COMSATS Institute of Information

Technology

Pakistan Telecommunication
Company Limited

COMPANY analysis

COURSE: Seminar In Business And Public Policy

Submitted TO: Dr. Irum Khan

Submitted BY:

Sana Munir
Midhat Batool
MBO-II
SEMINAR IN BUSINESS AND PUBLIC POLICY

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

2.6 Products & Services...................................... .................................7

2.6.1 PTCL Landline..................................................................................... .....................7
2.6.2 PTCL V-Fone.................................................................................................. ...........8
2.6.3 Ufone............................................................................................................... ........9
2.6.4 Paknet Limited.................................................................................................. .......9
2.6.5 PTCL Broadband......................................................................... .............................9
2.6.6 Smart Services........................................................................... ...........................10

3 ANALYSIS OF EXTERNAL ENVIRONMENT ....................................11

3.1 Industrial Structure.................................................... ..................11
3.2 Market Operation................................................ .........................12
3.3 Market Structure............................................................. .............12
3.4 Regulatory Environment..................................... ..........................13
4 ANALYSIS OF INTERNAL ENVIRONMENT..................................... .15
4.1 Organizational Management Cycle................................................16
4.2 Financial Aspects....................................... ..................................17
4.2.1 Profitability Position............................................................................ ...................19
4.2.2 Liquidity Position..................................................................... ..............................19
4.2.3 Leverage Position....................................................................... ...........................19
4.2.4 Activity Position................................................................................. ....................20
4.2.5 Dividends.............................................................................. ................................20

4.3 HR Aspects............................................ ......................................20

4.3.1 Training and Development............................................................................. ........21

5 BUSINESS STRATEGIES.............................................................22
5.1 Fixed Line Telephony ........................................ ...........................22
5.2 Wireless Local Loop........................................................ ..............23
5.3 Broadband and Value Added Services............................................23

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6 ENTREPRENEURSHIP – INNOVATION & INCENTIVE PLANS.............25

6.1 Quality Services................................................ ...........................25
6.2 Free Internet........................................................................ ........26
6.3 One Stop Shop................................................ .............................26
7 SWOT ANALYSIS..................................................... ..................27
7.1 Strengths
.................................................................................................. .......27
7.2 Weakness
.................................................................................................. .......27
7.3 Opportunities
.................................................................................................. .......27
7.4 Threats
.................................................................................................. .......28
8 FUTURE OF PTCL................................................ ......................29
8.1 Measures to achieve Set Targets...................................................29
8.1.1 New Technology................................................................................................ .....29
8.1.2 Cross Subsidization............................................................................................. ...29
8.1.3 Price Discrimination...................................................................................... .........30
8.1.4 Vertical Price Squeeze................................................................. ..........................30

9 Bibliography....................................................... .....................31
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1 INTRODUCTION OF TELECOM INDUSTRY

Since the independence of Pakistan, basic telecom services were being provided by a monopolist,
previously called as Telephone and Telegraph department (T&T). The department was being run by the
government and played multiple roles as regulator, policy maker, operator and service provider in the
country. The T & T department was later converted into a corporation. Although the corporation was
earning huge profits from the services, it was re-investing the same profits into the sector for the
provision of more telecom service but the investment was not enough.

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.

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2 PTCL – PAKISTAN TELECOMMUNICATION LIMITED

2.1 Introduction of PTCL

PTCL is the largest telecommunications provider in Pakistan. 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 Pakistan’s economic growth. PTCL has laid
an Optical Fiber 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.

