PTCL REMAINS THE LEADING PLAYER
Exceptional growth of telecom infrastructure benefitting PTCL
SHABBIR H. KAZMI,
July 16 - 22, 2007
Lately Pakistan has succeeded in attracting millions of dollars foreign direct investment in the telecommunication sector. This has helped in increasing teledensity manifold as well as availability of multitude of services at affordable cost. It may not be wrong to say that the exponential growth would have not been possible had Pakistan telecommunication Company (PTCL) would have not been there.
One may say that the number of subscribers of cellular phones has surpassed the number of fixed lines. However, fixed lines remain the prime connectivity and cellular phones are emerging as the second best options. Operations of business entities are still dependent on PTCL infrastructure. One may also say that the pyramid is being built on the PTCL infrastructure. It is heartening to note that the Company is also coming up with innovative products and services and also supporting the growth of cellular telephony in the country.
More than quarter of a century ago people used to buy a fixed line connection for Rs 10,000 and a telephone connection was considered symbol of prestige and prosperity. At that time it was also said that if a person applied for a telephone connection his grandson used to get it. As against this, now one can see a cobbler or a janitor carrying a cellular phone in his pocket.
It is also necessary to bring on record that during last five years, prior to privatization of PTCL, a major turnaround in the operation of the company was made possible. Induction of senior executives, including the Chairman of Board of Directors, from the private helped in bringing revolutionary changes. It would be unfair if the staff and workers are not given due credit. The induction of executives from the private sector gave a new vision but it was the employees of PTCL, which converted the vision into the reality.
According to an analyst, "PTCL management always wanted to offer new products and services and also the quality of service but lack of vision, inappropriate policies and bureaucratic hurdles did not allow ushering in new corporate culture and mind set. On top of this monopoly status created utopian mindset, where the customers were at the lowest priority."
According to another analyst, "The bureaucratic hurdles are still containing growth. This is evident from much slower growth of the Ufone subscribers. Both the PTCL and Ufone would have grown much faster but impaired decision making stalls even smooth operation of these entities. Having the advantage of PTCL's backbone Ufone should have grown to double of its present size. The result is PTCL's competitors are growing at much faster pace, both in terms of number of subscribers as well as product diversity."
The success story of Pakistan Telecommunication Company Limited (PTCL) is the story is the story of commitment and vision. It made a humble beginning as Posts & Telegraph Department in 1947. In 1962 it was converted into Telephone & Telegraph Department. Today it can rightly be termed the biggest telecommunication company of Pakistan.
The PTCL commenced a new journey in December 1990 by taking over operations and functions from Pakistan Telephone & Telegraph Department under Pakistan Telecommunication Corporation Act 1991. This coincided with the Government's competitive policy, encouraging private sector participation and resulting in award of licences for cellular, card-operated payphones, paging and data communication services.
Pursuing a progressive policy, the Government in 1991, announced its plans to privatize PTCL and in 1994 issued six million vouchers exchangeable into 600 million shares of the would-be PTCL in two separate placements. Each had a par value of Rs. 10 per share. These vouchers were converted into PTCL shares in mid-1996.
In 1995, Pakistan Telecommunication (Reorganization) Ordinance formed the basis for PTCL monopoly over basic telephony in the country. It also paved the way for the establishment of an independent regulatory regime. The provisions of the Ordinance were lent permanence in October 1996 through Pakistan Telecommunication (Reorganization) Act. The same year, PTCL was formed and listed on the three stock exchanges operating in Pakistan.
Since then, PTCL has been working hard to meet the dual challenge of telecom development and socio-economic uplift of the country. This is characterized by a clearer appreciation of ongoing telecom scenario wherein convergence of technologies continuously changes the shape of the sector. A measure of this understanding is progressive measures such as establishment of the company's mobile and Internet subsidiaries in 1998.
As telecommunication monopolies head towards an imminent end, services and infrastructure providers are set to face even bigger challenges. Pakistan also entered post-monopoly era with deregulation of the sector in January 2003. A comprehensive policy for telecom sector is now fully operative.
PTCL is in fully cognizant of the challenges and the policies exhibit a strong conviction towards healthy competition. In the post privatization era, the new management is in process of enhancing organizational and business proficiency through vertical integration and horizontal diversification. At the same time, cross-national ownerships, operations and partnerships are being evaluated with a view to developing and diversifying the business.
Pakistan Telecom Mobile is a wholly owned subsidiary of PTCL, established to operate cellular telephony. The company commenced its operations, under the brand name of Ufone, from Islamabad on January 29, 2001. As a consequence of PTCL's privatization, 26% of its shares were acquired by Emirates Telecommunication Corporation (Etisalat). 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.
