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PTCL Company Analysis PDF
PTCL Company Analysis PDF
Technology
Pakistan Telecommunication
Company Limited
COMPANY analysis
TABLE OF CONTENTS
1 INTRODUCTION OF TELECOM INDUSTRY............................ ...........4
2 PTCL PAKISTAN TELECOMMUNICATION LIMITED........................ ..5
2.1 Introduction of PTCL................................................................... ....5
2.2 Vision......................................................................... ...................6
2.3 Mission............................................................................... ...........6
2.4 Core Values......................................... ..........................................6
2.5 Organizational Structure................................................................7
2.5.1 Bankers....................................................................................... ............................7
5 BUSINESS STRATEGIES.............................................................22
5.1 Fixed Line Telephony ........................................ ...........................22
5.2 Wireless Local Loop........................................................ ..............23
5.3 Broadband and Value Added Services............................................23
9 Bibliography....................................................... .....................31
Further, with the technological advancement, more and more telecom services were becoming available
but there was not enough money available with the corporation to install new telecom systems for the
provision of modern services. Resultantly, a digital divide prevailed in Pakistan keeping it behind its
neighbors and other comparable countries in terms of telecom access. Cellular mobile services in Pakistan
commenced in 90s when two cellular mobile telephone licenses were awarded to Paktel and PakCom
(Instaphone) for provision of cellular mobile telephony in Pakistan. Currently there are six cellular
players in the market. The Telecom Sector has contributed 2 percent towards the overall GDP growth with
revenues of over PKR 235bn.
the
promulgation
of
Telecommunication
(Re-Organization)
Act
1996,
the
Pakistan
Telecommunication Authority was established as the Telecom Regulatory body. Following the open
licensing policy in BUY @ PKR 45.40 accordance with the instructions of Government of Pakistan and in
exercise of powers conferred by Pakistan Telecommunication (Re-Organization) Act 1996, the basic
telephony was put under exclusivity and PTCL was given a seven years monopoly over basic telephony
which ended by December 31, 2002. The year 2006-07 in the telecom sector witnessed a phenomenal
growth in the mobile phone sector in Pakistan, which doubled its subscriber base to 60 million. The
Teledensity increased from 26% to 40%, helping to spread the benefits of communication technology
across the country. PTCL's mobile phone subsidiary Ufone's subscriber base grew by more than 87%,
from 7.49 million to 14 million.
The year also witnessed the entry of major telecom companies, most notably China Telecom and Singtel,
into the market. Restructuring and re-engineering are in their final stages along with the implementation
of ERP system. From the end customer's perspective, a major initiative was put in place in the shape of
'Broadband Pakistan' service launch as a first step towards providing its customer with more value added
service and convenience. With this offering, the PTCL not only bringing the benefit of high speed Internet
access to subscribers in major cities but will also generate new revenue streams for future growth. The
company also continued to invest in infrastructure development and addition of network capacity with a
view to enhance services and to expand its reach across the country.
2.2 Vision
To be the leading Information and Communication Technology Service Provider in the region by
achieving customer satisfaction and maximizing shareholders' value'.
The future is unfolding around us. In times to come, we will be the link that allows global
communication. We are striving towards mobilizing the world for the future. By becoming partners in
innovation, we are ready to shape a future that offers telecom services that bring us closer.
2.3 Mission
To achieve our vision by having
Professional Integrity
Customer Satisfaction
Teamwork
Company Loyalty
Corporate Information
President
&
CIO
SEVP
SEVP Finance
HR & Admin
SEVP Corp
Development
SEVP
Operations
GM North Zone
SEVP
Commercial
SEVP
Technical
GM South Zone
2.5.1Bankers
Citibank N.A.
To increase operations, PTCL shifted from its conventional duration based charging system to
value based options, like 'Pakistan Package' that offered 5,000 minutes for on-net nationwide calls
at Rs. 199/month. PTCL also launched 'International Plus' package to facilitate cost effective
international calls at unmatchable rates alongside offering Voice messaging and Phone n Net
services, adding more value to the landline service. To increase customers' base, 'order on phone'
was introduced, allowing customer to apply for a new connection by simply calling 0800-80800.
To tackle the churn PTCL established an outbound call center to reach out to potential customers
with an objective to attain higher level of brand loyalty.