With 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.
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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

• An organizational environment that fosters professionalism, motivation and quality

• An environment that is cost effective and quality conscious
• Services that are based on the most optimum technology
• "Quality" and "Time" conscious customer service
• Sustained growth in earnings and profitability

2.4 Core Values

• Professional Integrity
• Customer Satisfaction
• Teamwork
• Company Loyalty
• Corporate Information

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2.5 Organizational Structure

President

&

CIO

SEVP SEVP Corp SEVP SEVP SEVP

SEVP Finance
Development Operations Commercial Technical
HR & Admin

GM North Zone GM South Zone

2.5.1Bankers
• Askari Bank Limited
• Citibank N.A.
• Faysal Bank Limited
• Habib Bank Limited
• MCB Bank Limited
• National Bank of Pakistan
• Standard Chartered Bank Limited
• United Bank Limited

2.6 Products & Services

2.6.1PTCL Landline

Since the deregulation of the telecom sector, a large number of foreign investors opted for
licenses in LL, LDI and cellular operations, identifying Pakistan as an emerging market. Investors
entered the market forcefully in the cellular segment, introducing heated competition for PTCL.
In this situation PTCL's counter strategy for landline service, during the year 2007-08 was aimed
to increase ARPU, acquire new subscribers and contain churn.
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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 PTCL’s 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.

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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 PTCL’s Broadband service under the theme of ‘Broadband Pakistan’ by the Prime
Minister of Pakistan. The service was launched on PTCL’s 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
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added bandwidth download. This high customer take up also reflected on the Company’s trusted
image in the eyes of the nation. The service is already available in the five largest cities of
Pakistan and will be expanded into another dozen cities during the coming year.

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.

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3 ANALYSIS OF EXTERNAL ENVIRONMENT

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.

3.1 Industrial Structure

Pakistan’s telecom sector has finally begun moving and looked set for an era of phenomenal growth. The
sector has witnessed tremendous growth in recent years with Teledensity depicting major expansion after
deregulation. The primary purpose of deregulation of the sector was to encourage healthy competition
while providing better quality products and services to customers on lower prices as well providing best
technology available worldwide.

Current Teledensity in Pakistan has expanded exponentially from 4.3 percent in 2002-03 to stand at 48.4
percent in 2006-07 with currently standing at over 52 percent, with better services and competitive rates.
Also, increasing inflow of foreign investment in the telecomm sector has resulted in the introduction of
new cut throat technologies for provision of various telecom services including cellular, wireless and
internet services. In recent times, the focus has increasingly shifted from Fixed Lines to Cellular and
Wireless Fixed Lines (WLL), with better portability and convenience. WLL has shown an improvement
from 0.7 percent to 1.1 percent in 2006- 07 from last year with subscribers of 2 mn.

Cellular segment remained the vital player with increase in total Teledensity contributing 48 percent. In
the urban markets introduction of Broadband internet services by various Telecomm giants such as PTCL,
WorldCall and Wateen has further benefited the consumers to access timely information over the internet
with competitive rates. The broadband penetration however has not depicted as much growth as expected
growing with 3.5mn subscribers in 2007 against 2.4mn subscribers in 2006. PTA estimates broadband
subscribers to grow to over 5mn by 2010. WorldCall has initiated cable television services with PTCL
expected to follow suite by providing IPTV services through its Triple Play services, ensuring
diversification of products and services. Recent conducive environment provide by PTA has resulted in
increased FDIs in the sector with investments of USD2.7 bn during the last five years making it the
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largest recipient of highest FDI during the past few years. The future for telephony lies amongst
unexplored rural regions of Pakistan with all major telecom operators looking forward to tap these
markets with a major contribution by WLL and Cellular segments due to cheaper installation costs. With
healthy competition instigating lower local and international tariffs and availability of alternative services
has progressively benefited the consumers overall.

3.2 Market Operation

Pakistan Telecommunication Company Limited, or PTCL, keeps callers connected from Karachi to
Islamabad. The communications services provider offers consumers and businesses with basic landline,
DSL broadband, interactive television, and IP telephony services. The company also provides wholesale
services such as traffic routing and call termination to other carriers. PTCL's subsidiaries include wireless
phone services provider Pakistan Telecom Mobile, which operates as Ufone. In 2006 Emirates
Telecommunications (Etisalat) acquired a 26% stake in PTCL and assumed management control of the
company.

