
adding over 10,000 subscribers
within the first few months of its operations depicting PTCL’s brand
recognition. Furthermore, with the
2
introduction of WLL segment, Phone N Net, IPTV, VMS and Carrier Services is
expected to bring
product leadership in the sector.
6 ENTREPRENEURSHIP – INNOVATION & INCENTIVE
PLANS
6.1 Quality Services
In order to have sustainable business performance in the highly competitive
environment of the Telecom
industry, PTCL has to deliver highest quality services to its customers. Quick
provisioning of PTCL
services brings lot of value to the customers which not only guarantees more
revenues but creates
goodwill for the company.
In the backdrop of this situation, PTCL management is taking key initiatives in
different business areas.
One important move aimed at improving the Sales and Customer satisfaction
is to boost the morale and
motivation level of our employees.
An Incentive Plan has been worked out to present substantial cash rewards to
the employees performing
beyond the specified benchmarks. This will be the start of an era where the
rewards shall be linked with
the performance and achievement of targets.
While the first phase focuses on front end of the Supply chain, it would
subsequently be expanded to
other segments of the organization like Fault management, WLL and IP TV
etc. Important features of this
plan are:
• Implementation would be highly transparent, with zero tolerance for abuse.
• It would cover Installation/Provisioning of Telephone (wire-line) &
Broadband connections.
• Rewards would be applicable to all the channels of request for installation/
provisioning of
connections.
• Rewards against Installation/Provisioning are subject to receipt of the
amount of first monthly bill
through B&CC.
• Rewards against Installation/Provisioning of telephone connections are
strictly subject to the fact
that the whole process completes within a span of 03 days (from service
request registration to
the final service activation).
2
6.2 Free Internet
PTCL proudly presents Free Internet facility for its landline valued customers.
All PTCL landline
subscribers can now experience the best dial up speeds with unlimited
internet usage during night hours
from 10:00pm to 07:00am. Furthermore subscribers can also avail up to 100
hours of free dialup internet
on monthly basis from 0:700 am to 10:00pm every day.
Offer/ Package Details:
• Free unlimited dialup internet will be available from 10pm to 7am in the
morning every day.
• For day time users (7am to 10pm) PTCL is offering up to 100 free hours on
monthly basis to
entire subscriber base.
• Customers exceeding 100 hours in a month (during day time from 7am to
10pm) will be charged
as per existing tariff of Rs. 6/Hour.
6.3 One Stop Shop
Customer service is a series of
activities designed to enhance the level
of customer satisfaction – that is, the
feeling that a product or service has
met the customer expectation. High
standard customer service is an integral
part of PTCL’s customer value
proposition. As part of strategy PTCL has
invested huge some of money to
improve the environment & efficiency of its service centers. With all together
complete change in outlook, services to customers & facilities available,
these
centers are called “One Stop Shop”. They are aimed to provide better
services to
our valued customers for sales of products and after sales services.
These “OSS” are nine in number and are in Major cities of Pakistan. By the
end of
this year there will be 19 OSS operational in 11 cities of Pakistan. Customer
feedback about services standards at these OSS is very positive; these
centers help
us to provide better service to our customers.
7 SWOT ANALYSIS
7.1 Strengths
• Largest operational network and infrastructure within ICT (Information &
Communication
Technologies) segment.
• An integrated Monoply
• Market leadership in Local loop, Wireless local loop (WLL) and Fixed
telephony.
• PTCL (Ufone) is market challenger in GSM segment
• Ufone is performing well though Warid and Telenor are tough competitors.
PTCL, Ufone’s
profitability increased by 49.2 percent to Rs 977 million in 1H/FY07 as
compared to Rs 655
million in the corresponding period last.
• Competitors still depend on PTCL network either directly or indirectly
• Experienced Telecom Resources
7.2 Weakness
• Not been able to nurture its growth around customer services oriented
strategy
• Internal organizational and business processes issues
• Monopolistic culture has further added to its complexities
• Paknet, the internet service provider arm of ptcl continues to incur losses
due to poor managment
and lack of network optimization
• Ptcl-v, the fixed wireless phone service is poor
• Over employment & low productivity.
• Slow decision making including external interferences.
• Corporate culture akin to government departments.
7.3 Opportunities
• Low teledensity of pakistan.
• Have vast infrastructure and real estate assets which can be leveraged
further.
• Global connectivity reliability has been improved. PTCL is expanding the
long distance and
infrastructure side through spreading out two sea-me-we submarine cables..
