E CONOMIC O VERVIEW

OF

T ELECOM I NDUSTRY

Pakistans economy remained stressed in the first half of the financial year 2010-11 (July-Dec). This downtime didnt occur only because of global trends, but mainly due to unprecedented floods that damaged one-fourth of the countrys agriculture land. The catastrophe resulted into high oil pricing, damages to private and public infrastructure, energy shortage, and above all the damage to telecom equipment in the field. However, an unexpected good performance by the services sector provided support to GDP growth and the government somehow managed growing macroeconomic imbalances in the economy. State Bank of Pakistan continued tight monetary policy to contain the inflationary impact and the only positive activity as a consequence to the floods was the strength of external sector, where large inflow of aid and remittances played positive role to economic recovery. Highlights Total telecom teledensity reached 65.2 percent Telecom revenues reported in 1st half of the FY2011 were over Rs. 180 billion compared to Rs. 167 billion earned during the same period last year. Cellular Mobile sector shares 67 % of the total telecom revenues, whereas fixed line services share is 26% of total revenue generation of telecom sector. FDI and investments in Telecom sector showed notable decline In the first half of the FY2011 the total contribution to national exchequer by Telecom sector was Rs. 56.3 billion which was Rs. 49 billion during same period last year, showing growth of 15%.

Porters Five forces model:

Bargaining power of customers: The bargaining power of customers in this case is very high because of the low switching cost in the industry. There are attractive substitutes available to the buyer even in the form of keeping the same cell phone number but changing the service provider. It makes very difficult for the market players to retain their customers. I think the brand loyalty can only be created through superior marketing campaigns and service.

Bargaining power of suppliers: This is a type of industry where, at least in present times, the bargaining power of suppliers is at the low level because of the nature of inputs for the business. Moreover, with the deregulated and friendly environment given by the government of Pakistan, the industry has become more competitive and quality services driven.

Threat of substitute products: Although the cell phone subscribers are more than 95 million now, still the threat of substitute products is high for the industry. Buyer inclination to substitute and priceperformance trade off are the most important to consider in determining the threat of substitutes.

Actually, just the subscription of cell phone service is not enough for a company to get optimal profits but the real challenges is that how many existing customers are using the service regularly for incoming as well as outgoing calls. The quality of service is the parameter for a customer to be loyal with the subscription otherwise fixed line and wireless fixed lines are the better substitutes, as been experienced in festive times.

Threat of new entrants: It is not easy to enter in this capital intensive sector of the telecommunication industry. So, the threat of new entrants is low. Though the growth and potential of the sector look very attractive, still it is very difficult to take risk for a new investor because the penetration in the market would be very difficult.

Competitive rivalry: When the competition is fierce, obviously the competitive rivalry will be at the highest level. The very high level of competitive rivalry among the major players of the cell phone sector is clearly observable. Just look at the advertisement campaigns of the rivals and you can see how intense the competition is. It looks like a battle for supermacy going on between the rivals. All means of attracting new and potential switching customers are being used by all the competitors to gain as much market share as they can. Exit barriers, industry growth, product differences, brand identity, and diversity of rivals are the main reasons of very high competitive rivalry in this case.

Future of the industry and opportunities:

Keeping in view the above scenario, number of investment opportunities has been created in the sector. The forward and backward linked businesses to telecom have become very lucrative from investment point of view. Some of which are Call Centers, IT enabled services, outsourcing, franchises by newly licensed operators, network solution providers to telecom operators etc. One can expect more than these few pointed areas where investment opportunities have been created. One can imagine that currently and in near future, opportunities from investment point of view in the telecom sector are

huge. However, it has put much responsibility on the regulator to keep check on the sector to avoid the burst of bubble in telecom sector. 7. CONCLUSION AND RECOMMENDATIONS 7.1. Conclusion As we know that each activity has pros and cons or positive and negative impacts, similarly the phenomenon of Privatization also have impacts on both grounds. If we look at the whole study we can find that privatization has the following Negative impacts on the performance and development of PTCL; Decrease in Subscribers: Due to privatization PTCL subscription level is getting low, because of poor customer services and the obsolete wired technology which always have problem of disconnection. While the competitors have international experience in customer services and they have the latest technology which attract customer to use their services. Decrease in Revenue: the revenue was mainly decreases due to market competition and the ultimate decline in the tariff and subscribers. There is a huge decline in the tariff from Rs.26 in 2003-04 to Rs. 2 in 2007-08 which badly impact the revenue of the organization. Decrease in employment: PTCL is in the process of employees layoff and provide huge amount to separate unskilled personnel beside this there is a turnover of the skilled employees as competitors offers more attractive packages as compare to PTCL. Beside this privatization also cast some significant impacts on PTCL: Induction of New Technology: The most important impact of privatization on PTCL is the induction of New Technology. Although PTCL is still staying behind the rest of the market competitors but due to privatization it is now in the process of adopting new and latest technology like 3G, Which will give competitive edge in future.