Ufone has successfully completed the network expansion in existing as well as in new cities and towns which amounted to more than US$ 170 million. As a result the asset base of the Company has increased from Rs. 20 billion to Rs 27 billion. Ufone has a adopted the policy of simplified tariffs with no hidden charges, which resulted in positive impacts on the usage trends of subscribers as well as total subscriber base, which has increased from 2.579 million in June 2005 to 7.487 million in June 2006.
Ufone caters for International Roaming to more than 195 live operators across 119 countries and introduced International roaming facility for Prepaid subscribers in Saudi Arabia, United Kingdom, United Arab Emirates, Singapore, Portugal and Kuwait with lowest rates, featuring no security deposit and activation charges. GPRS Roaming facility is available with more than 75 Live Operators across 59 countries. The company has also been awarded a new License for providing cellular services in Azad Jammu & Kashmir and Northern Areas.
Ufone's operational performance has been very encouraging. Despite the stiff competition in Pakistan telecom market, leading to reduction of prices to bare minimum level, due to its aggressive policies and exercising strict control over expenses the Company managed to improve its revenue and after-tax profit.
The management of Ufone strong believes that 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 undertaken network expansion plan of about half a billion dollars to enhance its subscribers base. This is the largest ever expansion project undertaken by the company.
The focus remains on maintaining high quality of service, which is always a benchmark of Ufone, increasing usage and exploring new revenue streams on value added services, market visibility through various market initiatives to fulfill subscribers' satisfaction and demand and above all to increase the value of investment for the shareholders.
In order to evolve with its customers and to keep pace with their needs, PTCL has been rejuvenating and revamping its image by changing its visual identity. Ufone understands the value of words and the need to communicate effectively and efficiently at all levels of society. Its primary focus is on U, the valued customers which bring strength to the Company.
With a fresher look accepted and appreciated by the people of all ages, Ufone aims to connect with them and provide them state of the art services. No matter who the customer is, where it is located, what it wants to say, how it want to say it or how it feel, U (customer) are the focus. Because at Ufone, it's all about U!
Covering about 2300 key destinations Ufone claims to be the ultimate means to stay connected wherever subscriber goes allowing seamless roaming through the network providing the best nationwide coverage. Ufone, being one of the leading cellular service providers, has launched its service in many new cities. Keeping up the pace Ufone is rapidly expanding its network.
Customers can experience limitless features by stepping into the world of Ufone's value added services. These are aimed at connecting them and provide them state of the art services to make sure they get the most out of their mobile phone.
Short Messaging Service (SMS) & International SMS
Caller Line Identification (CLI)
Missed Call Notification
Phone Book Saver
Virtual Private Network (VPN)
GPRS enabled MMS and Internet Access
Paknet is a fully owned Subsidiary of PTCL. It may be classified the biggest Internet Service Provider (ISP) of the Country. Paknet also provides data communication services like Clear Channel data links, Frame Relay and Digital Circuits on Optical fiber cross connect systems etc.
According to a survey conducted by the Pakistan Telecommunication Authority (results were announced in July 2006), Paknet enjoys top position in 75% regions of Pakistan for its quality of services. The company has taken its ranking up in metropolitan cities like Karachi and Lahore.
Paknet Limited was established in March 1999 and commenced its commercial operation in January 2000. Paknet made a fresh start with an Internet customer base of 6000 as of January 2000 and successfully achieved the target of its first year business plan of 50,000 Internet customers. Currently Paknet has a customer base of about 150,000 clients.
By virtue of its size, diversified range of products and services PTCL is expected to remain a major player in the short and medium term. Its privatization is also expected to accelerate restructuring process. It will continue to be major service provider to other cellular telephone companies.
It is also emerging as major player in the wireless telephone category due to its outreach, having exchanges even in the smaller towns capable of housing wireless telephone hardware.
As evident from July-March financial results, PTCL's subdued financial performance can be attributed to 1) decrease in domestic and international revenues, 2) additional provisioning for bad debts and 3) Significant increase in financial charges.
In presence of all these pressures, along with 3.5% Etisalat Technical Service Fee, PTCL gears itself to take a bold turnaround decision of VSS, targeting right-sizing by around 30,000 to 32,000 employees. PTCL may incur a cost of around Rs 15 billion in VSS. Simultaneously the provisioning for doubtful debts (mainly for LDI operators) is expected to taper down in coming months. In fact, going forward some of these provisions may be reversed as foreign operators take over some domestic LDI players.
Although for the next few years, Ufone is expected to drive PTCL's growth the company's other strategic plans also seem to have a promising future. PTCL's increasing focus on WLL, which is believed to be a close and cheap substitute for fixed line is another area of strength to capitalize upon.
The active entry of PTCL into broadband services is also promising, where the company can reap large benefits by using its extensive communication backbone infrastructure.
Last but not least is the growing leased line business of PTCL that is expected to grow reasonably well as the demand for online data reporting increases.
To further develop PTCL's backbone infrastructure, capacity expansion of SMW3 and SMW4 submarine cables and possibility of alternate submarine cable is also being considered.