Strategic Decision Privatization of PTCL by Government of Pakistan

Muhammad Hassan Maqbool 1

Dr Nadeem Kureshi
Center for Advanced Studies in Engineering, Islamabad, Pakistan
University of Engineering and Technology, Taxila, Pakistan
Abstract
PTCL is a mega corporation and a leading telecommunication services provider in Pakistan. The
company provides the telephonic services nation-wide and is the backbone for country's
telecommunication infrastructure. The company managed and operates around 2000 telephone exchanges
across the country, providing the largest fixed line network. Data and backbone services such as CDMA,
Broadband Internet, IPTV and wholesale are an increasing part of its business. Originally, PTCL was one of
the governmental organizations; the share holding of the PTCL has been reduced to 62%, when 26% of
shares and control was sold to Etisalat Telecommunications and the remaining 12% to the general public in
2006 under an intensified privatization program. However, the 62% shares are still remains under the
management of government.
Research Methodology
The purpose of this study is to analyze and understand the post-privatization performance of an
organization; like competition i.e. government would create competition and rivalry amongst the
stakeholders to reduce price and improve quality and to bring innovation and technological change,
profitability i.e. the main purpose of doing business, growth i.e. if the growth is slowed down, means either
the market has matured or products and services quality is not satisfactory to attract customer and the to
compete in the market with another hi-tech firm, the operation of the firm is profitable and is continuously
serving the growth, then government succeed in its purpose of privatization.
The most suitable situation for this case is the qualitative study. Qualitative approach is used when
the basic purpose of the study is to understand and gain insights (Ghauri P, 2005). This method is used
when the purpose of the study is to create understanding of certain phenomenon, this is more flexible
method and its results are rich and descriptive (Johansson, 2007-08).
The two basic types of data are primary and secondary. Primary Data is the data that is collected
for the current study, whereas, Secondary Data is data collected by someone for some other studies. A
case study often involves data collection through multiple sources such as verbal reports, interviews and
observation are primary data sources. Beside this, case studies also involve data collection through
sources like financial statements, data that existed in archives, budget and operating reports, competition
and marketing report. So keeping in view the overall scenario of our study which is basically a case study,
we will adopt qualitative method with emphasis on secondary data.
1 hassan.maqbool@gmail.com (00923215368883)
1

The paper is descriptive in nature. The paper uses case study design to present the artifacts for
privatization of PTCL. All the data presented in the paper have been collected from published sources in
print media and official and reliable sources of the organizations, authorities and companies available on
internet i.e. secondary data.
Justification of the Study
Privatization is one of the areas of interest for researchers, investors and governments. A large
number of studies have been undertaken. But this study has its own importance because it covers the
financial, administrative, technical and market aspects. This study will be helpful for upcoming researchers
in the field of privatization. The management of PTCL and concerned ministries of Government of Pakistan
can also take decisions in the light of findings and recommendations of this study.
Objective of Study
The objective of this study is to verify hypothesizes through thorough and exhaustive research and
sufficient proof; also look into reasons if the hypothesizes are refuted.
Why Privatize?
To bring private owners instead of state owners means effective and efficient economy and quickly
dealing with the property rights (Roland, 1994). Privatization is the process by which the private sector
assumes the operations and functionalities of a government organization which were previously undertaken
by the government. This includes sale of a public organization, PPP or contracts to deliver public goods and
services. The bottom line remains in each case that the operations are transferred from public to private
sector. The goals achieved by this process are enlisted below.

It fosters competition, eliminates monopoly, thereby, enhances efficiency and effectiveness.

Original and full cost of the services and goods is revealed to the public avoiding political and
economic motives of the government.
Private sector investments in R&D, modernize, advance and enhance its technology.
It attracts investment and capital market develops.
Minimize drain on government resources caused by the persistent losses of a public enterprise.
This could generate capital for the government.
Restructuring eliminates not-required labour thus increasing productivity.

It is clearly revealed in the table 1 below that privatization process is not furnishing with the
expectation i.e. increase in efficiency, quality and profitability in post privatization era of the organization or
the outfit.

Better
Same
Worse
Total
PME
9
13
16
38
Misc
3
10
1
14
Ghee
2
12
5
19
Mills
2
6
8
Rice Mills
2
2
4
Banks
18
37
28
83
Total
22
44
34
100%
Table 1.Privatization Effects on Organizations (Akhtar, 2004)
Privatization Policy of Government of Pakistan
(PC, 2012) Privatization Commission was created on 22 January 1991. The original mandate of the
commission was only restricted to industrial sector. However, by 1993, the agenda of privatization covered
a wide spectrum of fields and organizations like industry, bank, development finance institutions and capital
market, telecom, energy and electricity and infrastructure facilities for the stimulation of private sector. From
the date of creation of commission till financial year ending on June 2009, a total of 167 transactions have
been approved by the Government of Pakistan totaling to amount PKR 476.421 billion. The sources of
proceeds for this amount in different sectors are shown in the graph in figure 1.
About 66.3% of the proceeds have been received in foreign exchange. 67% of the acquired capital
was given to the Federal Government in it treasury. The distributions of proceeds are shown in graph in
figure 2.

Figure 1. Sources of Proceeds for PrivatizationFigure 2. Distribution of Proceeds for Privatization

The details of the privatization since the conception of the Privatization Commission till June 2010
are tabulated in table 2.

