PAKISTAN TELECOMMUNICATION COMPANY LIMITED (PTCL)
Mar 03 - 09, 2008
Pakistan Telecommunication Corporation (PTC) was formed in 1991, taking over all the functions and operations previously performed by the Pakistan Telephone and Telegraph Department, which had been responsible for providing telecom services since 1962. In mid 2005, the Government of Pakistan sold 26% strategic stake to Etisalat with total cost of $ 2.59 billion, converted PTC into PTCL.
PTCL offers national and international long distance and value-added services to its customers. PTCL also operates the country's largest fiber optic backbone network, digital exchanges and international gateways and provides services throughout Pakistan. She is the market leader in terms of share in fixed line segment. Besides Fixed Line Business, she offers cellular services in the country, Pakistan Telecom Mobile Limited under the brand name of Ufone, which is the second-largest player in the cellular market of six operators covering with cellular density of 16mn and above customers. She also has 100% stake in Paknet, an internet service provider.
She is worth Rs.155bn with paid up capital of Rs51bn. Her total outstanding shares are 5.1mn with Market Capitalization stands at Rs.216bn as on 28 Feb 08.
PTCL posted total revenue of Rs. 29 billion for the 1H-FY08 as against Rs.32.7 billion in the corresponding period last year, a decline by 11.34%. The major reasons for the decline are reduction in tariff of call charges, competition and impacts of growth in cellular segment resulted in slow growth in Fixed Line Segment. There was also an increase in operating cost by 101.5% to Rs 45.5 billion in 1H-FY08 as against Rs 22.6 billion over same period last year, mainly due to prudent provisions for doubtful debts and re-engineering in operations and customer services, which translate into gross operating losses. Company's non- operating income has shown declining trend during 1H-08 to Rs2.4 bln from Rs2.8 bln in the corresponding period last year showing decline of 15%. Due to higher operating cost and lesser non-operating income, her EBIT stood at negative Rs 14 bln in 1H-FY08 as compared to profit of Rs 13 bln in same period last year. The 208% decline in EBIT is due to prudent provisioning of bad debts and VSS Scheme, the restructuring move, whereby PTCL has laid off about almost 50% of her workforce.
Her financial cost has been increasing due to increasing working capital needs. She reported Rs 3.2 mln financial cost in the 1H-FY08 as against Rs 1.4 mln same period last year showing a growth of 118%. She has substantial receivables resulting in need for more working capital and to meet restructuring cost, are the reasons of increasing financial cost. She has made reversal of Rs 4.85bln in provision of taxation in 1H-FY08 as against Rs 4.6 bln provision of taxation made last year. It aroused due to adjustments made in taxation. She reported a net loss of Rs 9.54 bln in the 1H-FY08 due to above stated reasons, which has translated into negative EPS of Rs 1.87 as against Rs 1.64 in same period last year. It is worth mentioning here that, had provision for taxation not been adjusted she would have been in net losses of Rs 14.5 bln just in 6 months and even lower EPS. It is assumed that the restructuring would result in better earnings in future.
REVAMPING THE IMAGE
Before privatization lack of vision, inappropriate policies, bureaucratic hurdles, External say in management and monopoly status, where the customer were given a lowest priority, did not allow company to grow and lead her in new corporate culture and mind set.
After privatization efficient people from private sector were inducted into the upper management to revamp the company image. Now PTCL management is in the process of revamping the organization for improving business processes, operational efficiency and competitiveness. Modern tools of management, codes of procedure, automation and control are being implemented under an enterprise resource planning system based on international best practices. Looking forward, Company foresees some stabilization despite continuation of intense competition in the telecom market with further pressure on fixed-line sector.
Currently company is undergoing major restructuring whereby she has laid off almost 50% of its workforce under Voluntary Separation Scheme, which is one of the major reasons of losses at the moment. But company has strategic vision; she is bearing huge losses at this point in time and striving to change its positioning in the market. It is expected that the company will emerge as major player in the other segments of telecom, by virtue of its size, infrastructure and outreach.
Pakistan's telecom sector has been witnessing phenomenal growth due to favorable regulatory system implementation in the sector, which has attracted tremendous foreign investment. As a result Pakistan teledensity has increased to 53.4% in Jan-08 from 4.31% in FY03 showing an astounding penetration, but still huge market is untapped which is evident from entrance of CHINA MOBILE and Singtel.
By virtue of her size, diversified range of products and services, (PTCL) is expected to remain a major player in the telecom sector. Since she has gigantic network, she has started concentrating on different segments of telecom like WLL, Payphone and internet which have been growing. PTCL's Active entry of PTCL in Broad Band services, restructuring for operational efficiency and making customer as their highest priority and, last not least, continuously coming with innovative packages and products which foretell promising future of PTCL. All these factors will certainly minimize the cost and improve company's profitability.
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