PTCL monopoly: Is there any justification?

Another worrying aspect of the PTCL's performance is the fact that it keeps of heavily relying on traditional voice transfer services

By Syed M. Aslam
May 21 - Jun 03, 2001

You don't squeeze the consumers for whatever they are worth with complete disregard to improve the existing services and introduce value-added ones to facilitate demands of the digital world of today. Right? Wrong if you enjoy a complete monopoly over telecommunication services fixed line phones, telex and telegraph like the government-owned joint stock company Pakistan Telecommunication Company Limited (PTCL).

During 1998-99 and 1999-2000 PTCL's revenue, operating profit and pre-tax profit increased by 26 per cent to Rs 58.6 billion, by 30 per cent to Rs 25.3 billion and by 59 per cent to Rs 22.7 billion respectively primarily due to what the company prefers to call 'tariff rationalisation' a fancy verbal equivalent of tariff increase.

According to PTCL's annual report for the year ended June 30, 2000 the number of Actual Lines in Service (ALIS) increased from 2,874,234 in 1998-99 to 3,053,460 in 1999-2000 which depicted just over 6 per cent increase. However, during the same period PTCL's revenue increased at a much higher rate of 15 per cent from Rs 51 billion to Rs 58.6 billion.

The substantial increase in revenue was made possible primarily by 'tariff rationalisation' in July 2000 local call tariff was not only increased from Rs 1.75 to Rs 2.10 per call but was also subjected to five meter pulse which treated each 5 minute duration as a separate call. Local call tariff was further 'rationalised' during the current fiscal including increasing the local call tariff further to Rs 2.31 per meter and increasing the monthly line rent from Rs 235 to Rs 282.

Despite the increasing revenue and all around profitability the PTCL's portfolio of bad debts is also on the rise not only in term of the actual amount but more worryingly in term of percentage. For the year ended June 30, 2000 the volume of PTCL's 'trade debts' considered doubtful' increased to Rs 13.3 billion which was almost equal to its pre-tax profit.

Increasing trade debts

PTCL's trade debts, both good and doubtful, have increased from Rs 22.5 billion in 1997-98 to Rs 28 billion in 1998-99 to Rs 31.3 billion in 1999-2000. The volume of doubtful trade debts, however, have increased from Rs 7.59 billion, Rs 10.7 billion and Rs 13.3 billion respectively during the same period. The volume of doubtful debts as a percentage of total trade debts are on a constant increase from 33 per cent in 1997-98 to 38 per cent in 1998-2000 to 42 per cent during 1999-2000.

Another worrying aspect of the PTCL's performance is the fact that it keeps of heavily relying on traditional voice transfer services remaining oblivious of changing demands for data/text transfer. In 1999-2000, 35 per cent of PTCL's revenue came from the international incoming calls, followed by 23 per cent from local calls, 17 per cent from Nation Wide Dialing, 13 per cent from line rental, 9 per cent from international outgoing calls and 2 per cent from installation charges. However, as a whole domestic revenue local calls, NWD calls, international outgoing calls, month line rental and installation charges remained the largest contributor to PTCL's revenue. That should explain the reason for PTCL's strategy to increase the line rent, local call tariff and introducing the metered calls while decreasing the international call rates from Rs 67.04 to Rs 60.34 per unit on an average.

Not surprisingly PTCL fails to mention ISP's contribution in its overall revenue: A negligible 2 per cent of PTCL's revenue comes from the value-added service such as 800 and 900 toll free numbers, internet, CLI, etc., much lower than the 20-40 per cent earned by its counterparts in other parts of the world. In many cases the voice and value-added services of many foreign operators contribute half each to their total revenue.

Those related to IT industry in Pakistan never fails to blame PTCL to induct modern technology. They are vocal to say that PTCL absolutely lacks hi-speed and high-capacity digital lines and offers services and tariffs for only 2 megabit which results in increasing the costs. Better quality ISPs say that they have to use multiple of separate services to provide the 16 megabit service each of which is proving expensive to maintain due to individual maintenance, works and rental costs.

However, increasing the share of value added services in revenue is imperative for another important reason: without it PTCL would not be able to improve its infrastructure and increase the lines both of which require considerable investment.

Just how little importance PTCL pays to the all-important value-added service like internet is obvious from the fact that the Telecom Status Report 2000 of Pakistan Telecommunication Authority has allocated just two paragraphs to 'Internet in Pakistan.' The 85-page report, however, has dedicated almost six pages to electronic commerce which can not be facilitated in the absence of reliable telecom infrastructure in the country.