• Partnership with new entrants in a deregulated environment.
• Scope for efficient/cost effective operations.
2
7.4 Threats
• Increased competition in long distance continues to exert pressure.
• VOIP use is increasing despite ambiguous and discriminatory policies
• Exposure to market competition
• Migration to Cellular Networks
• Ability to Attract & Retain Quality Professionals
• Reduction in International Settlement Rates
8 FUTURE OF PTCL
Going forward PTCL is poised to align itself in to a more customer friendly and
commercially oriented
organization. This will be achieved through improved customer experience,
offering better quality of
service, and introducing new products and emerging services to satisfy
specific market segment needs
besides consolidating its leadership position in fixed line business. The
customer interfaces will be fully
empowered to achieve corporate objectives. Automation and simplification of
internal process,
optimization of operational expenditure, migration of services to Next
Generation Networks,
enhancement of national backbone infrastructure, expansion of robust and
resilient IP infrastructure and
proliferation of broadband services are few of the milestones for the way
forward.
8.1 Measures to achieve Set Targets
The management of PTCL has been adequately preparing itself to face the
forthcoming challenges of
deregulated environment. Appropriate structural changes have either been
initiated or these are underway.
To face the challenge, a new Marketing and Business Developing wing
headed by a Member with
appropriate organizational structure has been made functional with a view to
expanding business and
taking good care of the customers. Some other initiatives are as follows:
8.1.1New Technology
Prior to the start of the competition, PTCL should be well equipped with new
technologies,
billing, marketing & customer care infrastructure, skilled trained professionals
with focus to win
business and earn customer loyalty.
8.1.2Cross Subsidization
PTCL is providing range of services i.e. Fixed Line, Cellular Mobile and
Internet etc. As the
world experience shows, incumbent can engage in cross subsidization which
means that price of
one market may be increased above the cost and use the surplus revenue
obtained from this
market to subsidize the lower prices in other markets where more
competition is faced. Analyzing
PTCL position against this experience and seeing the prevailing competition
environments of
Pakistan, it can be safely concluded and seeing the prevailing competition
environments of
2
Pakistan, it can be safely concluded that cross subsidization is not possible in
Cellular Mobile and
ISP markets. However, in Fixed Line segment, there is a real possibility of
cross subsidization.
PTCL can lower rates of line rent, installation charges and local calls and
correspondingly
increase rates of NWD and International out bound traffic/maintain present
level/ lower the prices
but still remain on the higher profit margin side. Alternatively as part of
overall business strategy,
it can offer different packages i.e. residential and corporate customers, rural
and urban and
economy groups etc. within each package the prices can be cross subsidized.
This practice can
have adverse effects on the growth of other licenses particularly those not
having vertical
integration. This abuse can be controlled through license conditions and
accounting separation
which will determine the existence of cross subsidization.
8.1.3Price Discrimination
In order to retain and even expand the market share, PTCL can resort to price
discrimination. This
can be between users of own network and other operators networks. For
example PTCL may fix
different rates for intra-network calls and inter-network calls. Lower rates of
intra-network calls
will be strong temptation for customers to remain stuck with PTCL instead of
switching over to
other choice operators. This practice will be a restraint for other operators,
hence will be
considered anticompetitive.
8.1.4Vertical Price Squeeze
PTCL can increase the price of upstream input (local access). It monopolizes,
and keep the
downstream services (ISPs, DSL and Payphones etc.) price same. The effect
would be reduction
or elimination of the profit of downstream service providers because their
margins would be
squeezed. To increase the squeezing effects, PTCL can also reduce
downstream price of its own
services. To control price discrimination, the regulator can impose wholesale
cost imputation
requirements.
9 Bibliography
For successful completion of this project we have utilize different available
resources, from which we
have obtain required data. These resources lie in both digital and analog
form. Most of the information is
obtain from Internet, while a visit to company is also made to get further
information. We are thankful to
company management who had welcome and cooperate with us. Resources
which are consulted discussed
below:
Resources
o Company’s website - www.ptcl.com.pk
o Company Annual Reports
o Magazine Business Economist
o Google.com
o Economic survey of Pakistan
o Businessrecorder.com
o Security and Exchange Commission of Pakistan
o Kse.com
o Yahoofinance.com
o PTA Reports
Fig Below: 5 years Financial Analysis of PTCL

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Fig Below: 5 years Financial Analysis of PTCL

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