Strategic Management Report on Wateen Telecom Ltd.

Program: MBA/M.PHILL

Due Date:28-April-2011

Submitted To:
Dr. Muhammad Imtiaz Subhani
(Iqra University Researcher Head)

Uzma Basheer Ghaus

Submitted By:
Syed Adnan Kaleem (8631) Muhammad Farhan Farhat (9312)

ACKNOWLEDGEMENT
Through this, we would like to thanks Almighty ALLAH, The most merciful, for providing us the skills and strength to fulfill a task, which could not have seen and achieved without His blessings. Now, I can move forward but with great thanks and appreciation to those who has supported and encouraged me throughout my report. This report would not have seen its completion without the guidance from our senior teacher, Ms Uzma Basheer. This report reflects the knowledge, which we have gained from our valuable teacher. We acknowledge with deep gratitude the invaluable help extended to us by, and Sir Ehsan Durrani (Senior Teacher) and Special thanks to Dr. Muhammad Imtiaz Subhani (Iqra University Researcher Head), without his co-operation it was not possible for us to complete our report. He guided and helped us and specially the sympathetic attitude, which inspired us for hard work. Finally, I would like to thank all those people who helped me throughout this report.

Table of Contents
Executive Summary: Organizational Chart Coverage Core Values & Ethics VISION Statement MISSION Statement Product portfolio Telecom Industry Overview Broadband Penetration Subscriber Mix Broadband tariff External Analysis Political & Legal Economic Social Demographics Technology Competitive Edge of Wateen SWOT Analysis Porter Five Forces Model Rivalry among competing firms; Potential Entry of New Entrant; Potential development of Substitute product; Bargaining power of Suppliers; Bargaining power of Consumers; PORTERS FIVE FORCES MODEL External Factor Evaluation Matrix (EFE) Competitive Profile Matrix (CPM) INTERNAL ANALYSIS Marketing
3

Page
5 5 6 7 7 7 8 9 10 11 13 15 15 16 18 19 20 20 21 22 22 22 23 23 23 24 28 30 31 31

Management Financial Analysis Internal Factor Evaluation Matrix (IFE) TOWS Matrix SPACE Matrix INTERNAL EXTERNAL MATRIX BCG Matrix The Grand Strategy Evaluation of Strategies from Matrices QSPM Matrix Lower Price Improving or Development New & Innovative Product Market Development or Finding or Searching New Market Action Plan Marketing plan Production plan Financial plan R&D Plan MIS plan Projected plan for 5 years Conclusion

32 34 37 38 41 43 44 45 46 47 48 49 49 50 50 50 50 51 51 52 54

Executive Summary Wateen Telecom Limited provides international voice retail and wholesale communication services to carrier, corporate, and individual customers in Pakistan. It offers various networking services, such as WiMAX, a wireless broadband access; direct to home television; Long-Haul OFC network; metro OFC network for high bandwidth connectivity in various cities; and hybrid fiber coaxial network, as well as VSAT products and solutions in support of various applications, such as carrier class telephony networks; broadband, Internet, and multimedia access; corporate enterprise private networks, including banking; rural telephony public network extensions; government and military networks; and GSM and cellular applications. The company also sells and deploys telecom equipment, as well as provides system integration services; and offers international routing and termination of direct dial telephony traffic via voice grade switched circuits to international carriers. Wateen Telecom Limited operates an infrastructure of optic fiber network spanning approximately 10,000 kilo meters. It has strategic collaboration with Wateen Multimedia (Pvt.) Limited; and a strategic alliance with Defence Housing AuthorityLahore. The company was incorporated in 2005 and is headquartered in Lahore, Pakistan. Wateen Telecom Limited is a subsidiary of Warid Telecom International, LLC.

Organizational chart

Coverage

Abbottabad Bahawalpur D.I. Khan Faisalabad Gujranwala Gujrat Hyderabad Islamabad Jhelum Karachi Lahore Multan Okara Peshawar Quetta Rawalpindi R.Y. Khan Sahiwal Sargodha Sheikhupura Sialkot Sukhur

Core Values & Ethics

Our values guide our behaviors and shine through in all our interactions with each other and our stakeholders. Respect for others We deeply value diversity in background, strengths, interests and experiences Integrity and honesty We conduct our business with uncompromising integrity Open communication We believe in nurturing positive changes in the organization and the community Customer satisfaction We strongly believe in our passion for customers, partners and technology Leadership We practice and cultivate the will to excel and taking on big challenges Synergies and strategic partnerships We value maximizing growth opportunities and stimulate atmosphere of healthy competition

VISION Statement Wateens vision is to take Pakistan into the digital revolution of the 21st century by offering complete communications and media solutions such as Telephony, Internet, Data and TV / Multimedia to the public at large based on quality, affordability, availability and reliability. To make Pakistan a regional communications hub, inter-connecting the East with the West and Central Asia to the Middle East. MISSION Statement Offer affordable communication services that cater to the needs of our customers Deliver high quality, flexible solutions that allow customers savings, choice and enhanced efficiency Make Broadband Pakistan a reality Achieve maximum customer satisfaction at all levels Provide innovative, efficient and creative solutions
7

Product portfolio

Wateen was launched in a fragmented and new market, leveraged by its infrastructure as the unique selling proposition. The infrastructure comprised end-to-end consumer solutions ranging from triple play for households (Voice, Internet &TV) and targeted corporate solutions across all businesses and catering to all connectivity requirements. Wateen offer a unique product mix allowing depth and breadth in the product portfolio to ensure that Wateen dont just cater for customers needs but become part of the customers life.

WiMAX Metro Fiber Managed Capacity DPLC / IPLC & IP-transit VSAT [Very Small Aperture Terminal] Co-location / Tele-Housing Broadband Internet Telephony Consumer Calling card / calling account Content &Media Wateen brings it all under one roof as a one-stop-shop for world class entertainment. Under this umbrella, Wateen offers Analogue and Digital TV, Online Gaming, Infotainment Portal and many other first of its kind entertainment products which are mentioned below: Infotainment portal Wateens infotainment portal provides the most sought after information on the Internet. Online Gaming Wateens Online Gaming (WOG) targets avid gamers through dedicated servers, and casual market through a comprehensive web gaming portal.

