IMPACT OF

PRIVATIZATION ON
PTCL AND FEATURES
OF THEIR VOLUNTARY
SEPARATION SCHEME

Submitted by
Faisal Ahmad Jafri
Osaid Siddiqui
Ovaisuddin Adil
Shozab Abid Azhar
Summaya Zahra Rizvi
Syed M Asad Zaidi

Table of Contents
INTRODUCTION.................................................................2
PTCL BRAND PHILOSOPHY AND VISION.............................2
Vision..............................................................................2
History............................................................................4
Products and Services....................................................4
PTCL TODAY......................................................................4
Employment Categories.................................................6
Departments..................................................................7
Business Support Functions............................................7
Land Wise Regional Distribution.....................................8
PRIVATIZATION PROCESS AT PTCL.....................................8
HR CRISIS FOLLOWING PRIVATIZATION...........................10
VOLUNTARY SEPARATION SCHEME..................................11
Target Population..........................................................12
Components of VSS......................................................12
CONCLUSION..................................................................17
RECOMMENDATIONS.......................................................18

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INTRODUCTION
Pakistan Telecommunication Company Limited (PTCL) is the leading
telecommunication authority in Pakistan. The corporation provides telephonic
and Internet services nation-wide and is the backbone for the country's
telecommunication infrastructure despite the arrival of a dozen other
telecommunication corporations.
PTCL manages and operates around 2000 telephone exchanges across the
country, providing the largest fixed-line network. Data and backbone
services such as CDMA, broadband Internet, IPTV, and wholesale are an
increasing part of its business. PTCL also continues to be the largest CDMA
operator in the country with 0.8 million V-fone customers. The company
maintains a leading position in Pakistan as an infrastructure provider to other
telecom operators and corporate customers of the country. It has the
potential to be an instrumental agent in Pakistans economic growth.
PTCL has laid Optical Fibre Access Network in the major metropolitan centers
of Pakistan and local loop services have started to be modernized and
upgraded from copper to an optical network. On the Long Distance and
International infrastructure side, the capacity of two SEA-ME-WE submarine
cable is being expanded to meet the increasing demand of International
traffic.
Originally one of the state-owned corporations (SOEs), the shareholding of
PTCL was reduced to 62%, when 26% of shares and control was sold to
Etisalat Telecommunications and the remaining 12% to the general public in
2006 under an intensified privatization programme of prime minister Shaukat
Aziz. However, the 62% of shares still remain under the management of
government-ownership of state-owned corporations (SOEs) of Pakistan.

PTCL BRAND PHILOSOPHY AND VISION

Vision
To be the leading Information and Communication Technology Service
Provider in the region by achieving customers' satisfaction and maximizing
shareholders' value.
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Hello to the Future is an amalgam of PTCLs vision, brand philosophy, brand

values and strategy. The essence is futuristic approach. The positioning
statement Hello to the Future is basically comprised of two words Hello
and Future that provides the inward communication through the word
Hello, i.e. PTCL welcomes its customers and the future. Also it offers the
outward communication through the word Future by promising customers
the futuristic ideas and products, along with proactive solutions.

History
From the beginning of Posts & Telegraph Department in 1947 and
establishment of Pakistan Telephone & Telegraph Department in 1962, PTCL
has been a major player in telecommunication in Pakistan. Pakistan
Telecommunication Corporation (PTC) took over operations and functions
from Pakistan Telephone and 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 licenses for cellular, card-operated pay-phones,
paging and, lately, 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. The provisions
of the Ordinance were lent permanence in October 1996 through Pakistan
Telecommunication (Reorganization) Act. The same year, Pakistan
Telecommunication Company Limited was formed and listed on all stock
exchanges of Pakistan
PTCL launched its mobile and data services subsidiaries in 2001 by the name
of Ufone and PakNet respectively. None of the brands made it to the top slots
in the respective competitions. Lately, however, Ufone had increased its
market share in the cellular sector. The PakNet brand has effectively
dissolved over the period of time. Recent DSL services launched by PTCL

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reflect this by the introduction of a new brand name and operation of the
service being directly supervised by PTCL.
The post-monopoly era came with
Pakistans
Liberalization in
Telecommunication in January 2003. On the Government level, a
comprehensive liberalization policy for telecoms sector is in the offering. In
2005, Government of Pakistan decided to sell 26 percent of this company to
some private corporation. There were three participants in the bet for
privatization of PTCL. Etisalat, a Abu Dhabi based company was able to get
the shares with a large margin in the bet. Government's plan of privatizing
the corporation was not welcomed in all circles; countrywide protests and
strikes were held by PTCL workers.

