Mar 03 - 09, 2008

Pakistan Telecommunication Company Limited (PTCL) is going through major restructuring and apparently focus seems to be shifting away from fixed lines to value added services. Following of this practice is frustrating fixed lines users and forcing the subscribers to opt for cellular technology. Substantial investment in technology is adding to financial cost and depreciation but the latest jolt is VSS, leading to PTCL's huge losses during first half of the current financial year. The biggest loser is the Government of Pakistan having substantial stake in the company.

Until 2003, PTCL was the most dominant player in each segment of Pakistanís telecom sector. Over the years Pakistan Telecom Authority issued 38 licenses in fixed local loop segment stands, out of which 12 are operational while others are not fully operational. The local loop segment has witnessed higher competition over the last 4 years and large number of subscribers has switched over from local loop segment to cellular segment because of low tariff and new innovative services and value added services offered by the cellular companies. Low number of operators is also due to a number of reasons that include higher cost of interconnection, transit exchanges and taxes on import of communication equipment.

Despite this trend PTCL has succeeded in maintaining lion's share in the fixed line segment. It enjoyed 97.29 per cent of market share in 2007. Out of 4.8 million subscribers, the PTCL had 4.67 million subscribers followed by NTC having market share of 2.07 per cent with 0.09 million subscribers and WorldCall has only 10,748 subscribers.

The fixed teledensity in Pakistan, which has been increasing since 2001, became stagnant in 2004 and then started falling in 2007. PTCL is constantly loosing market share in fixed line segment but still it is beneficial for PTCL because customers have started to switch to wire less local loop segment. While looking at the province wise teledensity, Sindh is leading with 3.4 per cent teledensity followed by Punjab with 3.2 per cent, NWFP 2.4 per cent and the lowest teledensity of 1.6 per cent is in Balochistan.

Wire less Local loop service was introduced in Pakistan after deregulation of local loop sector in 2004. Out of 17 WLL companies five companies (PTCL, World call, Telecard, Great Bear and Burraq) are fully operational. WLL network plays a very important role in the growth of fixed line telephony, especially in the rural areas. The recent development is the introduction of WiMax technology by WLL operators, which will make high quality broadband data and internet services available to the masses.

The subscribers of wireless segment of local loop service are continuously increasing since 2004 and at the end of October 2007 the total subscribers were 2.02 million. Among the WLL providers, PTCL has 59 per cent market share followed by Telecard and WorldCall with 22 per cent and 17 per cent respectively. Wireless teledensity was 1.1 per cent in 2007 having grown from 0.66 per cent in 2006. WLL teledensity in total teledensity was negligible when the service started in 2004, but at the end of 2007 the contribution of WLL was 2.5 per cent of total teledensity. The growth of WLL is expected to remain high in future but depends mainly on the response of rural market to WLL and cellular networks.

The long distance and international segment has been improved after the deregulation of Pakistanís telecom sector in 2004. PTA has awarded 14 licenses for long distance and international services till 2007. Out of 14 companies 13 are operational. Wateen Telecom, which has its network across the country, now claims to have the largest WiMax network.

With increasing business and large shift in traffic pattern, the LDI operator revenue has also increased. Profitability of the companies decreased in Fy07 due to increase in competition and low tariff rate but higher turn over.

After the end of PTCL monopoly, various LDI operators have entered the market. The traffic trend in the country has also changed dramatically. The international traffic has increased significantly with the reduction in tariff due to the large variety of calling cards.

Overall the international incoming traffic in the country has shown an increase of 54 per cent in 2007, whereas in 2006 the increase was 118 per cent. PTCL has major share in the total incoming traffic with 2631 million minutes, translating into a market share of 53 per cent while rest of the operators has 2219 million minutes. Callmate, Wateen, and Burraq have seen a significant increase in total incoming traffic while DVcom, Redtone and WorldCall experienced negative growth in the year 2007.


PTCL announced its half yearly accounts posting losses of Rs 9,542 million (Rs 1.87/sh). As per initial information this is due to one-time cost of VSS. It is also believed that PTCL has charged only Rs15 billion of the total VSS cost of Rs 40 billion.

According to the reports, PTCL has accepted applications of 28,423 employees with total cost of VSS estimated at Rs 35 billion, which was subsequently raised to Rs 40 billion due to some non-cash expenses. There is still lack of clarity on the extent of cost sharing by the Government of Pakistan. There is a possibility of reversal of some of PTCL's VSS cost if the government agrees to share more cost, but chances of this appear low.

Those who have objected privatization of PTCL say, "Pakistan has not witnessed the much talked about charisma of Etisalat, which charges about Rs 3 billion as technical fee. What may be good for other countries may not suit Pakistan at all. People of this country are still hooked to fixed lines. In many countries telephone companies do not charge line rent but PTCL charges an exorbitant fee, despite the fact that phones remain out of order for days and months. Privatization of public sector utilities should also have helped in bringing down cost and improving service standard but PTCL subscribers do not foresee this in the near future."