Telecom Industry Overview The Information and Communication Technology industry around the globe has evolved and matured with an unsurpassed pace of growth and its diffusion has been exceptionally smooth. The mandate of World Summit on Information Society WSlS) that more than half of worlds inhabitants will have access to ICTs within their reach by 2015W has already been met. The dynamism of fixed and wireless broadband now becomes a deciding factor for increasing the broadband proliferation in any part of the world which would bring a lot more gains that what mobile communications had offered us at the start of the new millennium. Therefore a large number of countries are considering wireless broadband to overcome access gap, whereas Nordic countries vigorously expanded broadband usage on the basis of fixed broadband connection in 2002. Government policies also play pivotal role in proliferation of broadband. To this end investor friendly policies arc formulated to facilitate broadband rollout through soft taxation regimes, competitive market structures and fiscal incentives that result in giving stimulus for growth to the local market. Pakistan experienced a decade of exceptionally high telecom growth both in terms of technologies and accessibility, however, this growth mostly remained limited to voice only up till recently. It has been over 10 years now that Pakistan is connected to the World Wide Web however, a negligible number of people have the opportunity to enjoy this facility. The basic email and internet services that were introduced in Pakistan in 1998 were taken over by broadband services in the year 2000 when World Call introduced the first ever high speed internet through Hybrid Fiber-Coaxial HFC followed by DSL in 2002. With rapid advancement in technologies latest developments kept pouring into the country compelling the Government to revise and reform broadband friendly policy framework. As a result Pakistan received and implemented its first ever broadband policy in 2004 with optimistic targets for five years. It was the same time when Pakistan had entered the stage of telecom sector liberalization. It was expected that Governments enhanced focus on broadband and telecom deregulation would have synergy effect on broadband proliferation in the country. However, contrary to the expectations the broadband growth did not meet overwhelming results. There are number of economic and technical factors attached to it which include low literacy rate, down beat, absence of computers and allied equipment, inaccessibility of service, non availability of local content and very little
9

awareness of the ICT innovation. As recent as 2008 the broadband was available only in three metropolitan cities of the country. Today Pakistan is standing at the verge of entering broadband revolution that will place our nation on the road to ICT revolution with the rest of the world. There are over 0.9 million broadband subscribers in Pakistan with three years average growth rate of over 150%. According to Point Topics (a renowned international broadband research company) Global Broadband Report for 4th quarter 2009, Pakistan stands among the top ten countries for annual Broadband subscription growth. Similarly a global Broadband study was carried out by University of Oxford in September 2009, sponsored by Cisco which has ranked Pakistan at 60th position ahead of India and Indonesia which were given 62nd and 63 positions respectively. Broadband Penetration Broadband penetration in Pakistan today stands at 0.55% showing an average growth rate of 150% per year over the last three years. The broadband Broad band Penetration kicked off in 2008 when the Government took some major initiatives for its launch. Although there exists a colossal demand and supply barrier with large parts sans access to the services, Pakistan has not received the kind of investment that could coax robust broadband penetration. This was due to the fact that the worlds strongest economics face a crippling financial situation that has been trickling down over the years in to a gargantuan crisis of demand failure. On a positive note, broadband density verges improvement. If we look at the growth in penetration it is very impressive and stands at over 100% in the reported year

10

Subscriber Mix Broadband subscriber growth in Pakistan has truly been an amazing phenomenon over the Last few years. From a handful of subscribers in 2005 to almost a million by the end of FY 2009-10, broadband has transformed from a business luxury to a household necessity. People from all walks of life, professionals, students, academicians, business executives and corporate giants, all are at an equal footing to avail broadband privileges.

Broadband in Pakistan passed 900.648 subscriber marks at the end of FY 2009-10 as compared to 413.809 at the end of FY 2008-09. The astounding growth rate of over l00% is constantly being sustained by the industry for three consecutive years with 118% being the latest growth rate figure. A total of 486.839 new subscribers have been registered by the broadband companies during the FY 2009- 10, the highest ever. The continuous rise in the subscriber figure further consolidates the opinion that broadband will be The Next Big Thing in the Pakistans telecom market. Among the major players, PTCL is the biggest operator with 474.387 subscribers and a 53% market share combining both of its DSL and EvDO services. Wateen is the main competitor of PTCL with 188,725 subscribers and 21% market share. World Call is the third biggest company with 97,280 subscribers and an 11% market share. Wi-Tribe which started its services about a year ago has stepped into fourth spot with 51,912 subscribers arid 6% market share. Link Dot Net has 34.8 18 subscribers and a 4% market share. Figure depicts the rise of broadband players.

11

It is evident that Wi-Tribe is by far the fastest growing broadband operator in the country with a staggering 18 14% growth

Broadband is one of the most innovative telecommunication media, capable of carrying, heavy applications and multi -services delivery. The technological and economical impact of broadband especially in the context of ICT access has instigated policy makers and strategists for new paradigm to dwell upon. Exploring newest technologies and facilitating the emergence of this platform is among the main targets and goals of nations around the world. PTA has been keeping a close eye on these global developments and maintains a balanced approach towards broadband proliferation. On one hand, it assists the new entrants by providing technology-neutral license and negligible entry level fees while on the other hand keeps the companies on their toes in terms of quality of service and customer assistance. Pakistan stands out as among the few countries in the world where multiple Latest technologies exist for both wired and wireless media. The current rate and 49,200 net additions. Wateen holds the second spot with 158% growth along with 115.747 new subscribers during FY 2009 10. PTCL despite holding highest share in the market has the third highest growth rate at 129% and highest net new additions of 267,594 customers. WorldCaIl registered a 112% growth rate with 51,501 new subscribers during the FY 2009- 10.

12

It is evident from Figurc-24 that wireless technologies WiMAX and EvDO) arc clearly gaining on the market share like WiMax has total share of 28.6% and EvDOs share is 12.3%. The DSL, I-IFC, FT[H arc rapidly losing their share where DSL lost its share of 64% to 53% in one year. The main reason behind this trend is the deteriorating condition of fixed line infrastructure and poor quality of services. Although the entry cost of wireless broadband is higher, customers prefer to go for wireless media due to its robust and newly developed infrastructure. This trend is in total contrast with the global situation where DSL dominates the market Broadband tariff Broadband proliferation, like any other emerging phenomenon, has certain attributes/constraints which affect its penetration potential. Among the prime factors is the cost of service which is perhaps the most influential one. Cost of service has been the main reason behind sluggish growth of broadband till 2007 when market became feasible for private investors. Therefore, several new companies like Watecn, Link dot Net, Link Direct. Wi-Tribe etc launched broadband services mostly using wireless technology. Since then, a constant decline in monthly charges has been observed as a result of competition in the market. The costly Customer Premises Equipment (CPE) charges especially in the case of Wireless services remained a hindrance for general people to rush into the broadband arena. However, wireless broadband service providers are gradually bringing down the entry level charges (installation + CPE + security deposit) to a minimum possible. PTA carried out a benchmark study on broadband tariffs where level of broadband tariffs prevailing in Pakistan against other SAARC countries
13

were compared to identify the areas where further improvements can be made for the benefit of operators and users. The study concludes that Pakistans broadband tariffs are very competitive as compared to those of other regions. This is a good sign for the telecom market of Pakistan where low per capita income impedes the major portion of population to subscribe to broadband services.