Products and Services

PTCL provides a number of products and services. Under business solutions,
it provides PTCL cloud alongwith managed solutions, PTCL managed services
providing a comprehensive solution for corporate customers, International
Business, Hosted Solutions, Carrier and Wholesale, Business Connectivity for
an integrated end to end domestic and global connectivity and Business
communication.
PTCL provides a range of personal products and services aswell. In addition
to wireline operations, PTCL also provides fixed line service through its
countrywide CDMA based WLL (Wireless Local Loop) network, under the
VFone brand name.
In the Internet segment, PTCL provides fixed broadband through
conventional copper wire & FTTC and wireless broadband based on EvDO Rev
A and B technology with the brand name of EVO. Under the head of EVO,
PTCL is running 4 sub brands; EVO 3G wireless, EVO 3G Nitro 9.3, EVO Wingle
9.3Mbps and Charji EVO, which is the latest addition to the EVO family. PTCL
has also introduced a 3G enabled android tablet.
In addition to these services, PTCL also offers some of the world's first
commercial HD TV services based on IPTV with the brand name of Smart TV
and home surveillance and alarm over broadband under the brand name
iSentry. PTCL is also part of the consortium of three major Submarine
communication cable networks: SEA-ME-WE 3, SEA-ME-WE 4 and I-MEWE.
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PTCL also has Intelsat standard Earth Stations near Karachi and Islamabad.
These installations provide the diversity for International voice connectivity
and also work as Hub for domestic satellite users. There are four Intelsat
Standard B Earth Stations at Islamabad, Gilgit, Skardu and Gawadar.

PTCL TODAY
Pakistan
Telecommunication
Company
Limited (PTCL)
is
a megacorporation and a leading telecommunication authority in Pakistan.
Originally one of the state-owned corporations (SOEs), the shareholding of
the PTCL has been reduced to 62%, when 26% of shares and control was sold
to Etisalat Telecommunications and the remaining 12% to the general public
in 2006 under an intensified privatization programme of Prime
minister Shaukat Aziz. However, the 62% shares are still remains under the
management of government-ownership of state-owned corporations (SOEs)
of Pakistan.

Ownership Div ision

12%
Etis alat

26%

Government of Pakis tan

General Public

62%

Pakistan Telecommunication (Re-organization) Act, 1996 replaced Civil

servants Act for PTCL in 1996 and it became applicable on all employment
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categories. As per old employment structure at PTCL before privatization

there were two main categories, namely; Daily wagers and Regular Govt.
employees. BPS grade 17 and above employees were inducted through CSS
and follow the same bureaucratic protocols as of any other government
organization in Pakistan.
BPS 1-16 grade employees were inducted through different placement
programs time to time and follow regular government pay-grade structure.
Whereas, Daily wagers were contractual labor hired for different projects,
paid on monthly basis but not entitle for any benefits like any other regular
employees.
Etisalat takes over PTCLs management in 2006 with 72,000 employees
across Pakistan.
PTCL is one of those high potential public sector
organizations which were generating profits after being so overcrowded.
Restructuring and right sizing of the organization were the main challenges
for the new Etisalat Management.
So right after takeover Etisalat initiated a study/survey through renowned
consultants to identify the gaps and right potential of the organization. They
revealed that PTCL is highly overcrowded and must have laid off 80% current
workforce in order to get the desired objectives. The new PTCL management
decided to restructure employment categories and to introduce Voluntary
Separation Schemes for all categories except daily wagers.

Employment Categories
Under new PTCL employment structure now there are seven different
employment categories.

Employment Categories
Management
Open ended contracts (NTC)-Newly Hired Etisalat employees
Regular ( Govt. employees)
Management Trainees
Non-Management
Regular (Govt. employees)
NCPG (Daily wagers shifted to permanent payroll)
Outsourced staff (Third-party staff; HRSG, Esquare)

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Secondees (PTCL employees working on secondments in different

countries; Eg. ROSHAN Telecom Afghanistan)
Job Titles redefinition was also the part of new restructure policy.
Job titles
President
Senior Executive Vice President
Executive Vice President
General Manager
Sr. Manager
Manager
Asst. Manager/Specialist
Management Trainee

For effective business operations and maximum utilization of human

resources departments, business function and Regions were also re
organized.