2.6.2PTCL V-Fone
PTCL V-Fone (WLL Service) was another major area of focus for PTCL during the year. A few
prominent measures taken in this area during the year were launching of free home delivery
service. No line rent package was launched in September 2007. In June 2008, 30 seconds billing
was introduced contributing as an effective customer retention tool. PTCL has expanded the
network to provide coverage in all large and small cities including over 10,000 villages in rural
areas of Pakistan.
As Vfone becomes the Wireless substitute to landline in un-served areas, it will be a robust line
for voice, data and fax services for use at home and in the office. In business markets it will be
positioned as the CDMA tellular extension to add trunk lines to the ever expanding business
PABXs. Vfone will be spearheading the launch of the new postpay and pre-pay tariffs with no
line-rent to meet the market demand. The tariff will include new post-pay unlimited local and
nationwide calling packages to bring traffic back to PTCLs networks to stabilize the revenues.
After the initial launch, the Company aims to retain the momentum by offering different bundled
packages for voice to increase the subscriber base, including specifically targeting the rural areas
where copper infrastructure does not exist. On Wireless broadband front, a major upgrade of
PTCL WLL CDMA network is underway to provide Wireless broadband services in 17 major
cities by end 2007. Currently technical trial is in progress which will be followed by a pilot
project on WiMax technology. This will enable PTCL to maintain its competitive edge.
2.6.3Ufone
(Pakistan Telecom Mobile Ltd) a wholly-owned subsidiary of PTCL commenced its operations
on
29th January 2001 as a GSM 900 service provider. Since the outset, it has expanded its
coverage and customer base at a rapid pace and established itself as one of the leading cellular
service providers in Pakistan. Ufone is now considered to be one of the most active, aggressive
and innovative players in the mobile sector of Pakistan.
The growth of the cellular industry is a direct result of the successful implementation of the
telecom deregulation and cellular mobile policy by the Ministry of IT and Telecommunications
(MOIT&T) and the support, guidance and timely enforcement of regulatory process by the
Pakistan Telecommunication Authority (PTA).
Ufone's operational performance has been very encouraging despite stiff competition in Pakistan
telecom market which has led to reduction of prices to bare minimum level. Ufone managed to
improve its revenue and operating profit by 35% and 47% respectively, as compared to the last
year through aggressive policies and exercising strict control over expenses.
2.6.4Paknet Limited
Paknet was incorporated in year 2000 for providing internet related services in the country is
being wound up. However, PTCL has developed its own voice, data and video infrastructure and
services. Paknet's operations have been closed and liquidator appointed for completing the
formalities involving the company closure. All customers, assets, liabilities and capital stand
transferred to PTCL in accordance with the special resolution passed in General Meetings.
2.6.5PTCL Broadband
The first major product initiative taken towards a changing PTCL during the year 2006-07, was
the launch of PTCLs Broadband service under the theme of Broadband Pakistan by the Prime
Minister of Pakistan. The service was launched on PTCLs new state of the art Broadband
infrastructure that was added to our network during the last three quarters of 2007 with the initial
capacity of over 100,000 subscribers.
PTCL achieved unprecedented success as it added over 10,000 customers within the first 120
days of its launch while historically it had taken four years collectively for all the other operators
to achieve 30,000 customers in Pakistan! The hallmark of PTCL service was the removal of the
traditional barriers such as the upfront costs of installation and customer premises equipment and
2.6.6Smart Services
In March 2008, PTCL introduced a trial service that put PTCL on the path of a paradigm shift.
Branded under 'PTCL Smart Line', the service included Interactive Television, Broadband and
voice Telephony all at the same time on PTCL's telephone line. The 'Smart TV', for the first time
offered TV viewers the power to control the TV channels interactively. This included the ability
to rewind and pause live TV channels, block / unblock any TV channel for parental lock and
search through video on demand content. The Commercial launch of the PTCL Smart Line
services across the three largest cities in Pakistan was arranged on the 14th of August 2008 which
will be expanded to the other cities during the course of the year.
