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Return on Operating Assets & Equity Revenue and Trade Debtors

Breakup Value Vs Market Value Capacity: Installed Vs in Service

Annual Report and Accounts 2007

Pakistan Telecommunication Company Limited 12

Board of Directors

Chairman PTCL Board
Secretary IT&T
Ministry of Information Technology
Government of Pakistan

Farrakh Qayyum
Former Chairman PTCL Board
Secretary Petroleum
Ministry of Petroleum & Natural Resources
Government of Pakistan

Abdulrahim A. Al Nooryani
Chairman & Chief Executive Officer,
Etisalat International Pakistan L.L.C
Executive Vice President
Contracts & Administration
Etisalat, UAE. 13

Abdulaziz A. Al Sawaleh Ahsanullah Khan Farah Qamar

Chief Human Resource Officer Ambassador Company Secretary
Etisalat, UAE Embassy of Pakistan PTCL Headquarters
Abu Dhabi, UAE Islamabad

Fadhil Al Ansari Noor-ud-Din Baqai

Executive Vice President Engineering Member (Telecom)
Etisalat, UAE Ministry of Information Technology
Government of Pakistan

Abdulaziz H. Taryam Ahmad Waqar

General Manager Secretary Finance
Nothern Emirates Ministry of Finance
Etisalat, UAE Government of Pakistan

Saood Al Junaibi
Executive Vice President
Portfolio Management
Etisalat, UAE

Annual Report and Accounts 2007

Pakistan Telecommunication Company Limited 14 15

Message by CEO PTCL

PTCL operates in one of the most dynamic, deregulated are in a position to up sell new services. The broadband
and competitive markets in the world, with a population of market in Pakistan is a nascent market with very low levels
165 Million people, one of the fast growing economies in of penetration even compared to other regional countries.
the world, and still with relatively low penetration of We believe the market potential for broadband is up to 2
Information Communication Technology (ICT) services. A million lines, and once again we are uniquely positioned
market dominated by a young population growing by to leverage our nationwide landline infrastructure to
around 3 million new potential subscribers every year, dominate this segment. Our recent launch of this service
giving rise to a large market available for future growth in has shown that the demand has exceeded our initial
all the segments. PTCL is the only unified service provider expectations and we continue to focus on expediting the
in Pakistan able to service all the customer segments rollout further. We are preparing the ground for launching
including consumers, enterprise and carriers with a new bundled services such as IPTV in the market to
comprehensive portfolio of products including voice, leverage future services such as triple play which will
broadband and mobility products. As a market leader we enhance revenues further and minimize churn. Whilst we
understand the challenges and opportunities of all the are still the dominant player in WLL both in terms of our
different segments and by leveraging our considerable customer base and network coverage, we are not satisfied
assets we are in a very strong position. with our market share and are pursuing an aggressive
campaign in order to acquire new customers. PTCL has
The biggest challenge for PTCL is to transform itself from the largest nationwide installed network infrastructure
being a very large company that has been traditionally capability including switching, transmission, fiber optic
internally focused to one that is customer focused and backbone, co-location and international capacity. This
market led, with the speed to compete with smaller agile gives us a unique position to offer these services on a
new entrants. We have taken on the challenge and the turnkey basis to the growing list of carriers including Mobile,
transformation has already started. A comprehensive WLL, ISPs and Resellers. The ability to sweat our existing
business transformation program has been put in place assets will help our revenues and contribute towards
which is already showing results. All business transformation margin improvement. We will continue to invest in expanding
plans must address the cultural changes necessary and our infrastructure for our internal needs as well as for
to this effect we are emphasizing HR training on par with selling to other carriers, particularly in capacity
international standards. In addition, we are focusing on enhancement, quality improvements and increasing our
improving our customer satisfaction levels to bring us in fiber optic transmission footprint.
line with the best-in-breed class. Significant investment is
also being made in infrastructure improvements, By focusing on customer satisfaction, partnering with
introduction of new operational support systems including innovation, investing in our people, enhancing our
billing and customer care, and business process infrastructure PTCL has started to transform itself in to a
improvements with the introduction of a new ERP system vibrant and leading Telecom service provider in the region.
custom designed for our needs.

The market in Pakistan is one of the most competitive and

price pressure continues, so we are trying to enhance our
revenue stream from our existing customer base. We are
in a unique position of having around 6 million landline
customers nationwide with almost 100% market share, Walid Irshaid
and by introducing new services such as Voice Mail, we President & Chief Executive Officer