Demand is driven by technological innovation and by growth in business activity. The profitability of
individual companies depends on efficient operations and good marketing. Large companies have big
economies of scale in providing a highly automated service to large numbers of customers, and have the
financial resources required building and maintaining a large network. Smaller companies can compete
effectively only in small markets or by providing specialty services.

Top PTCL Competitors

• China Mobile
• Orascom Telecom
• Telenor

3.3 Market Structure

Wireless Local Loop (WLL) is growing at a rate of about 100 percent per annum as its teledensity has
reached to 1.34 percent by end of December 2007. The quarterly addition of WLL subscriber is
approximately 0.14 million on an average.

PTCL is leading in terms of traffic on WLL in Pakistan, which has about 54 percent market share of total
traffic of WLL segment. Two major players, PTCL and Telecard have lost market share in WLL traffic in
quarter ending December 2007 when compared with the same quarter of the last year. PTCL share came

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down to 54 percent from 57 percent while Telecard share in total traffic has come down to 22 percent
from 30 percent. WorldCall has gained 100 percent and its share reached to 22 percent at the end of 2007
compared 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.

3.4 Regulatory Environment

The local telecom market has altered significantly since the creation of PTA as an independent regulatory
agency and had enjoyed sizeable success to open up the local market to competing operators. With the
governments deregulation policies, Etisalat, the UAE based telecom player being the highest bidder
emerged as the buyer of the 26 percent share in PTCL in April 2006. PTCL, despite being a giant, had to
face many bottlenecks in its operations with such large network.

PTCL has recently taken an initiative to right size itself by introduction of VSS for its employees where
about 28000 employees are accepted under the scheme. Introduction of various diversified products and
services to sustain its market share, Implementation of ERP solutions to provide integration of various
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departments through acquisition of SAP software and state of the art billing and customer service
software, translates PTCL’s long term goals of operational effectiveness into practice. The telecom giant
PTCL has observed cutthroat competition from various service providers after the implementation of the
deregulation policies by the PTA. However, through the vast infrastructure and being the carriers’ carrier,
PTCL with diversification of its various services has enjoyed well-built position and posses immense
potential for growth, while need for telecom services is on rise as economy continues to grow on the right
track.

The telecom De-regulation and Cellular Mobile Policies announced by the Federal Government place
certain obligations on Pakistan Telecommunication Company Limited (PTCL) to facilitate market
liberalization. PTCL is bound to comply with these obligations within a stipulated time frame. These
obligations are of paramount importance for successful implementation of the policy and failure or any
deviation thereof may result in substantial damage to the deregulation process/liberalization program.
Similarly Defense, NTC and SCO also depend on PTCL for many facilities. Therefore, PTCL has
important obligations towards Defense of the country and other existing operators. In addition, PTCL has
been declared SMP operator. Under the status of SMP also, PTCL has certain obligations. PTA, as
regulator, has to ensure that new management of PTCL fulfils all these obligations.

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4 ANALYSIS OF INTERNAL ENVIRONMENT

Being a public limited company whose majority shares are controlled by the Government of Pakistan,
PTCL is responsible to provide telecommunication services in the country on affordable prices while
ensuring that the telecom services become accessible throughout the country. Since exclusivity of PTCL
has ended on 1st Jan 2003, the telecom sector of Pakistan has entered into a new era and PTCL is slowly
moving towards competition in the basic telecom services. The company’s policy objectives are as
follows:

• 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 Government’s financial position by expanding the taxable
revenue base.
• Accelerate expansion of telecom infrastructure to extend telecom services to unserved and
undeserved areas.
• 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.
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4.1 Organizational Management Cycle

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.