Sector

Sale Proceeds from 1991

to June 2010
No
Amount (M)
Banking
7
41023
Capital Market Transaction
22
133124
Energy
14
51756
Telecom
4
187360
Automobile
7
1102
Cement
17
16177
Chemical
16
1643
Engineering
7
182
Fertilizers
7
40281
Ghee Mills
24
842
Rice
8
236
Roti Plants
15
91
Textile
4
370
Newspapers
5
270
Tourism
4
1805
Others
6
159
Total
167
476421
Table 2.Sale Proceeds from 1991 to June 2010
Privatization in Telecom Sector in Other Countries
Private sector is not allowed to invest in telecom sector in a number of countries like China and
Saudi Arabia. However, majority of the countries have shifted to free economy and shifting from command
and mixed economies. This has also affected the telecom sector likewise.
India.
(DoEA, 2009) Telecom equipment was completely deregulated in 1991. Cellular services
were made open to private sector in 1992 and National Telecom Policy (NTP) was announced in 1994.
Independent regulatory body to regulate the affairs of telecom sector was formed in 1997 under the name
of Telecom Regulatory Authority of India (TRAI). ISPs were opened to the private sector in 1997. Various
amendments in the NTP and fee regulations have been done over the period of time.
UK.
Telecom industry in UK dates back to 1881 and in 1984 the British Telecom was privatized.
Broadcasting transmitters that belonged to BBC and IBA were privatized in 1990s (Wikipedia,
Telecommunications in the United Kingdom, 2012). Ofcom (Office of Communication) is the regulatory body
in UK. It was created on 29 December 2003 to control and regulate all matters related in telecom industry
(Wikipedia, Ofcom, 2012).
Bangladesh. Bangladesh opened the telecom sector and removed the sector from its reserve list in
1997. However, at that time Government of Bangladesh did not develop any regulatory body. Further many
of the cellular companies that invested in the country had to face many problems, dependence on
4

Bangladesh Telegraph and Telephone Board (BTTB) for long-distance calls was one of the major problems
(Jean Camp).
Hypothesis and Reasons
PTCL was privatized in the year 2005-06 under the Government of Pakistan initiative to move from
command or mixed economy to free economy and make the governmental departments privatized under
the Privatization Commission. This would result in better QoS, more competitors, new products and
services, healthier economic cyclic rotation and enhanced customer satisfaction. Though, the telecom
sector was opened to private investors and organizations in 1990s, in the shape of cellular telephone
service and other such areas, however, the FLL network has been the monopoly of PTCL since its
inception. This privatization has been done in the light of many international agreements and requirements
of the Government of Pakistan to generate some revenue and economic development of the country. As
per the Government of Pakistan, Finance Division, Year Book Financial Year 2005-06, FDI was record
highest at 20% of GDP of over 3 billion USD, Revenue increased by 21%, Public Debt to GDP ratio
declined to 56%, External Debt declined by 1.6 billion USD and Foreign Exchange Reserves touched an all
time high at 13.1 billion USD (Finance Division, 2005-06). These figures illustrate that the economy was
booming at that time. Though, PTCL revenue would be peanuts for the government however, it contributed
considerably to the national exchequer. Further, telecom industry has been fast developing internationally
technically and technologically, where PTCL lacked considerably. International community has been fast
moving from Command and mixed economy to free economy and free trade doctrine was getting popular.
Based on the reasoning and explanation given above, following hypothesis are made to be proven or
refuted as the case may be for the case study.
Hypothesis 1. PTCL privatization was to improve the efficiency of the company.
Hypothesis 2. PTCL was to be made state-of-the-art organization with latest technology and services by
privatization.
Hypothesis 3. GoP privatized PTCL to follow international binding agreements on free trade market.
Hypothesis 4. GoP generated revenue out of the privatization process and get more revenue than it was
already giving.
PTCL Privatization
PTCL
The brief history of PTCL from the time of independence in 1947 till date is as follows (Muhammad
Fahad Siddiqi):
Telegraph and Postal Department was established in 1947.

Telephone and Telegraph Department was established in 1962.

Pakistan Telecom Corporation was established in 1990-1991.

PTCL was listed in the Karachi Stock Exchange in 1996.

5

Internet and mobile subsidiaries was established in 1998.

Policies of Telecom sectors were finalized in 2000.
Deregulation policy of Telecom sector was announced in 2003.

Privatization of PTCL
PTCL was privatized in August 1994 by selling 2% of its shares to General Public through Stock
Exchange. Then 10% of its shares were sold in September 1994 through DR (Disaster Relief) Form. Finally
26 % of the shares along with the management control were offered in July 2005. PTCL itself is composed
of three business units i.e. Ufone, PakNet and landline network countrywide. PakNet was unable to deliver
what it was meant to and was not affective. Therefore, it was later dissolved. The present broadband
services are being provided under direct supervision of PTCL itself. PTCL is worth about USD 10 billion.
Three companies were short listed for final bidding. These companies were Etisalat from a UAE
consortium, SingTel from Singapore and China Mobile from China. In 2006, the final bid was secured by
Etisalat at highest price of USD 1.96 per share, whereas, SingTel offered USD 1.16 per share and China
Mobile offered USD 1.40. Etisalat offered a total of USD 2.6 billion for 26% of the shares and the
management control of PTCL. 66% of the shares are still held by the GoP. Resultantly, Etisalat is now in
management control of PTCL, PakNet and Ufone.
Share Holder