Pakistan followed a gradual approach to liberalize its telecom market. During 1990s, as a first step,
market was opened for value added services and competition was introduced in cellular mobile sector as
four licenses were issued (Mobilink, PTML, Paktel and Instaphone). The government monopoly was
retained in fixed line services, however, PTCL legal monopoly ended with effective from 31 st December
2002. The government announced Telecom Deregulation Policy and Cellular Mobile Policy in 2003 and
2004 respectively. The telecom regulatory, issued new licenses for Long distance International (LDI) and
Local Loop Fixed (LLFixed), Wire Local Loop (WLL) and Cellular Mobile. With the issuance of new
licenses the market is now open for full competition in all segments of the sector.
China Mobile
Orascom Telecom
Telenor
to
the
same
quarter
last
year.
PTCL, the incumbent operator in fixed line in Pakistan has also emerged as market leader with 57 percent
market share followed by Telecard and Worldcall with 19.6 percent and 20.2 percent market share at the
end of December 2007.
Great Bear International share is reported to be 3 percent, while Wateen Telecom share is 0.2 percent,
which started their services during the quarter. PTCL has gained over 1 percent market share compared to
the same quarter of last year while Telecard added over 5 percent market share during this period. Great
Bear International though a smaller shareholder in WLL market but its share is increasing due to its
quality of service as it reached to 3 percent as compared to 2 percent in December 2006.
It is believed that fixed-line tele-density will recover with WLL taking off due to its cost effectiveness and
in particular this technology suits for the hilly areas and far-flung regions in the country. The estimated
WLL per line cost is around US$ 100-150 in comparison to wire line cost which still remains to be more
than
US$
250-350
per
line.
PTCL has already covered over 11,500 cities/towns/villages while other major operators like Worldcall,
Telecard and Greatbear are increasing their coverage too.
WLL system is used when low to medium subscribers densities are located apart from each other and
deployment of primary or secondary copper network is difficult. WLL system is best suited for rural, sub
urban areas and very congested metropolitan areas.
Increase service choice for all consumers of telecom services at competitive and affordable prices
Increase
private
investment
in
the
telecom
sector
and
encourage
local
telecom
manufacturing/service industry
Enhance long run benefits to the Governments financial position by expanding the taxable
revenue base.
Encourage fair competition among service providers, while maintaining leadership in the telecom
sector
Maintain consistency with the Pakistan IT and internet promotion policy of low prices for
Bandwidth and Internet access.
The cycle above describes the Organizational Management process at PTCL. Yellow blocks describe the
core functions of the Company performed at all levels in the Organization. Blue Blocks are the Strategic
functions which are performed at the Strategic level only.
At the end of first quarter, the company stock was trading at a P/E ratio of 18.20. As illustrated by the
graph, the stock has performed remarkably well relative to the market. The stock has shown consistent
performance over the three months, dropping only slightly as the rest of the market dipped sharply during
August. As a consequence of the fading sales revenue for the period, the profit after tax of the company in
FY06 declined by 21.91% over FY05. The net profit margin has also been declining since the FY'04 and
the trend persisted in FY06. The decline in profit margin may be attributed to a 5.25% increase in
operating expenses for the year.
4.2.1Profitability Position
PTCL posted a net profit of Rs 15.64 billion (EPS Rs 3.07) in FY07 against last year's figure of
Rs 20.78 billion. The declining trend in profitability continued during the financial year ended
June 30, 2007 due to structural adjustments brought about in the telecom sector by competition.
Although PTCL maintained its leading market share in the fixed line, there was a decrease in
revenues by 5.5% mainly due to substitution impact of mobile expansion. There was also an
increase in operating expenses by 11.7% mainly due to prudent provisions for doubtful debts and
long term systematic improvements in operations and customer services.
In spite of decline in profit, the PTCL managed to increase its operating cash flows to Rs 35.54
billion compared to Rs 35.19 billion last year. Considering the cash requirements for restructuring
and development plan, the company declared a final dividend of Rs 2.00 per share for the
financial year ended June 30, 2007. The total revenue for FY 2006-07 stood at Rs 65.28 billion
against Rs 69.09 billion of FY 2005-06. The decrease in revenue was mainly in the domestic
segment due to competition and reduction in tariffs. However, PTCL is making all efforts to boost
revenue by improving customer service and launching new services to turn around the situation.
4.2.2Liquidity Position
The liquidity position of the company suffered a setback in FY06. This trend has been witnessed
despite increasing current assets, as current liabilities grew more sharply. The short term
borrowings of the company have been mounting for the last few years and this has contributed to
the current trend of the current ratio. It may be noted that the company holds large amounts of
cash and bank balances compared to the other companies in the business. This may provide an
edge to the company over its competitors. Although the liquidity stance of the company is fairly
satisfactory at the moment, but a continuation of the current negative trend may spell trouble for
the company.