Departments

Business Support Functions

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Land Wise Regional Distribution

Operationally Pakistan is divided into three regions North, Central and South.
Yellow: North
Green: Central
Blue: South

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PRIVATIZATION PROCESS AT PTCL

The major objective of the PTCL privatization was to introduce investment
and an improve and efficient management that can better respond to
consumer demands, especially with increase the installation of new lines to
meet the escalating needs of information technology. The company was also
suffering from large-scale corruption, nepotism and mismanagement.
Company resources and staffing were also mis-utilized through political
influence and staffing decisions were similarly politically motivated. In 2004,
the government official pressurized PTCL to pay Rs. 25 billion as dividend
from net profit of Rs. 30 billion, being the major shareholder; the large
amount was collected by government. Due to these conditions, the company
lagged behind in acquiring new technologies in comparison to other
companies which were making strategic investments.
This process was initiated as early as 1994 and also enabled the government
to gauge market interest in any potential takeover process. The Privatization
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Commission initially offered 2% shares of PTC through voucher scheme and

after receiving a positive and encouraging response offered another 10%
shares to the foreign buyers in September 1994 worth $ 898 million. The
formalized management change started in 2004 and PTCLs 26% shares were
offered for privatization along with the management control. Initially three
organizations, namely Etisalat from a UAE consortium, SingTel from
Singapore and China Mobile were short listed for the final bidding. PTCL
consisted three business units, Ufone, PakNet and country wide landline
network. The estimated assets of the company were approximately USD 10
billion and this was one of the major corporate transfer in history of Pakistan.
In 2006 the final bid was secured by Etisalat at highest price of $ 1.96 per
share whereas, $ 1.16 by SingTel and $ 1.40 by China Mobile respectively.
The Etisalat offered $ 2.6 billion with management control of the company.
66% of the shares of the company were retained by Government of Pakistan
and remaining shares were offered for public subscription. Subsequently
Etisalat took over the control of PTCL along with the control on Ufone and
PakNet.
PTCL is generally cited as being an inappropriate case for privatization.
Generally, governments offer those organizations for privatization whose
performance is considered below standards or if they are a management and
administrative burden on the government. However, the case of PTCL
privatization was unique in that a highly profitable organizational was offered
for privatization. It was contributing large amounts to national exchequer.
Before the privatization in 2005, PTCL generated Rs 84 billion with a net
profit of Rs 27 billion. In addition, it was a poor decision to transfer
management powers and control to an acquirer who was not familiar with
the organizational culture in Pakistan. Instead of building the company
strength, capability and making it more competitive in global market, the
company was ambiguously sold. A number of potentially unnecessary
concessions were also made to PTCL during this process. The privatization of
PTCL was also exempted from purview of Public Procurement regulatory
Authority Ordinance 2002 in the federal budget. With this major
constitutional concession, the Etisalat was given free hand for selling and
purchasing of assets. It was able to acquire PTCL in five year easy
installments. The government was also asked to pay 50% of the layoff
charges regarding the employees voluntary separation program and Etisalat
received $50 million as technical assistance fees for providing management
services and expertise

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HR CRISIS FOLLOWING PRIVATIZATION

After the privatization, the company went through the process of rightsizing
and downsizing of employees. 32000 employees from various sections left
PTCL through voluntary separation program and the government had to bear
$256 million as the payment to employees. A number of employees lost
confidence in the long term direction of the company and competent
managers and professionals also resigned. Soon the loss of large number of
experienced and trained workers began to hurt the performance of PTCL. The
network maintenance, customer care and operations suffered abruptly;
consequently, thousands of connections were lost. In addition, the new
management had to first understand the prevailing ethics and works
environments and culture in Pakistan, and then in turn develop a new culture
that would more in line with international norms. The company had to
address the suppressed morale following an internal research they did and
found following underlying factors and feelings within the organization,
where employees were concerned about future in which;
the way in which redundancies will be decided
the way that individuals will be notified due to rightsizing
the effectiveness of communications (or lack of adequate, clear, believable
information) throughout the process;
the perceived fairness of the selection criteria; and,
the aftercare of leavers and interpersonal treatment received from line
management
Keeping all the factors in mind, company had to come up with a process to
release unnecessary workforce. Privatization encompasses a wide range of
social consequences and a growing concern over the negative repercussions
of privatization has spawned research worldwide. The effects of privatization
on the employees, employers, industries and the society in general are wide
ranging. The effective policy prescriptions are essential in the whole
privatization process. Therefore, PTCL came up with a Voluntary Separation
Scheme for its redundant workforce.