14

External Analysis Political & Legal The last one decade has seen witnessed more concentrated form of political turmoil and instability than ever before witnessed. Part of the reason is access to information and the media boom of the 90s and early part of this millennium. But that is just one reason, the major reason being that political forces used media and information channels to shape political debates and provide a frame of reference under which the discussions was carried out. Media on the other hand also used it substantial power to influence those shaping the political landscape of the globe. Control over information has become a critical success factor in the political arena today and while stakes are high, the battle is immense. Governments and the opposition both have identified the importance of channels of mass communication and have invested heavily to propagate their perspectives. Looking at the macro environment from the national and regional level perspective, the last couple of years have seen a lot of turbulence in the political arena. This as a result has translated into different measures from the government from setting curbs on the media, imposing watchdogs like PEMRA, to declaring freedom of press and the right to freedom of expression. Under the 1973 Constitution, Fundamental Rights include security of person, safeguards as to arrest and detention, prohibition of slavery and forced labor, freedom of movement, freedom of association, freedom of speech, freedom to profess religion and safeguards to religious institutions, non-discrimination in respect of access to public places and in service, preservation of language, script and culture. The judiciary enjoys full supremacy over the other organs of the state. When discussing the impact of legal structures and regulatory bodies on the Telecommunication sector; we can observe a spectrum where on one hand the government gave complete freedom for Foreign Investment; while on the other hand the government curtailed basic civil rights, imposed restrictions on un-license frequency bands, illegal internet gateways and banned certain news channels. These controls were exercised through various instruments like regulations of PEMRA, PTA, national security clauses in the constitution, and imposition of emergency. Telecom sector flourished after General Musharraf seized power in a military coup in 1999, the president publicly encouraging Telecom Industry. This free hand brings a lot of froing
15

investment. When President Pervez Musharraf suspended Pakistan's constitution early in November 2007, he also clamped down on independent news reporting and later telecom business in Pakistan stop flourishing. Regulations were not imposed properly on incoming foreign investment. As soon as the emergency imposed by President Musharraf, Foreign investment was halted due to which there were massive cut layoffs were observed. On the other hand PTCL under the government hand, get fully activated and started PTCL Broadband DSL service. This increases the competition in a negative trend. Big telecoms like Wateen, Mobilink and other started to cut down there profit margins, layoffs and stiff targets were imposed on sales team.

Economic With a per capita GDP of about $2600 in 2006, the World Bank considers Pakistan a developing country. No more than 48.7% of adults are literate, and life expectancy is about 63 years. The population, currently about 165 million, is growing at 2.09% annually. The Gross Domestic Product in the country was $106.3 billion (est. in 2007) with an annual growth rate of 6.4 percent in the same year. The following graph shows the annual average growth rate of the GDP in the economy.

Source: http://www.indexmundi.com/pakistan/gdp_real_growth_rate.html

16

During FY 2009- 10, Telecom sector continued to actively contribute to the national exchequer through a steady state of revenue generation, subscriber growth and boost in tele density despite difficult economic situation in the country. Telecom companies invested heavily in aggressive marketing techniques and infrastructural expansion in far flung areas of Pakistan. USF contribution for undertaking these investments lent a helpful hand in keeping the telecom developments consistent. PTAs contribution has facilitated a smooth growth of the sector. The Authority has approached the concerned quarters of the government to reduce the tax burden on the industry to ensure confidence building of the investors in the telecom sector. Telecom Sector revenues improved steadily in the FY 2009- 10 and 6.5% growth rate was witnessed. Total telecom sector revenues reached Rs. 357.7 billion in the FY 2009- 10 compared to Rs. 333 billion the previous year. Cellular Mobile sector remained in the fore-front of revenue generation. Its revenue increased by about 11% in the current year from Rs.212.423 million last year to Rs. 236,046 million in the FY 2009 10. Its share in total telecom revenue stands at about 70% in the FY 2009-10 compared to 64% in the previous year. During the past 5 years, telecom sector invested over USS 11 billion in total in all segments of the sector and created millions of job opportunities in the country. Since the telecom sector is heading towards maturity, investment is also contracting with time. In the FY 2009-10, telecom sector invested over USS 1.13 billion in total which is about 508 million less than the previous year. Cellular mobile share in total stake remained about 80% with coverage for infrastructural expansion of over US$ 908 million extended to all regions of Pakistan. Telecom sector attracted over USS 6.3 billion FDI in the last 5 years, which is an encouraging response by the investors to Pakistan telecom sector policies. UAE, Norway and USA remained the major sources for FDI during last five years. Out of total US$ 6.3 billion EDI in the sector, UAE invested over US$2 billion and its share was more than 32% while USA and Norway brought FDI worth USS 890 million and USS 639 million respectively. Share in telecom FDI of both of these countries comes out 24%. China is another source of FDI for telecom sector with contribution of USS 582 million in last five years and rest of the FDI brought by other countries including Singapore, Netherlands, United Kingdom and Hong Kong etc.

17

After September 11, 2001, and Pakistan's proclaimed commitment to fighting terror, many international sanctions, particularly those imposed by the United States, were lifted. Pakistan's economic prospects began to increase significantly due to unprecedented inflows of foreign assistance at the end of 2001. Foreign exchange reserves and exports grew to record levels after a sharp decline. The International Monetary Fund lauded Pakistan for its commitment in meeting lender requirements for a $1.3 billion IMF Poverty Reduction and Growth Facility loan, which it completed in 2004, forgoing the final permitted tranche. U.S. assistance has played a key role in moving Pakistan's economy from the brink of collapse to setting record high levels of foreign reserves and exports, dramatically lowering levels of solid debt. A major part of the $3 billion five-year U.S. assistance package to address Pakistan's long-term needs in the health and education sectors. Also, despite the earthquake in 2005, GDP growth remained strong at 6.6% in fiscal year 2005/2006. In 2002, the United States led Paris Club efforts to reschedule Pakistan's debt on generous terms, and in April 2003 the United States reduced Pakistan's bilateral official debt by $1 billion. In 2004, approximately $500 million more in bilateral debt was granted. Consumer price inflation eased slightly to an average of 8% in 2005/2006 from 9.3% in 2004/2005. Low levels of spending in the social services and high population growth have contributed to persistent poverty and unequal income distribution. Pakistan's extreme poverty and underdevelopment are key concerns, especially in rural areas.

Social The socio cultural environment of Pakistan has seen some major shifts in the recent past as Pakistan became part of the Global Village due not only to the technological advancements, but
18

also due to opening up of the economy. As we became part of a global village, there was more access to information about other cultures, religions and customs. There were imprints of this openness as our society adopted some of these while rejecting others. Celebration of events like Basant, Halloween, and Valentines Day were considered part of an alien culture but now these events have made their way into our culture as well and these are celebrated by the young with zeal and fervor. This can be attributed to not only the media influx but also awareness, understanding of rights and political freedom. Over the past few years, there has been this immense drive to break free, to express individuality, and to create a sense of harmony and peace with other cultures and religions. The people are now more open to watching foreign channels than before. TV viewing has increased manifold with the advent of dish antenna and cable TV. Over the last few years, the Pakistani society at large has become more open to change, more understanding and has developed more capacity to accept and absorb cultural differences. It did not come as a surprise when at one of the places it was announced to celebrate Holi, the Hindu festival.

Demographics Pakistans population has been growing at a decelerating pace, from 3% in 1981 to 2% in 2004. It took almost 23 years for population growth to decline by just over one percentage point. Decline in the mortality rate owing to the elimination of epidemic diseases, improvements in health facilities, and a modest decline in the fertility rate resulted in negligible decline in population growth. About 50% of the total population falls in the age bracket of 0-19 years. In absolute terms, about 83 million people, equal to the total population of Germany, in Pakistan are below the age of 19 years. However, the decline in population growth and death rates indicate the future changes in demographics of the population. The proportion of the 0-19 age brackets will continue to decline, while the 20-39 age brackets will continue to increase. It is expected that 30% of the population will be in the age group of 20-39 by 2015. A substantial number of households run their own businesses or are selfemployed. The major businesses are import/export, manufacturing, and retail. The nature of business also varies by region. Sialkot is the major centre for leather products, sports goods, and surgical instruments, which are exported all around the world. Faisalabad is home to the textile sector, whilst the
19

major hubs of the financial and industrial activity are Lahore and Karachi. People in rural areas are mostly connected to agriculture. Recognizing the growth of the middle class, several multinationals have expanded the scope of their businesses in Pakistan. Services have also witnessed an enormous growth, offering attractive jobs and careers. IT is another sector that has raised the bar with respect to pay scales, especially in the metropolitan areas.

