NORTEL AND PAK TELECOM AGREEMENT

 

An ambitious project to launch service in more than ten cities and along major highways

By SHABBIR H. KAZMI
Mar 13 - 26, 2000

Pak Telecom Mobile Limited (PTML), a newly formed subsidiary of Pakistan Telecommunication Company Limited (PTCL), has signed a US$ 50 million agreement with Nortel Networks of Canada for digital wireless network infrastructure equipment including an intelligent Network platform capable of supporting. This includes billing and customer services, voice mail and transmission etc.

The Chairman of PTML, Naseem S. Mirza, at the signing ceremony emphasized the need for speedy and effective deployment of the network to ensure the competitive edge in service quality and coverage of PTML. When this facility is fully implemented the general public of Pakistan will get the most modern wireless communications. Project Director, Arshad Khan said that with this new network, PTML would be able to cater to the growing demand in Pakistan for high-quality wireless voice communications. He further said that PTML's competitive edge would come from superb customer service, a state-of-the art network and an array of value added service.

"This agreement extends a growing and successful business relationship with PTCL, which already uses Nortel Networks' data networking solutions," said Peter MacKinnon, Vice-President and General Manager, Mobility for Nortel Networks in Asia. Nortel Networks' strategic alliance with PTML, combined with your strong track record in cellular communications, will give a strong boost to PTML's success in this new venture. PTML has an aggressive market rollout plan, which were fully prepared by Nortel to support the ever increasing demand for cellular telephony in Pakistan.

Nortel Networks is a global leader in telephony, data, wireless and wireline solutions for the internet. The Company has 1998 revenues of US$ 518 billion and operations in 150 countries. The Company is creating a high-performance internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the internet through Unified Networks that promise a new era of collaboration, communication and commerce. It serves carriers and service providers to further its customers' competitive and economic advantage. It delivers the expertise, leadership and leverage customers need.

The turnkey project for launching the mobile phone service by PTML includes network design, supply of back-up equipment and commissioning of service for 500,000 subscriber base over a 5 year period. At present, the mobile phone industry in Pakistan covers nearly 250,000 users and involves a billing of Rs. 8 billion annually. The delay in launch of PTML mobile service is costing approximately Rs. 150 million monthly to the Company.

The PTML mobile project is an ambitious project and the Company plans to launch its service in more than ten cities and along major highways in the first year. It has a plan to achieve a target of more than 75,000 subscribers in the first year. Out of the present customer base, the only existing GSM network, Mobilink, has around 70,000 subscribers while the balance is shared by Paktel and Instaphone which use analog technology.

After the signing of this contract, the main concern is to evaluate the revenue potential of income from cellular segment for PTCL. Presently there are 250,000 cellular subscribers. Based on current penetration level of 0.19 per cent, any per capita income will result in increased spending, allowing cellular companies to make further inroads into a largely untapped market. However, according to some analysts, the increase in the per capita income of Pakistanis, mainly for a selected segment, implies that for the foreseeable future only a tiny segment of the population would be able to afford cellular phones. Given a total population base of 140 million even a tiny segment would represent a significantly large market.

Cellular revenues hold potential to earnings growth for PTCL after the end of monopoly. In 2001 cellular revenues should represent over 10 per cent of PTCL's total revenues, thus proving to be the ultimate saviour once the monopoly on fixed line service ends in December 2002. Keeping this situation in mind, it becomes imperative for PTML to expedite the launch of its cellular network. Over the next ten years, the analysts foresee, at the current penetration level of 1.5 per cent, a compounded annual growth rate (CAGR) in subscriber growth of 26 per cent

Keeping in mind the service oriented nature of cellular network, PTCL established PTML to provide an atmosphere geared at providing quality service, which the current employee base of PTCL has been unable to deliver. Also PTML's management has managed to wrest its employee base from the current cellular industry, thus allowing them to gain privileged information and a fair idea of the competitive environment of the cellular industry.