Manager Research
July 16 - 22, 2007

Pakistan Telecommunication Corporation was formed in 1991, inheriting all the functions previously performed by the Pakistan Telephone and Telegraph Department, which had been responsible for providing telecom services since 1962. Later on PTC was converted into PTCL, a public limited company as of 31 December 1995 and now PTCL is the only listed telecom operator in Pakistan and offers basic telephony and related services in the country. Having the largest copper-based wire line foot print, PTC offers national long distance, international long distance, and value-added services to its customers. PTCL also operates the countryís largest fiber optic backbone network, digital exchanges and international gateways and provides services throughout Pakistan except Azad Jammu & Kashmir and Northern Areas as defined in its license. Under its wireless local loop license, PTCL also operates a CDMA-based network. In addition to the fixed line business, PTCL offers cellular services in the country via its 100% owned cellular entity, Pakistan Telecom Mobile Limited (PTML). PTML is the second-largest player in the cellular market of six operators. PTCL also has a 100% stake in an internet service provider, Paknet. According to the companyís last annual report for FY06, the company had a consolidated contractual and permanent employee base of 63,000. Over 50% of the companyís employees are government employees transferred to PTCLís books when it was converted into a corporation back in 1996.


In November 2004, the Government of Pakistan announced its plans to offer 26% strategic stake (B-class shares). For the sale of its 26% strategic stake, the GoP had short listed three parties. These included SingTel, China Mobile and Etisalat. However, Etisalat made the highest bid. The strategic stake was sold on 18 June 2005 but the transfer of management control finally occurred after nine months of negotiations between the winning bidder Etisalat and the Government of Pakistan. Etisalat and GoP finalized the total cost of US$ 2.59 billion. Etisalat paid US$1.4 billion upfront, with the remainder to be paid in equal semi-annual installments over the next five years.



Paknet Limited was formed in March 1999 and started commercial operation in January 2000. The company is a fully owned Subsidiary of PTCL. Paknet is biggest Internet Service Provider of the Country. Besides Internet Paknet also provides data communication services like Clear Channel data links, Frame Relay and Digital Circuits on optical fiber cross connect systems etc.


PTML is a wholly owned subsidiary of PTCL and was established to operate cellular telephony. The company commenced its operations, under the brand name of Ufone, from Islamabad on January 29, 2001. Being part of PTCL, the management of Ufone has also been handed over to Etisalat. During the year July 2005 to June 2006, Ufone continued on the path to success. The Company further expanded its coverage and has added new cities and highways. Ufone has network coverage in more than 750 cities, towns and across all major highways of the country.

Keeping in view the growth potential of the cellular industry there is no option but to be aggressive in order to remain a potent force in the cellular industry. In order to extend cellular network to new cities, towns and highways and enhance its current installed capacities in existing cities, Ufone has finalized a huge network expansion contract amounting to about USD$ 550 million, which will enhance the subscribersí capacity by 10 million. This is the largest ever expansion project of Ufone.


PTCL has recently gone through a change at the top level where the President and CEO of the organization, Mr. Mohamed Abdulla Bamakhrama, was replaced by Mr. Walid Mohamed Ahmad Suleiman Irshaid. Mr Irshaid, who is of Jordanian descent, brings with him over 25 years of global telecom experience. Mr. Irshaid has worked with reputable operators, such as Etisalat (16 years), Investcom in Lebanon, Paltel in Palestine and FLAG Telecom, where he was president for the Middle East and Africa, Mr. Irshaid was responsible for 30 countries in the Gulf region, Levant, Africa, as well as Pakistan and Iran.


PTCL is the market leader in wire line with 96% share but in the overall context, wire line subscribersí share shrank to only about 13% at FY06 against 81% in June 2001. PTCL has raised its market share in the international incoming voice segment from 54% in 1Q FY07 to 57% in 2Q FY07. This was reflected in a 43% increase in international incoming revenues QoQ. Pricing in the segment remains under pressure and the continuous decline in international settlement rates has not stopped to crowd out grey traffic. While increase in formal traffic should provide operators with more traffic, the pricing pressure will help weed out smaller players resulting in volumetric gains for the larger players.


The total revenue for the nine monthsí period of FY07 stood at Rs. 48.5 billion against Rs. 51.2 billion of the corresponding period of FY06. The decrease in domestic revenue was 4% whereas international revenue showed a decline of 14% as compared with the same period last year. The major reason for the decline was reduction in tariff of call charges in retail segment. However, significant growth has been achieved on the wholesale side such as interconnect, leased circuits and corporate revenue.

On the expense side, the companyís operating costs increased to Rs. 33.7 billion for the nine month period of the current financial year from Rs. 30.3 billion of the same period last year, mainly due to adoption of prudent policy for doubtful debts provision. However, rest of the operating expenses has registered significant decrease in real terms. Other income for the period registered an increase and stood at Rs. 3.9 billion as compared with same period last year figure of Rs. 3.1 billion due to decrease in cash expenses and better funds management. Earning for the nine month period declined by 22.3% to Rs.11.86bn (EPS: Rs.2.33) as against Rs.15.28bn (EPS: Rs.3) in the same period last year.

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