Technology WIMAX (Worldwide Interoperability for Microwave Access) is a telecommunication technology that provides wireless data over long distances in a variety of ways (Voice, Internet, Data and in future Multimedia). WIMAX enables users to access high speed Internet, Voice and Value Added Services (VAS).It is the next-generation of wireless technology designed to enable pervasive, high-speed mobile Internet access to the widest array of devices including notebook PCs, handsets, smartphones, and consumer electronics such as gaming devices, cameras, camcorders, music players, and more. As the fourth generation (4G) of wireless technology, WiMAX delivers low-cost, open networks and is the first all IP mobile Internet solution enabling efficient and scalable networks for data, video, and voice. As a major driver in the support and development of WiMAX, Intel has designed embedded WiMAX solutions for a variety of mobile devices supporting the future of high-speed broadband on-the-go.

Competitive Edge of Wateen: Wateen WIMAX is a true broadband solution that provides an "always on" connectivity on wireless technology. Wateen WiMAX provides customers hassle-free and immediate access to high speed Internet and Voice services simultaneously. WIMAX is an internationally recognized standard for wireless broadband connectivity and Wateen is proud to have commercially launched the first 802.16e compliant network in the world and usher Broadband in Pakistan so that people can enjoy revolutionary, affordable broadband communication and media services.

20

SWOT Analysis:

Strengths Strong management Sales Own satellite HUB Metro Fiber in major cities Own Long-Haul Largest WiMAX Network Investors

Weaknesses Decreasing profit margin Lack of skilled human resource High Employee Turnover Increase in Debts Customer Retention Strategic direction Low revenue per user (ARPU) No research and development programs

Opportunity Huge market size LTE Technology Broadband services Satellite solutions IP Transit Telephony [voice/video] Increasing un employment rate Removal of international trade barriers

Threats Satellite Provisioning by Mobilink Metro Fiber by Multinet PTCLs smart TV Managed Services DSL for WiMAX Un-licensed or local fiber provider Increase in tax rate High inflation rate New competitor in broad band industry Price war Political Instability - Security issues.

21

Porter Five Forces Model: Rivalry among competing firms; Pakistans Telecommunication market has a huge rivalry among the competing firms. Wateen, Mobilink, Cybernet, Supernet, Multinet and many others are offering services at low cost which result in the huge competition among the firms. This happens due to the low FDI in recent years. Majority of the Pakistans Telecom industry is dependent on foreign investment, however due to global economic recession, Telecom industry receives low FDI which result in rivalry among the competitor and competition is fierce among the players. Wateen is offering 15% direct discount to any corporate customer which is not Wateens customer currently. Similar is the case with other players in the market. Even though many players have their individual competitive advantages (like Wateens WiMAX, own network long-haul) but due to countrys economic condition, and low FDI, competition is fierce.

Potential Entry of New Entrant; Potential entry of new entrant is high overall due to huge investment required as a setup cost. As telecom is a service industry and due to the competition because of economic and low FDI conditions, profit margins are low and big giants like Wateen and LINKdotNET suffers heavily due to initial huge investment.
22

Potential development of Substitute product; The Last Mile services in telecom industry are divided into Wired and Wireless media in which all or many of the products are offered to the market size by all providers. Hence the development of substitute product is very high. Only for WiMAX product, there are 5 competitors [Wateen, Mobilink, Cybernet, Augere, Wi-Tribe] in the market. Hence the substitute product potential is very high in the market. Bargaining power of Suppliers; Bargaining power of suppliers in Pakistans telecom industry is very low as there are many companies providing equipments, last mile solutions, vendor services & other offerings. Hence the bargaining power of supplier is low overall in this sector. Bargaining power of Consumers; Bargaining power of Consumer is Telecom sector is very high. As there are many providers and rivalry among the competitors, they offer low rates to the consumer which eventually gives the advantage to consumer while bargaining. Also due to low FDI and economic conditions, companies are taking services from Telecom providers as a in a bulk which give bargaining power to consumers.

23

PORTERS FIVE FORCES MODEL THREAT OF NEW ENTRANTS S # FACTOR S HUF A 1 Economies of scale Capital Requireme nt Expected Retaliation Lo w MUF A 2 Neutr al 3 MF A 4 HF A 5 Pakistan economy is not good High because of inflation and war on terror influences Need a lot of money for starting a business in telecom industry COMMENTS

Lo w

High

Lo w

Every company in telecom High industry already goes on to provide services in cheapest rate PTA has the authority to take High action in telecom industry in Pakistan People switch their service if they High see some benefits on other service provider

Governme nt Actions

Lo w

Brand Loyalty

Lo w

(3+5+4+4+3)/5=3.8

EXIT BARRIERS S # FACTOR S HUF A 1 Specialize d Assets Hig h MUF A 2 Neutr al 3 MF A 4 HF A 5 Own satellite HUB, Own LongHaul, and Metro Fiber in major cities COMMENTS

Low

24

Fixed cost of exit Strategic Interrelati on -ships Governme nt Barriers

Hig h Hig h

Low

We have already invest a lot of money in to our business There is no as such cooperation from competitor side

Low

Hig h

Low

investment in expensive equipment deployment

(2+2+3+2)/4=2.25

COMPETITIVE RIVALRY S# FACTORS HUF A 1 Compositio n of competitors Market Growth Rate Scope of Competitio n Degree of Differentiat ion MUF A 2 Neut ral 3 MF A 4 HF A 5 PTCL has a big market share and link dot net has a very small market share From 2009 to 2010, market growth rate is 135% COMMENTS

Equal Size

Unequal size

Slow

Fast

Global

Domestic competition is high but there is Domestic also threat from the global market Not as such special service provide to customer

Commo dity

Specialty

(4+5+4+3)/4=4

25

BARGAINING POWER OF BUYER S# FACTORS HUF A 1 Number of Buyers Threats of Backward Integration Product Supplied MUF A 2 Neut ral 3 MF A 4 HF A 5 From 2009 to 2010, number of users increased by 158.60% PTA have the authority to cancelled the telecom license Same kind of product and service provide by the competitors People can easily switch to other service provider COMMENTS

Few

Many

High

Low

Commo dity

Specialty

Switching Cost (5+2+3+2)/4=3

Low

High

BARGAINING POWER OF SUPPLIER S# FACTORS HUF A 1 Number of Important Supplier Switching cost MUF A 2 Neut ral 3 MF A 4 HF A 5 You have to take authority from PTA You cannot switch from this business to other COMMENTS

Few

Many

High

Low

26

Availability of Substitute Importance of buyer industry to supplier Suppliers product is an important input to the buyers business

Difficult

Many

Other companies also provide Broadband services

Low

High

PTA wants that people use internet services

Highly importa nt

Internet service is Less necessity for the important business

(1+1+4+4+1)/5=2.75 Overall Industry Attractiveness S# FACTORS Unfavorable < 2.5 1 2 3 4 5 Threats of New Entrants Exit Barriers Competitive Rivalry Bargaining Power of Buyer Bargaining Power of Supplier 2.25 Average 5.75 3.16 7.8 2.25 3 2.75 4 Neutral 3 Favorable > 3.5 3.8