Percentage
GoP
66 %
Etisalat
26 %
General Public
14 %
Table 3. Percentage Share of Each Share Holder
Reasons for Privatization of PTCL
There could be hundreds of reasons to make any company privatized. They may range from
political to economical and from technological to socio-cultural issues. However, a few concerning PTCL
has been outlined under, illustrating different opinions and dimensions of the privatization.
International Binding Agreements Obligations and Compulsions.
T&T department was converted
into Pakistan Telecommunication Corporation under an Ordinance on 15 December 1990 under the
pressure of World Bank (Muhammad Anwar Jamal Shah, 2009). WTO signatories have binding upon them
to ensure market access non-discriminatorily to all multinational companies in the entire services sectors in
the country (Klimenko, 2001). 160 services sector have been identified by the GATS and telecom sector is
one of them. To what extent the signatories have implemented this is another issue. Out of a total of 149
signatories, 45 have liberalized 80 of 160 sectors only (Adlung, 2000). Rest remains quite on it. Pakistan
had to follow WTO obligations since Pakistan signed the agreement on 1 January 1995. This resulted in
investment in telecom sector in cellular telephones, ISPs and most recently the privatization of state owned
PTCL (Shah, 2009).Under the ordinance of July 1995, "Pakistan Telecommunication Corporation" was
transformed to "Pakistan Telecommunication Company Limited" in 31 December 1995. The Ordinance of
1995 was replaced by an act in October 1996 called "Reorganization Act". This act provided the base for
6

reorganization and restructuring of the telecom sector in general and of PTCL in particular. As predicted in
the act PTA and FAB with the help of World Bank Project were expected to achieve the objectives.
Market Barriers Technology Advancement. Non compliance with the development and advancement in
technology is one of the barriers that could hinder to improve efficiency and productivity of the any
organization. Being a state run company, it would have been very difficult for PTCL to provide new and
better services to its customers by improving its infrastructure and technology. Up-gradation of its technical
infrastructure from POTS to NGN, from TDM based multiplexing to DWDM, provision of broadband internet,
CDMA based WLL are a few of the services and improvements that have come up after the privatization.
Requirement of Investment. An interview with Business Recorder of Mr Walid Irshaid, Group President
and CEO of PTCL was published on the official website of the magazine on January 9, 2012. The interview
clearly indicates the future plans of PTCL executives for improving the services by pouring in investment to
the tunes of billion of rupees between 2011 and 2016. According to him, 2006-2011 were the years of
transformation and 2011-2016 would be the years of consolidation. Therefore, it would have been very
difficult for GoP to pour in such huge amount of money into PTCL and make it what it is now and what it
would be in years to come (Report, 2012).
Ensure Fair Competition, Brand Loyalty and Profitability.
Promoting competition and rivalry among
the companies is one of the methods for improving standards and quality with in an industry. Further, this
would help in generation of revenue from the industry that would add on to the governments treasury.
About 200 telecom related licenses were issued by the GoP to the private sector between 2004 and 2006
and out of which 40 are presently working on ground in one form or the other (Muhammad Fahad Siddiqi
M. N.) Competition and rivalry forces the companies and competitors in an industry to improve their quality
and productivity to attract maximum of customers to purchase and use their products. Continuous
improvement and steady post sales services ensures brand loyalty. With the inclusion of private
companies, number of competitors increases in an industry. Consequently, the customer has more options
to choose from and brand loyalty becomes a challenge for the organization. One of the many ways of
keeping the customers is to lower the price and improve the quality of your service or product. This all will
certainly increase customers satisfaction, ultimately ensuring profitability to the organization.
Least Government Intervention and Burden on Governments Treasury.
After the privatization,
the government will have least or minimal intervention and most of the times it is just the regulatory body
(PTA in case of Pakistan) that would intervene to settle the conflicts between the telecom operators, if any.
Government is then left to policy formulation tasks only. Further, government will not go for escalating
commitment or even if the situation is otherwise, this will cause reduced or minimal burden onto the
government treasury.
Growth of Telecom Industry. With improved profitability, advancement and development in technology,
better jobs, more investment, fair competition, superior policies, least governments intervention,
introduction of new and better products and services and compliance to the international industrial
standards PTCL has certainly brought revolution into the telecom industry and the way it was thought to be
7

when it was a state owned organization. This has over all improved the quality and quantity of the telecom
sector as a whole. Telecomm industry is contributing a large amount to the national exchequer. This
contribution is to the tune of 100+ billion of rupees. Details from the year 2005-06 to 2010-11 are given in
table 4 below. The figures are in millions of rupees.
Year
2005-06
2006-07
2008-09
2009-10
2010-11

GST Act Chg PTA Dep

Misc
26.8
11.4
17.38
21.55
36.28 17.6
9.72
36.95
44.61 19.2
10.86
36.96
44.0
6.6
13.6
44.9
52.6
7.2
12.0
45.2
Table 4. Telecom Contribution to Exchequer