4.2.3Leverage Position
The debt ratios showed a decreasing trend in the FY07. The debt to asset ratio of the company
had declined considerably in FY05 but the trend reversed in FY06, declining again in FY07. It is
important to note that the company maintains a largely unleveraged capital structure, with the
current trend in debt ratios bought about largely by changes in current liabilities of the company.
4.2.4Activity Position
The DSO of PTCL witnessed an upward trend throughout the period under analysis, except in
FY05 when an improvement was marked. The ratio jumped up considerably in FY06, completely
nullifying the effect of the decline in FY05, and exacerbating the already long collection period of
the company. However, DSO showed a decline in FY07 showing that management of PTCL is
constantly striving for improvement and enhancement despite stiff competition. As a result, the
operating cycle has also decreased in FY07. The total assets turnover and sales to equity ratio of
the company also declined in the FY'06 as revenues shrunk during the period. Sales/equity
declined with the increase in equity of the company.
4.2.5Dividends
PTCL has had a history of paying out significant portion of its earnings to its shareholders.
However, with huge cash requirement for Voluntary Separation Scheme, PTCL is unlikely to
announce any cash payout during FY08. Therefore, once the ongoing process of VSS is through,
which requires a cash outflow of PkR23.2bn, dividend payout is likely to resume to its initial
levels.
4.3 HR Aspects
The transformation from a legacy public sector organization into a responsive and competitive enterprise
in the deregulated era could not have been possible without implementing a forward looking Human
Capital development and management strategy. One of the most important objectives of this new strategy
was to optimize the workforce which was implemented by offering the voluntary option of separating
from PTCL in exchange for financial compensation. Around 29,920 employees opted to pursue other
career opportunities after accepting terms of voluntary separation from PTCL.
Healthy improvements have been made in the area of Recruitment and Retention as the whole
recruitment process has been redefined to cope with the changing business requirements. Detailed
facilitation programs have been initiated for the orientation of newly hired employees. PTCL employees
have been provided excellent international placement opportunities across various Etisalat International
Business Operations.
At PTCL, training and development team would never miss an opportunity to contribute towards
the betterment of the company. Training and Developments is playing an essential role in
changing PTCL from a government sector organization to corporate sector company. PTCL
consider every employee of the company as our customer and firmly believe that meeting their
expectation would help us achieve customer satisfaction. We look forward to your input for
making our endeavors more effective. The Training and Development has a clear road map of
activities and is committed to provide high quality trainings for the development of every single
employee.
5 BUSINESS STRATEGIES
As part of the Companys vision of maintaining and growing its position as the leading ICT service
provider and a profit leader, a five year Strategic Master Plan for the Company, with defined corporate
KPI targets, timelines and ownerships was developed by the PTCL management. Defining yearly targets
on market shares for various voice and data services, introduction of a corporate KPI based performance
measurement system, Restructuring of the organization, formulation of IPTV, Triple Play and converged
services, migration to an end to end IP based network, Investment strategies such as Assets Management
for risk diversification and improved Return on Investments, were all part of the master plan. The five
year master plan will be reviewed and updated on an annual basis.
PTCL chose August 14th, the Independence Day, to launch its new logo and theme of feel the
difference. To support the new spirit and to reinforce its commitment, PTCL offered free nationwide
calls to the people of Pakistan. The traffic on 14th August 2007 jumped to 4 times the level on a similar
holiday to give credence to our hypotheses that the good old telephone Company is still the trusted
landmark of the people of Pakistan. This unprecedented response to free calls on 14th August was a heart
warming experience as it reassured the faith of our customers in our services, making us even more aware
of our responsibilities towards putting our customer first.
In the backdrop of this situation, PTCL management is taking key initiatives in different business areas.
One important move aimed at improving the Sales and Customer satisfaction is to boost the morale and
motivation level of our employees.
An Incentive Plan has been worked out to present substantial cash rewards to the employees performing
beyond the specified benchmarks. This will be the start of an era where the rewards shall be linked with
the performance and achievement of targets.