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VOLUNTARY SEPARATION SCHEME

The Voluntary Separation Scheme (VSS) offered by the PTCL is purely

voluntary in nature and does not force any employee to leave the company.
The management was fully cognisant of PTCLs employees concerns
regarding the scheme, and the aim of VSS is to offer an attractive scheme to
employees and at the same time, to help improve its operational efficiency.
The scheme would offer attractive package to the employees and it would
be ensured that the PTCL management inculcates confidence amongst the
employees regarding the benefits of the scheme and its voluntary nature. He
further said that the PTCL employees would be guided through workshops on
safe and secure investment opportunities.

When the first round of VSS was run in PTCL back in 2008, it was a success at
30,000 employees opted for it. In 2012, 5,600 employees opted for it.
In PTCL, the term voluntary is defined as on ones own will, and employees
decide whether to opt for the package or not, based on a totally own
decision. Each successive VSS is made in such a way that it appears not
only different but more lucrative from previous schemes.

Target Population
The VSS is applied on Regular and NCPG quota employees, it is not
applicable on contractual and daily wagers employees. VSS aims to target
redundant, surplus and low performing workers.
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Salient Features of VSS include all the following points:

EOBI benefits.
Addition of training period to the LOS.
PTCL accomodation for 6 months.
Increase in annual increments.
Simplified forms and more help desks

Components of VSS
The VSS scheme comprises of primarily of 5 basic components:
1.
2.
3.
4.

Transition compensation
Benefits compensation
Supplementary benefits
Optee Support Program

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The transition compensation is valid on all regular and NCPG employees;

transition bonus has two rewards, based on time limit i.e Rs 200,000 as an
early bird bonus and Rs 150,000 as regular program bonus. All the
calculations are based on Incremented Basic Pay/Emoluments/Gross Pay i.e
Pays & Allowances as of December 2014 Payroll

Transition Pay Criteria

VSS includes benefit of 2 year of relaxation to pension eligibility and

enhanced gross pension due to the employees length of service. The
retirement benefit for employees greater than and less than 18 years differs
as per following options.

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Gratuity is only applicable to NCPG employees, while the health fund

includes both NCPG and regular employees according to the employees
length of service

Leave encashment is applicable to both NCPG and regular employees but the
cash amount formula varies for both.
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Supplementary benefits of Loan write-offs and minimum package amount

apply to both Regular and NCPG employees.

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CONCLUSION
In the light of the above facts we conclude that privatization is critical and
politically sensitive government activity that has led to fundamental shifts in
the relationship between the private and public sectors and effects of
privatization on workers are both negative and positive. Privatization is in the
interest of employees because workers often have gained from privatization
and after privatization; remuneration packages tended to improve. In several
instances there have been wage rises and better working conditions. In an
industry that is sufficiently competitive privatization improves welfare.
However, effects of privatization usually on jobs are negative because public
enterprises were overstaffed and on privatization employees, feel job
insecurity and have fear losing their jobs. In majority of privatization cases
workers lost their jobs after privatization, but in cases where employees lost
their jobs as a result of privatization, such employees tended to receive
generous severance. Overall point is that there can be no simple prediction
about the distributional effects of privatization; the impact depends on at
least three factors: initial conditions, the sale event, and the postprivatization political and economic environments. Whatever, the balance
between the various objectives of privatization, social considerations are an
essential component of its process. They should form an integral part of the
design and implementation of privatization policies and programs.
Privatization works most successfully where it is backed up by social
consensus and support. We conclude that privatization brings layoff and
reduction in employment if there is overstaffing and privatization is carried
out without proper planning for this overstaffing, but it brings other benefits
like wage rises or lucrative packages in the form of golden handshakes.

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RECOMMENDATIONS
On the basis of the study and analysis following broad recommendations
have been extracted:

Privatization has given impetus to market reforms in many countries.

To have an impact, it is important to coordinate the activities of the
bodies responsible for privatization and those responsible for
competition
If privatization is to yield strong benefits to society as a whole, it needs
to give consideration to its impact on workers. Social factors such as
job security, occupational stress, in the affected community and its
natural environment should be serious considerations in privatization
activities
To lessen the side effects of privatization, organizations should support
their employees sufficiently to enable them to adapt themselves to the
changes, through allowing their employees to participate in making
decisions concerning the functional changes in the system to prevent
or reduce the subsequent job stress

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