Total
77.13
100.55
111.63
109.0
117.0

Pre and Post Privatization PTCL

In this section, we shall only compare the state of PTCL in year 2005-06 and 2011-12. The condition of
PTCL could be judged only through the telecom indicators which are analyzed below (PTA, 2006), (PTA,
2012), (PTA, PTA, 2012) .
Teledensity. The teledensity in 2005-06 stood at 26.6% and has exponentially increased to 72.1% by
May 2012. Further, PTCL with introduction of Wireless Local Lope (WLL) has increased its WLL
subscribers, maintaining equilibrium to decreasing Fixed Local Lope (FLL).
Category
Ufone
WLL
FLL
Broadband

No of Subscibers
Pre
Post
7,487,005
23,550,270
5,128,442
2,961,915
661,532
1,644,283
26,611
849,228
Table 5. Teledensity

Difference
+314 %
-173 %
+248 %
+3191 %

Ufone.
With increase in cellular teledensity from 22.21% in 2005-06 to 68.6% in May 2012, Ufone
has increased the subscribers from 7,487,005 in 2005-06 to 23,550,270 in May 2012, with an increase
of approx 314%.
PTCL.
PTCL had 5,128,442 FLL subscribers in 2005-06. This number has reduced to 2,961,915
in 2011. FLL teledensity has decreased from 3.37% in 2005-06 to 1.7% by May 2012. This has
happened due to increased inclination of the public towards cellular phones. On the other, WLL
subscribers have increased from 661,532 in 2005-06 to 1,644,283 in March 2012. WLL teledensity has
increased from 0.66% in 2005-06 to 1.8% by May 2012.
Broadband.
FLL Broadband subscribers were 26,611 in 2005-06 and have increased to
849,228 in April 2012 by an increase of approx 3191.2%. Though this increase is quite high, but this
has been adversely affected by HFC, WiMax, FTTH, EvDO and other technologies introduced by
8

different companies with different packages and with varying degree of customers requirements and
customer satisfaction.
Revenue.
Revenue from the telecom sector stood at 194,562 million rupees in 2005-2006 it has
increased by 186.53% to 362,935 million rupees in the year 2011-2012. The bulk of the revenue though is
coming from the cellular sector. However, the revenue for FLL has decreased from 71,186 million rupees to
58,320 million rupees, for LDI has increased from 7,199 million rupees to 29,954 million rupees, for WLL
has decreased from 12,453 million rupees to 4,849 million rupees and for VAS decreased from 13,827
million rupees to 7,052 million rupees from 2005-06 to 2010-11.
Category
FLL
LDI
WLL
VAS

No of Subscribers
Pre
Post
71,186
58,320
7,199
29,954
12,453
4,489
13,827
7,052
Table 6. Revenue

Difference
-122 %
+416 %
-277 %
-196 %

Investment. The boom in telecom sector was witnessed from year 2006 to 2008 with the bulk being
invested, in any form, during this time period. Major portion of the investment was still in the cellular sector.
Figure 3 shows FDI in telecom sector (blue) compared to the total FDI (red) in the country. The amount is in
billions of USD.
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

Figure 3. FDI in Telecom Sector vis--vis Total FDI

Table 7 shows investment in telecom sector in various fields. The amount is in billion of USD.
Analyzing the figures of the table, it can be concluded that bulk investment was done by FLL operators,
PTCL being the SMP for this sector, during the years 2006 to 2009. 747 million USD were invested in WLL
9

during the year 2006-07 soon after the privatization of PTCL. Likewise, 342.1 million USD were invested in
FLL in year 2007-08. This concludes the new management of PTCL was all out to improve the quality and
diversify its products line to attract maximum and diversified customers with varying requirements.
Year
Cellular
LDI
FLL
WLL
Total
05-06
1,420.90
50.5
0.3
259.4
1,731.10
06-07
2,584.50
602.8
40.6
747
3,974.80
07-08
2,337.70
403.9
342.1
52.8
3,136.40
08-09
1,229.75
276.75
57.37
82.11
1,646.98
09-10
908.8
183.1
22.5
23
1,137.51
10-11
358.6
108.8
18.2
10.2
495.81
Table 7. Investment in Different Divisions of Telecom Sector
Services and Products.
The pre privatization services and products of PTCL include FLL, dialup
modem internet and limited broadband internet. This is far backwards compared to international standards
and the technologies prevailing at that point of time. Post privatization services and products are in line with
the latest technologies of the world and are the state-of-the-art. These includes CDMA based WLL (Vfone),
broadband internet based on copper and OFC (PTCL Broadband), wireless internet based on EvDO Rev A,
B, C (EVO). 3G tab (PTCL EVO Tab) (Wikipedia, 2012). Data products include IPLC, MPLS / International
VPN, IP Transit and Satellite and Radio Solutions (PTCL, 2012). PTCL offers HD TV based on IPTV (Smart
TV) and home security and alarm system over broadband (iSentry). PTCL is also part of the consortium of
three major Submarine communication cable networks (SEA-ME-WE 3, SEA-ME-WE 4 and I-ME-WE).
Various products have also been launched by Ufone in consistency with the technology and market
requirements.
Competition between WLL Providers. With the introduction of WLL, based on any type of technology, it
has made its place in the market. The market has accepted this service due to its almost same tariff plans
and added advantage of mobility. A total of 17 licenses were issued by PTA. Out of 17, 4 licenses have
been cancelled, 1 has been suspended and 2 are non operational (PTCL, 2012). Therefore, 10 are
competing in the market. Out of these 10, only are providing WLL telephone services that include PTCL,
TeleCard Limited and WorldCall Telecom Limited. Therefore, the market has 3 competitors in total to
compete. PTCL leads the market with 54% of the market share and TeleCard and WorldCall both at 22%
(Muhammad Nomaan, 2009).
Stock Price Comparison and Financial Performance. A detailed analysis of the PTCL shares has been
carried out in a study. It gives an insight to the differences that came to surface in pre and post privatization
era of PTCL. The findings are summarized here to further proceed in the case study (Muhammad Fahad
Siddiqi M. N.).