Annual Report and Accounts 2007

Pakistan Telecommunication Company Limited 16

Directors' Report

The Directors of PTCL are pleased to present the Annual • Induction of a state of the art billing and customer
Report and the audited financial statements of the Company care system. Started during 2006-07, this is expected
for the year ended June 30, 2007. to go a long way in addressing the modern day
customers’ needs and offering more flexible and
The year 2006-07 in the telecom sector was marked by
customer friendly service packages.
the phenomenal growth in the mobile phone sector in
Pakistan, which doubled its subscriber base to 60 Million. From the end customer’s perspective, a major initiative
The teledensity increased from 26% to 40%, helping to was put in place in the shape of ‘Broadband Pakistan’
spread the benefits of communication technology across service launch as a first step towards providing its customer
the country. Your Company continued to be a major player with more value added service and convenience. With
in this sector through its mobile phone subsidiary Ufone, this offering, PTCL will not only be bringing the benefit of
whose subscriber base grew by more than 87%, from high speed Internet access to subscribers in major cities
7.49 million to 14 million. The year also witnessed the entry but will also generate new revenue streams for future
of major telecom companies, most notably China Telecom growth.
and Singtel, into the market. In this ever more challenging
The Company also continued to invest in infrastructure
competitive environment during the year, where there was
development and addition of network capacity with a view
an increasing trend of substitution of fixed line with cellular
to enhance services and to expand its reach across the
voice, and there were more new internationally owned
competitors in long distance data and voice wholesale
service, the PTCL management initiated and implemented
a number of strategies to ensure that your Company Corporate Strategy
maintains and grows its leading position in the telecom As part of your Company’s vision of maintaining and
market in the years to come. These included: growing its position as the leading ICT service provider
• Development of a medium to long term strategic master and a profit leader, a five year Strategic Master Plan for
plan where the technology and the operational plans the Company, with defined corporate KPI targets, timelines
are driven by commercial requirements. and ownerships was developed by the PTCL management.
Defining yearly targets on market shares for various voice
• Internal restructuring of the Company whereby the
and data services, introduction of a corporate KPI based
Company’s traditional operational regions were
performance measurement system, Restructuring of the
converted into target oriented ‘business units’ with
organization, formulation of IPTV, Triple Play and converged
prime focus being on ‘customer care’.
services, migration to an end to end IP based network,
• Initiation of re-engineering and automating the existing Investment strategies such as M&As for risk diversification
internal processes within the Company. This was done and improved ROIs, were all part of the master plan. The
by bringing in the automated ERP (Enterprise Resource five year master plan will be reviewed and updated on an
Planning) tool, ensuring that the processes within the annual basis.
Company are all made fast and efficient so as to cater
for all the internal and external customers’ modern
needs. 17

P & CEO with his team of SEVPs

Financial Performance
The Company posted a net profit of Rs.15.64 billion
(EPS Rs.3.07) against last year's figure of Rs.20.78
billion. The declining trend in profitability continued Revenue
Rs. in Billion
during the financial year ended June 30, 2007 due
2007 65.28
to structural adjustments brought about in the
telecom sector by competition. Although PTCL 2006 69.09
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 Company managed

to increase its operating cash-flows to Rs.35.54
billion as compared to Rs.35.19 billion of last year.
Considering the cash requirements for restructuring
and development plan, your company declared a
final dividend of Rs.2.00 per share for the financial
year ended June 30, 2007.

Annual Report and Accounts 2007

Pakistan Telecommunication Company Limited 18

The total revenue for FY: 2006-07 stood at Rs.65.28 billion Commercial Initiatives
against Rs.69.09 billion of FY: 2005-06. The decrease in
revenue was mainly in the domestic segment due to Your Company has now embarked on becoming the Next
competition and reduction in tariffs. The Company is Generation carrier in Pakistan by offering the 21st century’s
making all efforts to boost revenue by improving customer converged services to the consumer, business and carrier
service and launching new services to turn around the markets.
As part of highlighting that change, the management
There has been a remarkable increase of 41.6% in non- initiated work on re-branding the Company as a modern
operating income over last year’s figure of Rs.3.91 billion. and ‘customer centric’ national carrier. Externally, changing
The Shareholders’ equity has also shown a growth of 5.2% of the logo was carried out to reflect the commitment to
as the net worth of the Company rose to Rs.110.91 billion. our customers that will come through modernizing of the
This positive growth was also reflected in the market infrastructure and the state of the art customer services.
capitalization of the Company which increased by Internally, it was to present our employees with a new zeal
Rs. 83.01 billion. Your Company is implementing new plans & determination that stimulates a mindset change from
and strategies to improve revenue and control costs to technology and operations focused company to a
increase shareholders' value. competitive carrier that has customer services as its
hallmark. 19

It takes two
to create a
we and

Annual Report and Accounts 2007

Pakistan Telecommunication Company Limited 20

PTCL chose August 14th, the Independence Day, to launch Pakistan! The hallmark of PTCL service was the removal
its new logo and theme of ‘feel the difference’. To support of the traditional barriers such as the upfront costs of
the new spirit and to reinforce its commitment, PTCL offered installation and customer premises equipment and added
‘free’ nationwide calls to the people of Pakistan. The traffic bandwidth download. This high customer take up also
on 14th August 2007 jumped to 4 times the level on a reflected on the Company’s trusted image in the eyes of
similar holiday to give credence to our hypotheses that the nation. The service is already available in the five
the ‘good old telephone’ Company is still the trusted largest cities of Pakistan and will be expanded into another
landmark of the people of Pakistan. This unprecedented dozen cities during the coming year.
response to free calls on 14th August was a heart warming
experience as it reassured the faith of our customers in Re-launch of V Wireless as Vfone
our services, making us even more aware of our
responsibilities towards putting our customer first. As your Company’s continued commitment to the growth
of telecommunications in Pakistan, V wireless has been
re-branded as Vfone, the new CDMA based WLL platform
more aligned with our core telephony and value added
services that include internet access, fax, SMS and modern
day features available to cellular users around the world.

Vfone brand is poised to become the largest fixed wireless

telephony network of Pakistan. 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 post-
pay 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 PTCL’s networks to stabilize the revenues. After the
initial launch, the Company aims to retain the momentum
Launch of Broadband Pakistan by offering different bundled packages for voice to increase
the subscriber base, including specifically targeting the
The first major product initiative taken towards a changing rural areas where copper infrastructure does not exist.
PTCL during the year 2006-07, was the launch of PTCL’s
Broadband service under the theme of ‘Broadband On Wireless broadband front, a major upgrade of PTCL
Pakistan’ by the Prime Minister of Pakistan. The service WLL CDMA network is underway to provide Wireless
was launched on PTCL’s new state of the art Broadband broadband services in 17 major cities by end 2007.
infrastructure that was added to our network during the Currently technical trial is in progress which will be followed
last three quarters of 2007 with the initial capacity of over by a pilot project on WiMax technology. This will enable
100,000 subscribers. PTCL to maintain its competitive edge.

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