27

External Factor Evaluation Matrix (EFE) Analysis utilizing an External Factor Evaluation Matrix can be very helpful in determining the severity of threats and opportunities to Wateen Telecom. An EFE Matrix for Wateen Telecom follows: External Factor Evaluation Matrix (EFE) Opportunities 1 Huge market size Weight Rating Score 0.08 0.07 0.05 0.06 0.05 0.08 0.03 0.03 3 3 2 2 2 3 3 3 0.24 0.21 0.1 0.12 0.1 0.24 0.09 0.09

2 Broadband services 3 Satellite solutions 4 LTE Technology 5 IP Transit 6 Telephony [voice/video] 7 increasing un employment rate 8 Removal of international trade barriers Threats 1 Satellite Provisioning by Mobilink 2 Metro Fiber by Multinet 3 PTCLs smart TV 4 Managed Services 5 DSL for WiMAX 6 Un-licensed or local fiber provider 7 increase in tax rate 8 high inflation rate 9 new compititor in broad band industry 10 price war 11 Political Instability - Security issues. Total:

Weight Rating Score 0.05 0.08 0.07 0.04 0.02 0.02 0.04 0.05 0.05 0.08 0.05 1 2 3 3 3 1 3 2 4 3 4 4 0.1 0.24 0.21 0.12 0.02 0.06 0.08 0.2 0.15 0.32 0.2 2.89

28

The matrix above summarizes and estimates the external factors that give a considerate view of how effective the companys strategies are used in the capitalization of their opportunities and disclose the point of threats that are active. The weights are set between 0.0 and 1.0 depending on its level of importance depending on how well Wateen responds to the above factors considering its current objectives and strategies. The total weighted score of this matrix reveals that it has a normal score of 2.89 which is higher than norms.

29

The competitive profile matrix for Wateen categorizes the competitors such as PTCL and World Call. Companies are then evaluated on the basis of significant success factors of the Telecom industry and the success factors are weighed and the ratings pass on to the strengths and weaknesses by 4 being the major strength, to 1 for major weaknesses.

30

INTERNAL ANALYSIS Marketing Wateen having world largest WiMAX service provider with 25+ cities operational network over WiMAX, started their marketing campaign as a WiMAX provider. Though this product is marketed for Consumer customers only, however due to huge network, corporate sector also started taking the same service. The Advertising campaign was mainly for Wateen calling cards as well as for WiMAX services. The strategy for selling is as follows; Consumer Sector mainly home users or low cost tariff Corporate Sector MNC, financial sectors, ISPs, Oil & Gas sector etc.

For Consumer Sector, Wateen opted to go in print and electronic media as seen in the below ads.

31

For corporate sector, Wateen started personal and direct selling, either by calling customer directly or visiting customer, taking requirement from customers and provide tailored made solutions to the customers. Market Share

Management After years of disturbance and mismanagement within the company, Warid Telecom seems to be in safe hands after Dhabi Group announced on 8th of January the appointment of Mr. Zouhair Khaliq to serve as Executive Director and represent the Group on the boards of Warid Telecom, Wateen and Wincom, while Mr. Naeem Zamindar will hold the position as CEO of Wateen. In his media statement Chairman of Abu Dhabi group, Sheikh Nahayan Mabarak Al Nahayan said, Both Zouhair and Naeem are visionaries, and competent executives, and are highly qualified. Each will continue our Groups strong commitment to the Pakistani market and the people of Pakistan. They lead our efforts to enhance our operations and improve our organizational effectiveness. For us, at the Abu Dhabi Group these new business leaders
32

represent the next generation of senior executives whose focus will be on setting corporate strategies and policies, providing exceptional service to our customers and creating value for our shareholders in times of constant change. The decision came following the annual report released by PTA in which Warid Telecom is shown to have achieved negative growth in the year 2009-10 losing 0.9 million customers and bringing market share to 17.1% from 18.9 % in 2008-09.

Sources confirm that negative growth of the entity isnt the only reason behind management change. Serious management issues during the tenure of Mr. Pervez Shahid and Mr. Bashir Tahir caused Abu Dhabi group to face legal notices from various vendors apart from continuous declining revenue, loss of customers trust and brand image which left no other option for the top man but ask for the resignation from both the gentlemen responsible. With deteriorating performance after a successful start, Abu Dhabi group started selling its telecom operations in 2009 and 2010 on global level and managed to sell its African and Bangladeshi operations partially. After various attempts management at UAE failed to merge Pakistani operations with several interested groups including Telenor, PTCL, and CM-Pak because of alleged resistance from Parvez Shahid and Bashir Tahir.

33

Financial Analysis In the annual report published for the year 2009-2010; Wateen Telecom Limited has posted PKR 8,608 million as revenues in the year ended June 30, 2010 (FY10) with the gross margin for second half of FY10 increasing to 38% from 30% compared to the first half of FY10. Although Wateen posted PKR 1,994 million as after tax loss for FY10, this was an improvement over initially projected loss of PKR 2,071 million for the same period. Companys financial performance in FY10 has shown a positive trend marked by a positive EBITDA of 6% for second half compared to negative 3% for first half of FY10. Wateen Telecom outperformed management expectations through various cost rationalizing and consolidation initiatives aimed at lowering operational overheads. This effort has resulted in significant cost savings from initially projected. Overall, Wateen was able to cut more than PKR 700 million in operating costs which resulted in EBITDA of 4% for FY10 compared to a projected EBITDA of 0%. As a result of this positive trend; the sponsors have recently extended a support of over PKR 2,100 million to Wateen. This news has resulted in renewed investor confidence and a positive impact on the share price. Source: http://www.telecomrecorder.com/2010/10/14/wateens-performance-beats-forecast/

34

Analysis of Financial Statement

Wateen
2010 2009 CHAN GE % Operating Ratio Gross Profit Margin Net Profit Margin % % 25.67 (25.38) 31.17 6.02 (17.65) (521.5 6)

Worldcall
2010 2009 CHANGE % 2010

PTCL
2009 CHAN GE %

11.58 (15.37)

16.31 (5.84)

(29.01) 163.24

33.08 16.26

36.30 15.45

(8.87) 5.23

Performance return on Operating Assets Debtors' turnover Return On Equity times

% times %

(11.85) 2.44 (48.00)

6.60 5.55 21.53

(279.5 1) (56.04) (322.9 4)

(8.96) 3.70 (11.21)

(4.05) 3.97 (4.31)

121.19 (6.81) 159.94

10.54 5.62 9.32

10.45 5.50 9.21

0.81 2.11 1.19

Leverage Debt equity Time Interest Earned times times 6.06 (0.57) 4.93 3.35 22.78 (116.8 8) 1.15 (1.02) 1.01 0.03 14.53 (3,589.6 5) 0.51 36.42 0.55 16.53 (7.02) 120.25

Liqiudity Ratio Current Ratio Quick Ratio times times 0.34 0.30 0.71 0.63 (52.34) (51.77) 0.43 0.39 0.78 0.69 (44.78) (43.86) 1.51 1.37 1.50 1.36 0.19 0.88