Stock Performance. Stock exchange data has been analyzed for 4 years (2 pre and 2 post
privatization year) i.e. from 1 January 2003 to 31 December 2006. Four variables have been used
to measure the stock performance, which are Average Share Price (ASP), Stock Return (SR),
Volume of Stock (Vol) and Number of Trades (NoT). ASP and Vol has increased, SR and NoT has
10

decreased. Standard deviation has increased for ASP, SR and Vol symbolizing volatility of the
market. The details of each are given in table 8.
Financial Performance.
The financial performance has been measured basing upon 10
years data (5 pre and 5 post privatization year) i.e. from 2000 to 2009. Four variables, which have
been used to measure the financial performance, are Operating Profit Margin (OPM), Net Profit
Margin (NPM), Return on Equity (ROE) and Earning per Share (EPS). The details of each are
given in table 8. It can be significantly made out that all the variables have declined after
privatization and have become more volatile. The Significant Value is greater than 0.05 (less for
OPM) indicating that no changes in these variables is significant statistically.
Pre ASP
Post ASP
Pre SR
Post SR
Pre Vol
Post Vol
Pre NoT
Post NoT
Pre OPM
Post OPM
Pre NPM
Post NPM
Pre ROE
Post ROE
Pre EPS
Post EPS

Mean
SD
SV
35.77
7.2
0.00
55.13
10.61
0.0004
0.014
0.57
-0.0002
0.019
12326.20
11906.26
0.00
21213.80
35907.23
2111.30
1503.94
0.00
4363.02
5205.71
48.67
3.87
0.027
29.26
9.29
30.39
5.13
0.19
17.96
13.60
26.82
3.61
0.09
13.38
10.83
3.29
1.72
0.74
2.72
2.22
Table 8. ASP, SR, Vol, NoT, OPM, NPM, ROE and EPS

PTCL as SMP (Significant Market Power) Operator. PTCL owns the only OFC that extends North to
South, along the eastern bank of River Indus, in the country and thus has complete dominance over the
OFC. It also enjoys complete dominance and control IPLCs (to clear the international calls etc),
SEAMEWE-II & IV (to connect Karachi with Mumbai and to the world) and the PTCL earth stations (to clear
satellite communication). This entails that all the other companies and competitors are dependent on PTCL
for one purpose or the other for interconnection of different terminals at distant locations to provide hi-tech
services to its subscribers. Though some of the companies have OFC of their own, but still there are many
places where they are dependent on PTCL. Therefore, PTCL always has some dominant role to play in
provision of services by other companies in the market. As per the survey carried out by PTA and
determination signed and published on 15 July 2010 by the Chairman PTA Dr. Muhammad Yasin, PTCL is
SMP in almost all of the regions of the country (PTA, 2010).
Obligations towards Defense Forces. There are many places where the FLL communication has not
been extended by the Defense Forces as per their requirement. This is so because it is not financially
11

feasible to undertake mega projects to cover the length and width of the country by the defense forces.
Therefore, telecom requirements of defense forces are met by PTCL in various remote places of the
country. Further, apart from all this, PTCL also supplements defense communication at all major tiers. This
dependence has enhanced with improvement in the technology of PTCL and provision of better and more
services like IPTV, security solutions using CCTV cameras, broadband internet and CDMA based WLL.
The mobility and volatile nature of defense operations (sometimes) dictates compromising the security for
the sake of maintaining impetus (Army, 2007).
Post-Privatization on PTCL
Customer Satisfaction
A survey was conducted online to find out the customer satisfaction level. After a period of 1 month
online, the results of the survey were collected on 5 December 2012. 31 individuals responded to the
survey. The questionnaire was available online at URL http://kwiksurveys.com/app/rendersurvey.asp?
sid=zsu532b2onwit1n43855&refer=. 67.74% of the respondents were PTCL users for more than 10 years
and 22.58% were users for more than 5 years, which ascertains that our sample could lead to reliable
results to evaluate pre and post privatized PTCL. 38.71% were of the age 25-30 and 32.36% were 30-35.
Therefore, bulk of the sample was youth. 100 % of the respondents used PTCL at their homes. The results
of questions 5-8 (total in 4) are critical to this case study. The results are graphically represented below.
60

60

50

50

40

40

30

30

20

20

10

10

Figure 4. PTCL Quality of Service

Figure 5. PTCL Products
(Question 5 & 6 comparison)
(Question 7 & 8 comparison)
Note: Blue bars are for pre privatization & Red bars are for post privatization
12