Improvement in customer services: Keeping in view the customer services of competitors PTCL has also making steps towards further improvements in their services to attract more customers, which were simply not possible as state run enterprise. Increase in Competition: Privatization always encourage healthy competition based upon good services and cheap prices where the end benefits goes to the customers, which always favors further growth of the Industry. While studying the case of Telia, and keeping in mind the current situation of PTCL. It has been observed that PTCL is not in a bad condition. PTCL is in the same condition as Telia (the world leading telecommunication company) were after privatization. After privatization 64

Telia has reduced its overall cost by reduction in employees, outsourcing, acquiring the latest technology and providing the cheap services to its customers as compare to their competitors. PTCL have to introduce innovative products and services and should revise the human resource policies such as hiring right person for the right job. To remain the leader in the telecom sector PTCL has to give importance to its customers by offering low charges and high quality service. In nut shell privatization always leads to efficiency but not in short run. 7.2. Recommendations Some suggestions are enumerated hereunder for the improvement of the PTCL as says There is always room of improvement. Recommendations suggest improvements in areas, which have capacity for polishing and progress. The suggestions are as under:7.2.1. Services On the bases of our study it is clear that PTCL customers care services are not in line with its business. Customers care service unit of PTCL is unskilled and unqualified. While

competitors main competitive advantage are their reliable and customers friendly services. It is observed that PTCL customers are not satisfied with the customers care services, particularly billing system and complaint processing system. It is recommended that staff of customers care services must be qualified and trained with in the area of customers services so that they can facilitate customers properly. There must be proper complaints management system, which can handle customers complaints on daily bases. Subscribers of landline in the rural areas are suffering from disconnection due to many reasons for which customers makes complaints, takes weeks to connect. If this problem is being resolved, usage of those lines will be increase which ultimately contributes to the revenue. 7.2.2. Substitute to Landline The problem of landline disconnection in rural areas can be resolved with the wireless substitute called V-phone (WLL). The demand of V-Phone is at hike day by day due to avoid the complications of Cable system. It has another advantage that this technology is also economical as well as feasible in remote & far flung areas where this facility may be provided easily. It also carries less maintenance expenditure. PTCL should increase the coverage of V-Wireless communication to the rural areas. 65

7.2.3. Technological Improvement Although PTCL is adapting new technology after privatization but the pace of acquiring the latest technology is very slow. All the competitors are very advance in acquisition of new technology. In order to become a leader in telecom market PTCL must acquire the latest technology like, 3G and 4G. In the same way Internet services around the world are growing

swiftly so in this global world PTCL has no exception to cater the requirement of modern era. 7.2.4. Common Awareness As the PTCL is undergoing post privatization process it is inevitable that all employees at every level must be well conversant with the latest Technology, Marketing tactics, Computer inventions in order to meet with the present era requirements, so that they may utilize their talent & abilities to improve the overall performance of the entity.

S UGGESTIONS

AND

R ECOMMENDATIONS

No doubt P.T.C.L having the monopoly in providing the Land-Line Telephone Connection in Pakistan and its playing its role magnificently. In current scenario P.T.C.L has increases its Revenue quite dramatically, and probably that as soon as this organization has become privatized it will flourish its revenue in better manner.

PTCL should immediately change its Finance upper level of hierarchy and should stream line in the good manner. PTCL should also encourage the Billing On line system that each and every customer should have to pay his/her bill on line basis. The system of E-PAYMENT which although exist in PTCL finance system but there is need of improvement this facility. The image of PTCL being leading Telecom Providing is not good in the eyes of common customer especially there are lot of complaints about the including the bogus local calls in the monthly bills of various customers. PTCL should also provide the detail of local calls made from any Land Line Number which would be provided in Micro level to the customer.

Faulty Telephone connection should be Fault Free within 24 hours in order to maximize the Revenue, as Revenue of PTCL should sacrifice at the cost of Faulty Telephone.

PTCL should make Customer Care Centers in remote areas.

The punching system of Billing through automation at CITI Bank Karachi takes so much time to adjust so it should be revived. The Financial D.D.O powers should be entrusted to the Director Finance rather GM. PTCL is not utilizing its surplus profit in long-term investment projects which be done. PTCL management should give concentration towards the Securities of deposit and it should be on maximum level. The return on deposit should be checked accordingly. The cash generated from the operation must be utilized accordingly. Each Region should allocate the funds at its own level. PTCL should take the services of highly qualified financial analysts. The promotion system in the Finance & Revenue wing should be revived in true manner all promotion must be made strictly on merit. Each Region should maintain Profit & Loss and Balance sheet and the statement of Cash inflow and outflow.

C ONCLUSION
PTCL needs innovative service offerings currently it doesnt even offer bundles or a single bill. Has been unclear about its IPTV and WiMAX plan and strategy (trials are in progress) Overall PTCL still behaves as a monopoly it has to change its attitude. At a minimum, avoiding billing errors and providing competent and courteous service to its customers is essential if PTCL wants to show that it is transforming itself to a competitive company which cares for its customers. It is said that the best assets of a company go home to their family in the evening. Can the culture of PTCL be changed to a performance and service based organization? According to the latest directors report from PTCL the organization is being revamped. Only time can tell the impact.