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4.2 Financial Aspects

The structural adjustments undertaken by the company in response to the increased competition and
substitution impact of mobile expansion has adversely hit the profitability of PTCL in the short run. The
first quarter of FY'08 recorded a drop in profitability of PTCL, as the company's profit after taxation
declined 41.5% over the three months period to September 2007, as compared to the same period last
year. Sales revenue dwindled during three months period, reaching Rs 14.4 billion, compared to Rs 16.9
billion last year, depicting a decline of 15%. A 6% rise in operating expenses as a result of high
provisioning against doubtful debts and infrastructure development for high speed DSL connections,
combined with a 32% increase in financial charges, provided a further blow to the bottom line.
Consequently, operating profit declined 46%. However the effect on net profit was somewhat diluted by a
14% increase in non-operating income of the company so that the company posted profit after tax of Rs
3.01billion, compared to Rs 5.15 billion in1Q'07.

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.
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Fig Below: 5 years Financial Analysis of PTCL

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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.
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This was brought about mostly due to a decline in current liabilities of the company in FY05 and
an increase in the same in FY06. The absence of the dividends payable portion of current
liabilities in FY05 and its coming back online in FY06 was an important contributor to the trend.
Further, the FY06 also saw an increase in short term borrowings of the company, complemented
by increases in other components of current liabilities. Increases in assets, mainly arising from
higher cash and bank balances, could not prevent the trend of the debt ratios.

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.

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The VSS marked the single largest most successful exercise in the history of Pakistan. In the highly
challenging marketplace, PTCL HR wing stepped forward to facilitate the emergence of new Corporate
Culture by becoming Equal opportunity employer, inducting fresh blood from the market, improving the
way PTCL runs and reducing the number of employees having outdated skill set. The Training &
Development wing of the HR Department also organized a comprehensive six months “Urgent Training
Needs” program in technical and managerial fields to enhance soft skills. An MoU was also signed with
Etisalat Academy to benefit from their experience in training programs.

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.

4.3.1Training and Development

The role of training and development in a service involved organization is many times more in
comparison with what it has in a manufacturing involved organization. This role becomes more
significant in a situation where the need to transform organizational culture is identified as the
most glaring problem and the most difficult impediment on the way to organizational growth.
PTCL employees are a great asset not only for the company but also for the country. Their
marvelous potential is yet to be exploited. Their skills need to be developed, their expertise need
to be updated for which training and development department is at their disposal to cater to their
training needs.

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.
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5 BUSINESS STRATEGIES

As part of the Company’s 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.

5.1 Fixed Line Telephony

PTCL’s fixed line segment has witnessed decline in numbers in 2006-07 as against last year with a
decrease of 452K lines during the past year. The market for the FLL segment has least amount of
penetration primarily due to the major inclination towards cellular and wireless segments by users.
PTCL’s fixed line potential is anticipated to remain stable with its having the largest network, coverage
and better quality service as compared to WLL and cellular networks. The fixed line segment is

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anticipated to cater the needs of the business community at large and as expected is to be driven by the
country’s future economic growth.

5.2 Wireless Local Loop

PTCL’s WLL segment has depicted immense amount of growth, nevertheless at a slower pace than
expected. It started its service from the northern regions slowly moving towards the metro cities using its
CDMA wireless technology. WorldCall and Telecard were the other major operators that introduced the
WLL services using CDMA2000 and CDMA technology to cater the needs of its customers. Telecard
started its operations from Karachi, flowing into Baluchistan region while WorldCall initiated its
operation in Lahore in Jun 2005 with aim of rollout its network to update its capacity to 1.5 mn
subscribers in the years to come. PTCL has been facing stiff competition however with vast presence and
infrastructural facilities across Pakistan, has the potential to outrun its competitors in the segment.

5.3 Broadband and Value Added Services

PTCL through diversification and assorted products and services could retain its fundamental presence in
the Telecom Sector. Introduction of DSL Broadband services across major cities with plans to include
more cities in times to come will enhance the revenue base of PTCL. Stiff competition from other cable
based broadband service providers and local cable operators still persists. PTCL’s broadband services
were introduced in Jun 2007 with free installation service with an initial capacity of 100,000 subscribers
by providing services in the five largest cities and had a decent start by adding over 10,000 subscribers
within the first few months of its operations depicting PTCL’s brand recognition. Furthermore, with the
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introduction of WLL segment, Phone N Net, IPTV, VMS and Carrier Services is expected to bring
product leadership in the sector.