87.1% respondents think that privatization has improved the efficiency of PTCL and 74.19% are
satisfied with the services and products of the company.
SWOT Analysis of PTCL
The arguments and artifacts given in the preceding paragraphs show diverse impacts and bearings
of re-regulation, reorganization and privatization process in telecom sector in general and PTCL in
particular. Nevertheless, to know the existing internal situation strengths and weaknesses of PTCL and
the present external environmental condition opportunities and threats in the telecom market vis--vis
PTCL, SWOT analysis of PTCL is done and anticipated as given below.
Strengths. The predictable strengths of PTCL are as under:

Pakistan largest telecom company and the backbone of basic telephony services with about
approximately 2.9 million subscribers as on December 2011 (PTA, 2012). Further, PTCL has a total
of approximately 23.5 million subscribers for LL, WLL and GSM (PTA, 2012).
Hub for the entire basic telecommunication infrastructure.
Approximately 2000 state-of-the-art exchanges all over the country (Wikipedia, 2012).
Internet facility on basic telephone line and DSL with speeds up to 50 Mbps (VDSL) (PTCL, 2012).
With the brand name "Vfone" using CDMA based WLL to provide services of fixed line on-the-go
and has a largest network across the country. It has around 1.42 million Vfone customers (PTA,
2012).
Ufone is a PTCL subsidiary for mobile communication. It is country's third largest mobile phone
operator with 19.6 % market share, and about approximately 23.83 million subscribers as on May
2012. (ibid)
Ufone has the top class technology and services in mobile telecom sector. It is continuously
expanding its coverage and customer base.
Ufone has a balanced and exhaustive sales and after sales network. It owns 17 service centers,
359 franchisees and 9 one stop shops all around the country (Ufone, 2012).
There is a consortium of the three "Submarine Communication Cable" networks called I-ME-WE,
SEA-ME-WE 3 and SEA-ME-WE 4. PTCL is part of the consortium.
PTCL has two Intelsat earth stations near Karachi and Islamabad. Intelsat provides international
voice connectivity and works as a hub for domestic satellite users. There are four standard B
Intelsat stations at Gilgit, Skardu, Gwadar and Islamabad, for remote connectivity.
PTCL owns more than 20,000 km fully redundant, fiber optics DWDM backbone network and
connecting over 1062 cities and towns. It has a 270 GB bandwidth backbone (PTCL, 2012).
PTCL is providing major infrastructure services in the form of backbone (OFC or OFAN) to the
LDIs, local loop operator, ISPs, payphone operator and call centers.
In Pakistan, PTCL has the fastest growing and largest network of broadband services. Within a
short time, it has acquired more than 1 million subscribers across the country in over 1000 cities,
since its launch on 19 May 2007 (PTCL, 2012).

13

PTCL offers "digital interactive television" services with the highest digital quality (not HD) picture.
Approximately 120+ TV channels are offered under the brand name of PTCL Smart TV (SmartTV,
2012).

Weaknesses. The weaknesses of PTCL are anticipated as follows:

PTCL has a continuous downward trend in its revenue since 2005. PTCL had Rs.75,972 million
revenue in 2005 (PTCL, 2005) and it decreased to Rs. 60,038 million by 2012 (PTCL, 2012).
Continuous decline in the number of subscribers from 5,190,899 in 2005 (the max ever) to
2,961,915 in December 2011 (the min ever) (PTA, 2012). This has happened due to inclination of
usage of communication from fixed to cellular technology.
Heavy unskilled human resource, which is gradually being phased out by the new management of
the company, to bring in more competent and skilled human resource to improve the efficiency and
efficacy. One internal report from 2003 about the education level of employees show that around
20% employees are middle qualified, 26% have done Matric and 20% are intermediate and the
remaining are bachelor and above. This illustrates heavy less qualified and unskilled workforce.
The promotion method of PTCL was on seniority basis and not on competency and qualification
basis (Senior Manager PMO WLL Commercial, 2012). Most of the senior management and
technical staff had reached these positions because they served PTCL for long time. And not
because they were qualified for the post. Therefore, senior in the hierarchy are lacking the required
skill at specialist level which is the main disadvantage to PTCL and advantage of the competitors in
the market.
Only 6% employees have post graduate qualification, which does not match the requirement of the
company working with technology and competing with international telecom giants.
PTCL has no reliable statistical reports on absenteeism, which tells us about the less effective
control of management in the organization (PTCL, 2012).
Employees are unaware of work ethics and are irresponsible, especially those working in the rural
areas (Mehmood, 2012).
Slow pace in adopting the latest technology that is giving advantage to the market competitors.
PTCL wired connections are in open air, not covered with pipelines or duct routes, which always
become disconnected in storms and rains. PTCL mainline cabins and DPs are not secure and
managed. When a line develops a fault by any reason, especially in the rural areas, takes weeks to
get rectified.
Weak customer care services. A normal application takes more than one week to process in major
cities and in villages takes more than 2 weeks.
Telephonic complaint will rarely complete the task. Customer need to go physically to the offices for
making complaints. This is further pronounced in rural areas.
Difficult to make appointment with people at managerial level, since they are not readily available.
PTCL has no R&D Department and no market survey branch to explore new horizons to grow
exponentially.