Valuation Earnings per Share(Before Tax) Earnings per Share BOOK Value Per Share

Rs Rs Rs

(6.78) (4.43) 9.23

3.46 2.22 10.31

(295.7 9) (299.5 5) (10.49)

(1.75) (1.33) 11.86

(0.72) (0.57) 13.21

142.03 133.33 (10.24)

2.80 1.82 19.56

2.75 1.79 19.49

1.86 1.56 0.37

Historical Trends Operating Results Revenue Profit Before Tax Profit After Tax Efficiency Ratio Assets Turnover Return on Assets Return on EQUITY EARNING POWER(EAT/T.A) SG&A to Sales Sustainable Growth Rate working capital times % % % % % Rs(00 0) 0.27 (6.80) (48.00) (6.80) 19.50 (0.98) (16,098,95 8) 0.60 3.63 21.53 3.63 11.86 (1.05) (3,028,67 9) (55.54) (287.4 4) (322.9 4) (287.4 4) 64.42 (6.59) 431.55 0.34 (5.21) (11.21) (5.21) 21.78 (0.92) (4,803,26 8) 0.37 (2.15) (4.31) (2.15) 16.13 (0.81) (1,167,88 6) (7.96) 142.29 159.94 142.29 35.04 13.10 311.28 0.38 6.16 9.32 6.16 16.38 (1.20) 15,257,4 58 0.38 5.94 9.21 5.94 18.15 (2.96) 18,133,9 19 (1.39) 3.77 1.19 3.77 (9.75) (59.37) (15.86) Rs(00 0) Rs(00 0) Rs(00 0) 7,961,103 (3,091,546 ) (2,020,513 ) 15,410,1 15 1,446,82 4 927,763 (48.34) (313.6 8) (317.7 8) 7,464,40 4 (3,091,54 6) (2,020,51 3) 8,408,27 5 1,446,82 4 927,763 (11.23) (313.68) (317.78) 57,174,5 27 14,281,1 18 9,294,15 2 59,239,0 01 14,020,9 17 9,151,18 5 (3.48) 1.86 1.56

35

PROFIT AND LOSS ACCOUNT

Rupees In Thousand

2010
Revenue cost of good sold gross profit OPERATING EXP General & Admin Expenses Advertisment & Marketing Expenses Selling &Distribution Expenses Depreciation& Amortisation Expenses OTHER CHARGES OTHER INCOME FINANCE INCOME profit/(loss) before interest and tax or EBIT FINANCE COST profit/(loss) before tax or EBT INCOME TAX profit/(loss) after tax or EAT EARNING PER SHARE AVG NO.OF ODANARY SHARE in 000 b(1-div pay out ratio) TA/SALES
BALANCE SHEET ACCOUNT Rupees In Thousand

2009
15,410,115 10,607,011 4,803,104 1,810,317 198,632 17,307 946,810 189,656 41,981 2,061,675 614,851 1,446,824 519,061 927,763 2.22 417911 1.0000 1.6594

CHANGE
(7,449,012) (4,689,210) (2,759,802) 0 (278,369) (15,486) 3,179 701,689 28,936 (113,834) 134,621 (3,178,964) 1,359,406 (4,538,370) 551,972 (2,948,276) (7) 38,187

7,961,103 5,917,801 2,043,302 1,531,948 183,146 20,486 1,648,499 28,936 75,822 176,602 (1,117,289) 1,974,257 (3,091,546) 1,071,033 (2,020,513) (4.43) 456098 1.0000 3.7319

OPERATINE ASSET NET CR.SALES TRADE DEBTS Share Holders Equity Total Debts Total Assets Current Assets Quick Assets Current Liabitility

2010 17,045,929 7,559,076 3,097,982 4,209,667 25,500,725 29,710,392 8,201,388 7,353,860 24,300,346

2009 CHANGES 14,050,553 2,995,376 16,553,214 (8,994,137) 2,982,561 115,421 4,309,427 (99,760) 21,261,870 4,238,855 25,571,297 4,139,095 7,345,991 855,397 6,509,056 844,804 10,374,670 13,925,676

36

Internal Factor Evaluation Matrix (IFE) The Internal Factor Evaluation Matrix works similarly to the EFE Matrix. An IFE for Wateen Telecom follows:

Internal Factor Evaluation Matrix (IFE) Strengths 1 Strong management 2 Sales Weight Rating Score 0.08 0.1 0.03 0.04 0.04 0.04 0.05 3 3 4 3 4 3 4 0.24 0.3 0.12 0.12 0.16 0.12 0.2

3 Own satellite HUB 4 Own Long-Haul 5 Metro Fiber in major cities 6 Largest WiMAX network 7 investers Weaknesses 1 Decreasing profit margin 2 Lack of skilled human resource 3 High Employee Turnover 4 Increase in Debts 5 Customer Retention 6 Strategic direction 7 Low revenue per user (ARPU) 8 No research and development programs Total:

Weight Rating Score 0.1 0.08 0.07 0.08 0.08 0.08 0.08 0.05 1 2 2 3 2 3 2 2 1 0.2 0.16 0.21 0.16 0.24 0.16 0.16 0.05 2.6

After evaluating and analyzing the weights of strengths and weakness of the company, the total weighted score is 2.6 which slightly higher above the average score 2.50 and it clearly indicates that Wateen needs to do some significant improvements in their internal operational structure in order to achieve competency.

37

TOWS Matrix A scan of internal and external environment is important part of the strategic planning process. The companys internal strengths and weakness are related to external opportunities and threats. The analysis provides information that is helpful in matching the firms resources and capabilities to the competitive environment which operates. Strengths Strong management Sales Own satellite HUB Metro Fiber in major cities Own Long-Haul Largest WiMAX Network Investor Weaknesses Decreasing profit margin Lack of skilled human resource High Employee Turnover Increase in Debts Customer Retention Strategic direction Low revenue per user (ARPU) No research and development programs

Opportunity Huge market size LTE Technology Broadband services Satellite solutions IP Transit Telephony [voice/video] increasing un employment rate

SO Strategy 1) Having own Long-Haul and Metro-Fiber can provide reduction in cost offerings to the customer [S5:S4:O1]: Product development 2) Satellite penetration in remote areas of Pakistan and Afghanistan can provide high earning in cost and overall reduce overheads [S3:O4]: Market Penetration

WO Strategy

1) Wateen has decreasing profits and lack of skilled workforce to address huge market size [W1:W2:O1]

2) Using diversified portfolio, can retain customers and improve service quality and penetrate in triple play services [W5:O6]

38

Removal of international trade barriers 3)We can increase our sales by starting a new campaign and provide new technology ( telephony Voice/Video) [S2:O6] 4) Largest WiMAX network can provide feasible solution to cater huge market size[S6:O1] We can work on our profit margin by expending our business by providing our service to other countries [W1:O8)

Threats Satellite Provisioning by Mobilink Metro Fiber by Multinet PTCLs smart TV Managed Services DSL for WiMAX Un-licensed or local fiber provider increase in tax rate high inflation rate new compititor in broad band industry

ST Strategy

WT Strategy

1) Metro fiber can provide an edge over PTCL smart TV service [S4:T3]

1) Increase in Debts & reduced profit margin can be a threat to Smart TV applications & managed services [W1:W4:T3:T4]

2) Satellite HUB deployment and market penetration by other providers like Mobilink can be catered by taping the remote areas of Pakistan and Neighboring region of Afghanistan [S3:T1]

