TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Oct 05 - 11, 2009

Pakistan Telecommunication Company Limited that claims for being carrier of the carriers registered a phenomenal profit for the year ended June 2009. The revenue decline in the financial year (2008-09) did not affect profitability of the only landline telecommunication service provider in Pakistan. It is however an ordinary development for telecom experts belonging to the company. According to general statements, Pakistan Telecommunication Company Limited (PTCL) earned profits in the face of stiff competition posed by telecom rivals because of the insurmountable specialty of the company on network and infrastructure development across the country.

PTCL's profit after tax (net) stood at Rs9.15 billion as on June 2009 while in the previous year it sustained a heavy loss of Rs2.82 billion. The company earned profits for the year ended June 30 despite decline in its revenue 11 percent to Rs59 billion over Rs66 billion in financial 2007-08. Industry analysts believe that reduction in volume of severance pays last year left a buffer for profit to escalate.

Ali Qadir Jilani executive vice president corporate communications PTCL says impact of voluntary separation scheme (VSS) was pronounced with full enormity during FY08 than in last year (2008-09), therefore making this a reason for up in profits is not a realistic approach. It is relevant to recall that UAE-based management of the telecom giant announced voluntary separation scheme after buyout to reduce cost on business operation of workforce, which was estimated at approximately 53,000 at the time of privatization deal. It was determined of augmenting competencies of staff by going in to attrition. The management put before permanent employees an option to opt for premature retirement by offering them certain compensations. While many agreed to severance pays, others did not choose this option and remained with the company. The conflict on VSS between management and bargaining agents continues with union (workers) worried about implications of layoffs and management executing curtailment in operational costs.

VSS is not an inexpensive decision either for the management of PTCL since it causes considerable costs to the telecom service provider. The cost of VSS however was low in the period under review. It does make sense certainly then why PTCL made profits for the year just passed. It expensed out only Rs23 billion on account of the scheme in FY09 while it coughed up around Rs90 billion in the previous year. UAE-based Emirates Telecommunication Corporation, known as Etisalat, bought 26 percent shares of PTCL from the government of Pakistan in April 2006 under a 2.6 billion US dollars deal. Following privatization, the management decided to make operational expenses in shape and placed human resource on the anvil to begin with. While it is increasing bonuses and allowances, unpopular retirement options overshadow workers welfare prone programmes.

From the beginning, the restructuring has never been easy since the management confronted with strong protests from employees against VSS, who termed this forced layoffs in the disguise exercised to downsize workforce. Apart from this perspective, this load shedding made the company to redeem falling subscriptions of fixed lines, a pioneer business segment. PTCL is the only provider of wired telephony services to widespread areas in the country. Fixed line has been its signature service for years before its extension of product lines to level its services with prolific competitors offering multiple telecom services.

Overwhelming entry of private and foreign telecom companies that offer telephone and internet services with customer convenience and price benefits might be one of the reasons of dropping market shares of fixed line. Cellular services are giving tough time to retrieval of market share of fixed line despite the fact that PTCL is offering incentives to win back lost market share. Rate of fixed line subscription declined following arrival of multiple substitutes to fixed line. Popular use of cellular phones and WLL increased the rate with which fixed line users unsubscribed. PTCL has recently introduced programs to get back market share. Waiver of Rs500 restoration charges on landline is one of such bets. Double up unlimited package, which promises dual services of telephony and internet may be another smart strategy by which customer traffics toward fixed line can rev up. Activation of this service requires fixed line.

The vigorous marketing approach is an indication of the company's covert desire to make fixed line main revenue earner. Ali Jilani is not sure of prospective growth rate of landline subscription. However, "We will keep on increasing expenditures on upgradation and improvement of infrastructure and network," he tells this correspondent adding the impact of last year's investment remains to be seen. He says investment on network would dispense financial outcomes this year.

PTCL has already an edge over other telecom service providers in terms of its widespread network. It has laid 10,400 km fiber optics network connecting over 840 cities and towns and installed over one million lines. Broadband has become a prime revenue generator for the company for last couple of months. The market response to the internet service launched by the company is manifestation of customers' unshared loyalty to pioneer telecom service provider, which for long enjoyed monopoly in telecom sector and long history to have cultivated deep-roots. A lengthy period of existence and state support strengthened the technological dominancy of the company in the market. New companies have to make huge investments to break into premier zone of PTCL, broadband of which is also acquiring clienteles rapidly and in a short span broadband clouded 150 cities and towns across Pakistan and its customers exceeded 150,000. In wireless local loops and wireless internet services, however, there has emerged a healthy market competition bringing improvement in customer services. Still, PTCL claims to be largest CDMA operator with 1.25 million V-fone customers covering area of 10,000 urban and rural areas.



HP has expanded its networking portfolio with new HP ProCurve offerings integrated with HP BladeSystem infrastructure solutions that enable customers to increase performance, security and management of both physical and virtual environments.

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