Opportunities. The probable opportunities for PTCL in the present market are listed as under: 14

Large unmet market with total population of approximately 181 million (Census, 2012).
Large existing infrastructure for land line covering the whole country which is already available with
PTCL and must be exploited.
PTCL has the opportunity to utilize its sources that include submarine cable system and satellite
communication system. This can be used for low cost long distance communication and by raising
the QoS provided by PTCL compared to that provided by others.
There is no dazzling competition in the landline market but PTCL is still the SMP in almost all the
regions of the country.
Pakistan is the emerging market for the broadband ISPs and PTCL has a huge bank of
subscribers. Total internet users in Pakistan are to the tune of 2.2 million in August 2011
(Wikipedia, 2012). Out of this, PTCL has 896,325 subscribers, which is about 40% of the market
share. If PTCL improves the QoS and increases the efficiency of the customer care centers, these
subscribers could increase exponentially in near future.

Threats. The projected threats of PTCL are as under:

There is continues price war of market share holding between telecom operators in the country.
Mobilink is leading the market with approximately 36 million cellular phone subscribers (PTA,
2012).
Telenor is second largest cellular company in the market with approximately 30.1 million cellular
phone subscribers (PTA, 2012).
Warid is a joint venture of Abu Dhabi Group & SingTel Group. Abu Dhabi Group is the largest
business group in the Middle East and they have the largest investment in the shape of Warid
Telecom in Pakistan. It holds a market share of 10.5% (PTA, 2012).
China Mobile Pakistan (CMPak), with the brand name Zong, has invested millions of USD. Zong
has a market share of 14.8% (PTA, 2012).
There are 2.9 million WLL subscribers in the country out of 588,056 are Teleca rd users, 518,340
are WorldCall users, 238,908 use Wateen, 63,736 use Sharp, 9,165 use NTC, 39,135 use Link
Direct and 32 are the users of Mytel. The largest WLL subscribers back is with PTCL with
subscribers to the tune of 1,424,051 that makes 49.4% of the market share (PTA, 2012).
Beside all these threats from competitors, PTCL landline is also facing problem from terrorism and
instability in all the 7 tribal areas and four distracts of Malakand division.

Impacts
The impacts of privatization on the PTCL and its performance can be measured by evaluating the
operating highlights and financial statements that would help in assessing financial performance of the
company. Financial performance of the company is one of the major criterions for finding out the state of
the company in pre and post privatization era. The operating highlights and financial statements for the
year 2006 (pre privatization) (PTCL, 2005), 2007 (post privatization) (PTCL, 2007) and 2012 (to date)
(PTCL, 2012) are available in the PTCL Annual Reports for respective years. The analysis is done in the
proceeding paragraphs.
15

The Directors Perspective. The management of PTCL ever since its privatization totally understands
the need of diversification, expansion and broadening the horizons, if it has to compete in the highly
competitive and gung ho environment. Further, this is needed to venture into new areas other than just
repackaging its present offerings.
This behavior is very much obvious if we understand the nature of ventures PTCL has been
entering into lately. Firstly, it entered into mobile sector by opening up a subsidiary by the name of Ufone,
which is a star for Ufone (BCG Matrix) as it is continuously increasing in size and numbers. PTCL also
ventured into the wireless phone by the name of Vfone, which is more of a Dog in the Ufones BCG Matrix
because the revenues are decreasing and so is the share of the company. Lastly and most importantly is
the trade mark land line service of the PTCL, which was a cash cow on its decline. Nevertheless, PTCL
through its dynamic and energetic leadership has converted it into a star and it seems to be doing good.
Thanks to the SMART PHONE offerings. Although, its long term impact is yet to be seen on the financial
growth of the company. One question mark that the company is facing is its 3G EVO product, which seems
a little ahead of time and might fully capitalize on its first movers advantage in this segment.
Company also realizes the need to restructure and reorganize its Capital structure, which is a long
term process and is a reason for unstable and fluid financial figures. The Debt to Equity Ratio has changed
from 13:87 in year 2005 to 18:82 in year 2012.
The Financial Perspective.
Since the privatization of the company, it has been unable to generate a
stable cash flow the revenues had been up and down and so has been PAT. The EBIT ratio also shows that
the management has not been able to keep the output steady.
The earnings per share (EPS) had been on a continuous decline ever since the privatization of the
company. Likewise, the market value of shares leaves the investors very concerned. The company has not
been able to control its operational expenses, which had been increasing for one reason or another and the
management seems incompetent to control it in the future either. Overall the management seems in a bad
position, its approach towards a strong financial growth seems smudge and blur or the hurdles faced in the
post-privatization period seem too big to get over with.
Hypothesis Testing
The details and analysis given in the preceding paragraphs have completely given the artifacts
about the PTCL in pre and post privatization era. The hypothesis derived in the start of the case study are
now proven or refuted with the details in the proceeding paragraphs.
Hypothesis 1. PTCL privatization was to improve the efficiency of the company.
PTCL like many of the other public organizations of the country was over employed. It was stuffed
in with extra manpower due to various diversified bureaucratic and political reasons. Therefore, there were
many in the company who were doing nothing employees. The manpower of PTCL was unqualified and
less educated for undertaking the tasks in the company in almost all the levels of hierarchy. However, the
16