2) Metro fiber and managed services can be a threat to customer retention [W5:T2:T4]

3) Low strategic direction can result 3) To cater managed solutions by rivals, bundled services can be offered related to corporate solutions [S4:S5:S6:T4] in unmanaged services, Triple play and IP transits [W6:T3:T4]

39

price war 4) Use Fiber & WiMAX as a Political Instability Security issues alternate solution for regulations from PTA related to unlicensed fiber provider [S4:T6]

40

SPACE Matrix
The strategic Position and Action Evaluation (SPACE) Matrix is one of the significant techniques to recognize the type of strategy company has to choose. The matrix consists of four different areas with a specific strategy in each. The axis of the SPACE matrix represent two internal dimensions (functional strength and competitive advantage) and two external (environmental stability and industry strength) which are important in order to identify companys overall strategic position. Financial Strength (FS) Return on Investment Leverage Liquidity Working Capital Cash Flow Debitor Turnover earnings per share price earning ratio Total Competitive Advantage (CA) Market Share Product Quality Product Life Cycle Customer Loyalty Competitions capacity utilization Technological skills Control over distributors and suppliers Total 2 3 2 1 3 4 1 16 -2 -2 -4 -2 -3 -1 -3 -17 Environmental Sustainability (ES) Technological Changes Inflation rate Demand fluctuation Price bracket of competing products Entry barriers into the market Pressure from competitors Easy exit from the market Price elasticity of demand Risk involved in Business Total Industry Strength (IS) Growth possibility profit potential Financial constancy Technological knowledge Resource consumption Ease of entry into the market Productivity, capacity, utilization Total 5 5 2 5 3 4 3 27 -1 -5 -3 -2 -4 -1 -3 -4 -2 -25

FS CA ES IS

2.2857 -2.4286 -2.7778 3.8571

41

X-Axis Y axis

1.4286 -0.4921

Wateen falls on competitive profile side which means that Wateen has a major competitive advantage in a high growth industry. It can work on market penetration, market development and product development.

FS

5 CONSERVATIVE 4 3 2 1 CA -5 -4 -3 -2 -1 -1 -2 -3 DEFENSIVE -4 -5 ES COMPETITVE 1 2 3 4 5 IS AGGRESSIVE

42

INTERNAL EXTERNAL MATRIX

IFE WEIGHTED SCORE
4 STRONG 3 AVERAGE 2 Weak 1

High

EFE WEIGHTED SCORE

EFE=2.89 IFE=2.6

Medium 2

Low

The Internal-External (IE) Matrix is a strategic management contrivance that is used to analyze the strategic position of a business. The IE matrix is supported by the total weighted scores of the IFE matrix on the x-axis and the EFE matrix on the y-axis. The matrix spots an organization into nine cells and the matrix can be divided into three major sections that have dissimilar allusion. The IE matrix is almost similar to BCG matrix and it has two key dimensions including the scores in the x axis and EFE total weighted scores on the y axis. Total IFE weighted score of 2.6 falls in X axis and the Total EFE weighted score of 2.89 fall in the Y axis and both the whereas both the values are slightly above average. According to the IE matrix below, Wateen falls in the fifth cell and so as they should follow the strategy of hold and maintain. This strategy mainly focuses on both market penetration and product development

43

The BCG matrix reveals the companys market share position in the industry to the market share detained by the largest competitor in the same industry. The matrix displays the companies on a graph of the market growth vs. market share relative to competitors. The BCG Matrix is divided into four types of circumstances, the Stars, Cash Cows, Dogs and Question Marks. The following BCG Matrix shows the proportion between relative market share and industry growth rate of Wateen. With a relative market share of 0.21 and industry growth rate of 135.53 % the position lies in the first cell Question Mark which represents the strategies of market development, market penetration, product development and divestiture.

44

The Grand Strategy The GS matrix is one of the popular tools to identify and formulate alternative strategies and companies can be positioned in one of the four quadrants which represent different strategies. The following grand strategy matrix of Wateen evaluates competitive position and market growth in the current similar market industry.

Rapid Market Growth Quadrant II Quadrant I Wateen Telecom Weak Competitive Position Quadrant III Strong Competitive Position Quadrant IV

Slow Market Growth

According to the Grand Strategy Matrix, the position of Wateen Telecom lies in the first quadrant which reveals that the company has above the average competitive position among the competitive market with rapid market growth as the industry growth rate is really high. The strategies recommended are market development, market penetration, product development, forward, backward, horizontal, and related diversification.

45

Evaluation of Strategies from Matrices

By analyzing and evaluating all the matrices, the strategies more used are in all the matrices are market development, market penetration and product development. The alternative strategies developed according to the three strategies accordingly and used in the QSPM.

46

Strategic Alternative
1
lower Price (Value Chain) Market Penetration or Increase Market Shares

2
Improving or Developme nt New & Innovative Product

3
Market Developme nt or Finding or Searching New Market

QSPM Matrix
key factors
1 2 3 4 5 6 7 Strengths Strong management Sales Own satellite HUB Own Long-Haul Metro Fiber in major cities Largest WiMAX network investors Weaknesses Decreasing profit margin Lack of skilled human resource High Employee Turnover Increase in Debts Customer Retention Strategic direction Low revenue per user (ARPU) No research and development programs Total: Opportunities Huge market size Broadband services Satellite solutions LTE Technology IP Transit Telephony [voice/video] increasing un employment rate

Weight

AS

TAS

AS

TAS

AS

TAS

1 2 3 4 5 6 7 8

0.08 3 0.1 4 0.03 4 0.04 3 0.04 3 0.04 3 0.05 4 Weig Rati ht ng 0.1 3 0.08 1 0.07 2 0.08 3 0.08 3 0.08 3 0.08 3 0.05 1 1 Weig Rati ht ng 0.08 3 0.07 0 0.05 0 0.06 1 0.05 0 0.08 0 0.03 0
47

0.24 4 0.4 3 0.12 3 0.12 3 0.12 3 0.12 3 0.2 3 Sco Rati re ng 0.3 3 0.08 3 0.14 3 0.24 1 0.24 2 0.24 2 0.24 1 0.05 4 2.85 Sco Rati re ng 0.24 2 0 1 0 1 0.06 3 0 3 0 3 0 0

0.32 4 0.3 3 0.09 1 0.12 1 0.12 2 0.12 3 0.15 3 Sco Rati re ng 0.3 3 0.24 2 0.21 2 0.08 3 0.16 2 0.16 2 0.08 1 0.2 0 2.65 Sco Rati re ng 0.16 3 0.07 2 0.05 2 0.18 2 0.15 2 0.24 2 0 0

0.32 0.3 0.03 0.04 0.08 0.12 0.15 Sco re 0.3 0.16 0.14 0.24 0.16 0.16 0.08 0 2.28 Sco re 0.24 0.14 0.1 0.12 0.1 0.16 0

1 2 3 4 5 6 7

Removal of international 8 trade barriers Threats Satellite Provisioning by Mobilink Metro Fiber by Multinet PTCLs smart TV Managed Services DSL for WiMAX Un-licensed or local fiber provider increase in tax rate high inflation rate new competitor in broad band industry price war Political Instability - Security issues. Total: Total:

0.03 0 0 0 0 0 0 Weig Rati Sco Rati Sco Rati Sco ht ng re ng re ng re 0.05 0.08 0.07 0.04 0.02 0.02 0.04 0.05 0.05 0.08 0.05 1 2 3 3 1 2 0.1 0.24 0.21 0.04 0.04 1 2 1 2 1 0 0 0 0.05 0.16 0.07 0.08 0.02 0 0 0 2 1 1 1 2 0.1 0.08 0.07 0.04 0.04

1 2 3 4 5 6 7 8 9 10 11

0 0 0 0 3 0.15 0 0 4 0.32 0 0 1.4 4.25

0 0 0 0 3 0.15 3 0.15 2 0.16 0 0 1.65 3.93

3 0.15 0 0 0 0 1.38 4.03

Lower Price For using this strategy, we have to reduce our cost which decreases our profit margin like general and admin expense, interest expense and operating expense. We are paying 1.97 billion Rupees in finance cost which belongs to markup long term and short term loans. Our stocks is now cheaper than our loans so we can reduce this cost by raising money from stocks and paid to loans. The second highest expense is interest expense which makes the income statement negative. The third highest expense is general and admin expense which is based on salaries, rent repair etc., where there are unemployment rate is too high in Pakistan, we can hire the staff at low salary. After cutting cost, we will be able to cut our product selling price which increases our sales and market penetration.

48

Improving or Development New & Innovative Product In second strategy, we have to focus in our research and development department. We have to spend money in this department for invent a new technology or product. It will increase our sales because we will be the only one who will offer that technology. It will built up competitive advantage and market penetration

Market Development or Finding or Searching New Market In this third strategy, we have to find some new town and selling present products or services in new markets. We have to take actions like targeting promotions, opening sales offices and creating alliances to operationalize a market development strategy

49

Action Plan Marketing plan We have to do Customer analysis by doing customer surveys, analyzing consumer information, evaluating market positioning strategies and developing customer profiles. Right now we are focusing on corporate level user which is not sufficient coverage. We have to target home user also and home users want something more with internet service. We have to focus youth. So in marketing, we spend money in advertising, sales promotion and publicity in which we relate our product with some sports game. Production plan In corporate level, we can offer high speed broadband internet and portable device like ptcl provide Evo to their user. And in home user, we have to give something more with internet like TV channels, software, movies, games, etc., for taking competitive edge from our competitor. Financial plan Financial report already shows that company is working insufficiently. Admin, finance and operating expenses is too high which make our income statement negative. We have to focus on those expenses especially on done credit bases. We are not utilizing our assets properly. Also we have long term and short term debts on which substantial amount of cash out flow. We are now paying 25% of total revenue for financial cost. So we have to take immediate steps to reduce interest expenses. The current ratio diagnose that wateen has not enough resources to pay its bills over the next 12 months which shows bad cash management. We have to increase debtors turnover which indicate up word trend towards sales. Receivables are not collected reasonably in

50

accordance with their terms; management should rethink its collection policy. Here receivables are excessively slow in being converted to cash, liquidity could be severely impaired. In this case we have to work on to generate efficiently profits from the assets employed. Here negative ratio indicates an inefficient use of business assets. Asset turnover is quite low shows efficiently profits are not being generated from the assets employed in the business. wateen faces high financial risk leverage is 6times over its equity. Management has to take immediate corrective action on financial position of wateen. R&D Plan Right now we do not work on R & D department. We are already buying new technology from other sources. Some portions of those technologies are still a part work-in-progress in which wateen group have already invested substantial amount in it. R&D required a lot of investment and time to invent a new product and in our case invent a new product is more costly than purchasing new technology from outsider. But if we invest on R&D and make something new then we will take competitive edge in the market. MIS plan We have to make our MIS department stronger because managerial level takes decision on the basis of information. Management information system receives raw information from both the external and internal evaluation of an organization. It gathers data about marketing, finance,

production, and personnel matters internally; and social, cultural, demographic, environmental, economic, political, government, legal, technological, and competitive factors externally. Because organizations are becoming more complex, decentralized, and globally dispersed, the function of information systems is growing in importance.
51

Projected plan for 5 years

Sales Cost Gross profit Opereting exp Profit/(loss) before interest and tax or EBIT Interest Profit/(loss) before tax or EBT Tax Profit/(loss) after tax or EAT Earning per share Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) Rs FY1 15,000,000 9,000,000 6,000,000 1,800,000 4,200,000 750,000 3,450,000 1,207,500 2,242,500 3.02 FY2 18,000,000 11,250,000 6,750,000 2,070,000 4,680,000 525,000 4,155,000 1,454,250 2,700,750 3.64 FY3 21,600,000 14,062,500 7,537,500 2,380,500 5,157,000 367,500 4,789,500 1,676,325 3,113,175 4.19 FY4 25,920,000 17,578,125 8,341,875 2,737,575 5,604,300 257,250 5,347,050 1,871,468 3,475,583 4.68 FY5 31,104,000 21,972,656 9,131,344 3,148,211 5,983,133 180,075 5,803,058 2,031,070 3,771,987 5.08

common stock financing

Earning Before Interest & tax INTEREST Earning Before tax TAX Earning After tax Number of Shares Earning Per Share Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) (000) Rs recession 1,600,000 0 1,600,000 560,000 1,040,000 742475 1.40 normal 4,200,000 0 4,200,000 1,470,000 2,730,000 742475 3.68 boom 5,157,000 0 5,157,000 1,804,950 3,352,050 742475 4.51

stock financing
6,000,000 5,000,000 4,000,000 Axis Title 3,000,000 2,000,000 1,000,000 0 1.40 3.68 4.51 stock financing

52

Debt Financing
Earning Before Interest & tax INTEREST Earning Before tax TAX Earning After tax Number of Shares Earning Per Share Rs(000) Rs(000) Rs(000) Rs(000) Rs(000) (000) Rs recession 1,600,000 1,974,257 -374,257 130,990 -243,267 617475 -0.39 normal 4,200,000 2,982,257 1,217,743 426,210 791,533 617475 1.28 boom 5,157,000 3,183,857 1,973,143 690,600 1,282,543 617475 2.08

debt financing
6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1.00 2.00 3.00 debt financing

53

Conclusion We have to take immediate action and raise funds through equity and payout our debt which carry heavy financial cost. Reduce admin expenses by eliminating layers of management and inefficient employee. Work on value chain and curtail irrelevant cost. Immediate lounge marketing campaign with proper targets and pay them accordingly. Create variable pay plan to motivate efficient and effective employee. Requires a policy approved by top management that states objectives and provides a commitment to improve performance. Requires procedures for Hazard Identification, Risk Assessment, Risk Control, Identifying Legal & Other requirements maintaining documented objectives Maintaining Management Programs for achieving its objectives including designating responsibility and authority, means, and timeframes for achievement. Procedures should exist to ensure information is communicated to and from employees and other interested parties. Employees should be involved in development of procedures and consulted when changes affect their workplace. Establish qualitative and quantitative measurement processes, both proactive and reactive. Maintain procedures for handling investigations; mitigating the consequences; initiating & completing corrective actions; and confirming the effectiveness of corrective & preventive actions. Maintain procedures for the identification, maintenance, and disposition of records. Records shall be legible, identifiable, traceable, readily retrievable, and protected against loss and / or damage.

54