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6 ENTREPRENEURSHIP – INNOVATION & INCENTIVE

PLANS

6.1 Quality Services

In order to have sustainable business performance in the highly competitive environment of the Telecom
industry, PTCL has to deliver highest quality services to its customers. Quick provisioning of PTCL
services brings lot of value to the customers which not only guarantees more revenues but creates
goodwill for the company.

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:

• Implementation would be highly transparent, with zero tolerance for abuse.

• It would cover Installation/Provisioning of Telephone (wire-line) & Broadband connections.
• 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).
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6.2 Free Internet

PTCL proudly presents Free Internet facility for its landline valued customers. All PTCL landline
subscribers can now experience the best dial up speeds with unlimited internet usage during night hours
from 10:00pm to 07:00am. Furthermore subscribers can also avail up to 100 hours of free dialup internet
on monthly basis from 0:700 am to 10:00pm every day.

Offer/ Package Details:

• 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.

6.3 One Stop Shop

Customer service is a series of

activities designed to enhance the level
of customer satisfaction – that is, the
feeling that a product or service has
met the customer expectation. High
standard customer service is an integral
part of PTCL’s customer value
proposition. As part of strategy PTCL has
invested 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

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feedback about services standards at these OSS is very positive; these centers help
us to provide better service to our customers.

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, Ufone’s
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

• Low teledensity of pakistan.

• Have vast infrastructure and real estate assets which can be leveraged further.
• Global connectivity reliability has been improved. PTCL is expanding the long distance and
infrastructure side through spreading out two sea-me-we submarine cables..
• Partnership with new entrants in a deregulated environment.
• Scope for efficient/cost effective operations.
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7.4 Threats

• Increased competition in long distance continues to exert pressure.

• VOIP use is increasing despite ambiguous and discriminatory policies
• Exposure to market competition
• Migration to Cellular Networks
• Ability to Attract & Retain Quality Professionals
• Reduction in International Settlement Rates

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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 Measures to achieve Set Targets

The management of PTCL has been adequately preparing itself to face the forthcoming challenges of
deregulated environment. Appropriate structural changes have either been initiated or these are underway.
To face the challenge, a new Marketing and Business Developing wing headed by a Member with
appropriate organizational structure has been made functional with a view to expanding business and
taking good care of the customers. Some other initiatives are as follows:

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
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Pakistan, it can be safely concluded that cross subsidization is not possible in Cellular Mobile and
ISP markets. However, in Fixed Line segment, there is a real possibility of cross subsidization.
PTCL can lower rates of line rent, installation charges and local calls and correspondingly
increase rates of NWD and International out bound traffic/maintain present level/ lower the prices
but still remain on the higher profit margin side. Alternatively as part of overall business strategy,
it can offer different packages i.e. residential and corporate customers, rural and urban and
economy groups etc. within each package the prices can be cross subsidized. This practice can
have adverse effects on the growth of other licenses particularly those not having vertical
integration. This abuse can be controlled through license conditions and accounting separation
which will determine the existence of cross subsidization.

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.

8.1.4Vertical Price Squeeze

PTCL can increase the price of upstream input (local access). It monopolizes, and keep the
downstream services (ISPs, DSL and Payphones etc.) price same. The effect would be reduction
or elimination of the profit of downstream service providers because their margins would be
squeezed. To increase the squeezing effects, PTCL can also reduce downstream price of its own
services. To control price discrimination, the regulator can impose wholesale cost imputation
requirements.

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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

o Company’s website - www.ptcl.com.pk

o Company Annual Reports
o Magazine Business Economist
o Google.com
o Economic survey of Pakistan
o Businessrecorder.com
o Security and Exchange Commission of Pakistan
o Kse.com
o Yahoofinance.com
o PTA Reports