While the first phase focuses on front end of the Supply chain, it would subsequently be expanded to
other segments of the organization like Fault management, WLL and IP TV etc. Important features of this
plan are:
Rewards would be applicable to all the channels of request for installation/ provisioning of
connections.
Rewards against Installation/Provisioning are subject to receipt of the amount of first monthly bill
through B&CC.
Rewards against Installation/Provisioning of telephone connections are strictly subject to the fact
that the whole process completes within a span of 03 days (from service request registration to
the final service activation).
Free unlimited dialup internet will be available from 10pm to 7am in the morning every day.
For day time users (7am to 10pm) PTCL is offering up to 100 free hours on monthly basis to
entire subscriber base.
Customers exceeding 100 hours in a month (during day time from 7am to 10pm) will be charged
as per existing tariff of Rs. 6/Hour.
service
is
series
of
of
PTCLs
customer
value
huge
some
of
money
to
improve the environment & efficiency of its service centers. With all together
complete change in outlook, services to customers & facilities available, these
centers are called One Stop Shop. They are aimed to provide better services to
our valued customers for sales of products and after sales services.
These OSS are nine in number and are in Major cities of Pakistan. By the end of
this year there will be 19 OSS operational in 11 cities of Pakistan. Customer
7 SWOT ANALYSIS
7.1 Strengths
Largest operational network and infrastructure within ICT (Information & Communication
Technologies) segment.
An integrated Monoply
Market leadership in Local loop, Wireless local loop (WLL) and Fixed telephony.
PTCL (Ufone) is market challenger in GSM segment
Ufone is performing well though Warid and Telenor are tough competitors. PTCL, Ufones
profitability increased by 49.2 percent to Rs 977 million in 1H/FY07 as compared to Rs 655
million in the corresponding period last.
Competitors still depend on PTCL network either directly or indirectly
Experienced Telecom Resources
7.2 Weakness
Not been able to nurture its growth around customer services oriented strategy
Internal organizational and business processes issues
Monopolistic culture has further added to its complexities
Paknet, the internet service provider arm of ptcl continues to incur losses due to poor managment
and lack of network optimization
Ptcl-v, the fixed wireless phone service is poor
Over employment & low productivity.
Slow decision making including external interferences.
Corporate culture akin to government departments.
7.3 Opportunities
7.4 Threats
8 FUTURE OF PTCL
Going forward PTCL is poised to align itself in to a more customer friendly and commercially oriented
organization. This will be achieved through improved customer experience, offering better quality of
service, and introducing new products and emerging services to satisfy specific market segment needs
besides consolidating its leadership position in fixed line business. The customer interfaces will be fully
empowered to achieve corporate objectives. Automation and simplification of internal process,
optimization of operational expenditure, migration of services to Next Generation Networks,
enhancement of national backbone infrastructure, expansion of robust and resilient IP infrastructure and
proliferation of broadband services are few of the milestones for the way forward.
8.1.1New Technology
Prior to the start of the competition, PTCL should be well equipped with new technologies,
billing, marketing & customer care infrastructure, skilled trained professionals with focus to win
business and earn customer loyalty.
8.1.2Cross Subsidization
PTCL is providing range of services i.e. Fixed Line, Cellular Mobile and Internet etc. As the
world experience shows, incumbent can engage in cross subsidization which means that price of
one market may be increased above the cost and use the surplus revenue obtained from this
market to subsidize the lower prices in other markets where more competition is faced. Analyzing
PTCL position against this experience and seeing the prevailing competition environments of
Pakistan, it can be safely concluded and seeing the prevailing competition environments of
8.1.3Price Discrimination
In order to retain and even expand the market share, PTCL can resort to price discrimination. This
can be between users of own network and other operators networks. For example PTCL may fix
different rates for intra-network calls and inter-network calls. Lower rates of intra-network calls
will be strong temptation for customers to remain stuck with PTCL instead of switching over to
other choice operators. This practice will be a restraint for other operators, hence will be
considered anticompetitive.
9 Bibliography
For successful completion of this project we have utilize different available resources, from which we
have obtain required data. These resources lie in both digital and analog form. Most of the information is
obtain from Internet, while a visit to company is also made to get further information. We are thankful to
company management who had welcome and cooperate with us. Resources which are consulted discussed
below:
Resources
Google.com
Businessrecorder.com
Kse.com
Yahoofinance.com
PTA Reports