new management has shed off approximately 15,000 jobs by Voluntary Separation Scheme (VSS) and this
process started since the new management took over in 2005-06 and is still continuing. Resultantly, the
company is now being employed to the numbers.
This has increased the efficiency of the company, improved the efficacy, raised customer dealing
and customer satisfaction. Therefore, hypothesis 1 i.e. PTCL privatization was to improve the efficiency of
the company, stands proven.
Hypothesis 2. PTCL was to be made state-of-the-art organization with latest technology and
services by privatization.
PTCL switched to advanced technologies soon after privatization. Latest equipment was brought in
and more products and services were introduced. The first step it took was to shift from old multiplexing
techniques and multiplexers to DWDM. Secondly, backbone was exponentially enhanced to 270 GB, which
is a very big river to make many canals out of i.e. provision of services to the subscribers. Advanced
exchanges were brought in to replace the POTS and provide diversified services like CLI, Call Waiting, Call
Forwarding, Call Recording, Observations etc. Further, many new products have been introduced that
includes Vfone that provides landline services on-the-go, PTCL broadband up to the speed of 50 Mbps
using VDSL, SIP Phone for video conferencing / calls, EVO Cloud and EVO Nitro for speeds up to 9.3
Mbps with multi devices support, EVO Phone and EVO Tab with EvDO services, PTCL Smart TV for
provision of digital quality 120+ channels at affordable price, security solutions like iSentry and many more
such products and services.
These are clear indications that PTCL has improved upon its technology manifolds and introduced
the latest products and services matching the international market and standards. Further, the amount of
money that was required to transform PTCL what is today was quite huge vis--vis the budgetary allocation
to PTCL in the annual budgets. This amount was to the tune of millions of USDs. This transformation would
have been impossible without PPP or privatization or any other such venture. Therefore, hypothesis 2 i.e.
PTCL was to be made state-of-the-art organization with latest technology and services by privatization,
stands proven.
Hypothesis 3. GoP privatized PTCL to follow international binding agreements on free trade
market.
Almost all of the international organizations that fund the poor and developing countries are
dependent on the policies made by the developed western countries. Likewise, once they fund any project
in the less developed countries, they come with their conditions to control the market economically.
Pakistan is a developing country and has to relay many times on foreign debts and donors. This package
always came with additional restrictions and agreements binding upon GoP. ADB, IMF and World Bank are
a few of the international donors. Concept of free market is one of the clauses of their agreements for
provision of loans. Telecom sector is one of the most looked forward sectors, which is being asked to be
covered under free market doctrine. Revenues from telecom sector are almost guaranteed.
17

Further, Pakistan is also a signatory of WTO. WTO and GATS bounds its signatories to give open
access to private sector and foreign investment to almost 160 sectors and industries. Telecom sector is
also one of the indentified sectors. Therefore, GoP as signatory to the agreement issued multiple cellular
licenses, multiple FLL operators came into the markets, various companies started providing internet
broadband facilities and few of the companies offered card phones. They all were given the license under
the binding agreements of free trade and free market doctrine, of which Pakistan is a signatory.
At par with the other sub sectors of telecom sector, PTCL was also privatized to meet international
binding agreements as well as to meet with the clauses of international donors organizations in particular.
Therefore, hypothesis 3 i.e. GoP privatized PTCL to follow international binding agreements on free trade
market, stands proven.
Hypothesis 4. GoP generated revenue out of the privatization process and get more revenue than
it was already giving.
The revenue of PTCL declined drastically under the new management by almost 21 % compared
to Rs.75,972 million revenue in 2005 and it decreased to Rs. 60,038 million by 2012. Net Profit Margin has
been least for the year 2012 at 12.01 % (less the year 2008 where it was a negative value i.e. -4.26). EPS
has been all time low for 2012 at Rs 1.41 (less the year 2008 where it was a negative value i.e. Rs -0.55).
Liquidity, both current and quick, has been all time high at 2.30 times and 2.16 times respectively. Total
assets of the company are at all time high in 2012 at Rs156,949 million. However, GoP got 2.6 billion USD
through the privatization process.
In view of the declining trend of the company hypothesis 4 i.e. GoP generated revenue out of the
privatization process and get more revenue than it was already giving, stands refuted.
Conclusion
The telecom department of GoP can into existence with very limited and sparse resources. It has
changed its shape many times, has modified and transformed its organization time and again, amended its
name many a times. However, it continued to grow with time and was almost inevitably meeting the
communication requirements of the country. By the year 1996, PTCL came into the shape, as was for the
year 2004-05, and with the same name through an Ordinance that was aimed to re-structure and reregularize the telecom sector in totality. Later licenses were issued to many companies for various
subsectors of the telecom sector and competition started between the companies. PTCL was later
privatized in 2005-06 and 26% of the shares were sold to UAE based company Etisalat. With this 26%
shares, management control of the company was also handed over to the company. PTCL then started its
new stage of life with new management and diversified ideas. Now it was a corporate and not a SOE. Many
new services and products have been introduced to date. Technologically, PTCL has become a state-ofthe-art firm. HR Department has disposed off unhealthy and non-contributing partners of this long journey.
As many as 15,000 jobs were waved off through VSS. PTCL now is a modern, well equipped and a growing
organization. Through, financially the company has come down by about 20%. Nevertheless, the customer
18

satisfaction has risen exponentially that tells that there are many more horizons that PTCL can still meet
and can compete in the market with other telecom sector companies.
Overall, there may be problems or corruptions in the process of privatization. However, PTCL has been
groomed well after privatization.

19

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