6 ptcl privatisation paper

8/18/2019 6 PTCL Privatisation Paper

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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

compan! provides the telephonic services nation"#ide and is the backbone $or countr!%s

telecommunication in$rastructure The compan! managed and operates around &''' telephone e(changes

across the countr!) providing the largest $i(ed line net#ork Data and backbone services such as CDM*)

+roadband ,nternet) ,PT- and #holesale are an increasing part o$ its business .riginall!) PTCL #as one o$

the governmental organi/ations0 the share holding o$ the PTCL has been reduced to &2) #hen &2 o$

shares and control #as sold to 3tisalat Telecommunications and the remaining 1&2 to the general public in &'' under an intensi$ied privati/ation program Ho#ever) the &2 shares are still remains under the

management o$ government

Research Methodoogy

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,

pro$itabilit! i.e. the main purpose of doing business, gro#th 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 tocompete 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 !hauri ", #$$%&. This method is used

when the purpose of the study is to create understanding of certain phenomenon, this is more fle'ible

method and its results are rich and descriptive (ohansson, #$$)-$*&.

The two basic types of data are primary and secondary. "rimary +ata is the data that is collected

for the current study, whereas, econdary +ata is data collected by someone for some other studies.

case study often involves data collection through multiple sources such as verbal reports, interviews and

observation are primary data sources. eside this, case studies also involve data collection through

sources like financial statements, data that e'isted in archives, budget and operating reports, competition

and marketing report. o 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 [email protected] (00923215368883)

1

mailto:[email protected]:[email protected]


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The paper is descriptive in nature. The paper uses case study design to present the artifacts for

privatization of "T/0. ll 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.

!"stification of the St"dy

"rivatization is one of the areas of interest for researchers, investors and governments. large

number of studies have been undertaken. ut 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 "T/0 and concerned ministries of !overnment of "akistan

can also take decisions in the light of findings and recommendations of this study.

#b$ective of St"dy

The ob1ective of this study is to verify hypothesizes through thorough and e'haustive research and

sufficient proof; also look into reasons if the hypothesizes are refuted.

%hy Privatize&

To bring private o#ners instead o$ state o#ners means e$$ective and e$$icient econom! and quickl!

dealing #ith the propert! rights 2oland, 3445&. "rivatization 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, """ 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.

• 6t fosters competition, eliminates monopoly, thereby, enhances efficiency and effectiveness.

• 7riginal and full cost of the services and goods is revealed to the public avoiding political and

economic motives of the government.

• "rivate sector investments in 28+, modernize, advance and enhance its technology.

• 6t attracts investment and capital market develops.

• 9inimize drain on government resources caused by the persistent losses of a public enterprise.

• This could generate capital for the government.

• 2estructuring eliminates not-required labour thus increasing productivity.

6t is clearly revealed in the table 3 below that privatization process is not furnishing with the

e'pectation i.e. increase in efficiency, quality and profitability in post privatization era of the organization or

the outfit.

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'etter Same %orse Tota

"9: 4 3 3< *

9isc 3$ 3 35

!hee # 3# % 34

9ills # - < *2ice 9ills # # - 5

anks 3* ) #* *

Tota (( )) *) +,,-

Table 1Privati/ation 3$$ects on .rgani/ations khtar, #$$5&

Privatization Poicy of Government of Pakistan

"/, #$3#& "rivatization /ommission was created on ## (anuary 3443. The original mandate of the

commission was only restricted to industrial sector. =owever, by 344, 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. >rom

the date of creation of commission till financial year ending on (une #$$4, a total of 3


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Sector Sae Proceeds from +..+

to !"ne (,+,

/o Amo"nt 0M1

anking ) 53$#

/apital 9arket Transaction ## 33#5

:nergy 35 %3)%<Telecom 5 3*)


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angladesh Telegraph and Telephone oard TT& for long-distance calls was one of the ma1or problems

(ean /amp&.

8y9othesis and Reasons

"T/0 was privatized in the year #$$%-$< under the !overnment of "akistan initiative to move fromcommand or mi'ed economy to free economy and make the governmental departments privatized under

the Privati/ation Commission. This would result in better Qo, 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 344$s, in the shape of cellular telephone

service and other such areas, however, the >00 network has been the monopoly of "T/0 since its

inception. This privatization has been done in the light of many international agreements and requirements

of the !overnment of "akistan to generate some revenue and economic development of the country. s

per the !overnment of "akistan, >inance +ivision, Eear ook >inancial Eear #$$%-$+6 was record

highest at #$@ of !+" of over billion C+, 2evenue increased by #3@, "ublic +ebt to !+" ratio

declined to %inance +ivision, #$$%-$


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• 6nternet and mobile subsidiaries was established in 344*.

• "olicies of Telecom sectors were finalized in #$$$.

• +eregulation policy of Telecom sector was announced in #$$.

Privatization of PTCL

"T/0 was privatized in ugust 3445 by selling #@ of its shares to !eneral "ublic through tock

:'change. Then 3$@ of its shares were sold in eptember 3445 through +2 +isaster 2elief& >orm. >inally

#< @ of the shares along with the management control were offered in (uly #$$%. "T/0 itself is composed

of three business units i.e. Cfone, "akAet and landline network countrywide. "akAet 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 "T/0 itself. "T/0 is worth about C+ 3$ billion.

Three companies were short listed for final bidding. These companies were 3tisalat from a C:

consortium, 5ingTel from ingapore and China Mobile from /hina. 6n #$$


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reorganization and restructuring of the telecom sector in general and of "T/0 in particular. s predicted in

the act "T and > with the help of Dorld ank "ro1ect were e'pected to achieve the ob1ectives.

Market 'arriers – Technoogy Advancement. Aon 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. eing a state run company, it would have been very difficult for "T/0 to provide new andbetter services to its customers by improving its infrastructure and technology. Cp-gradation of its technical

infrastructure from "7T to A!A, from T+9 based multiple'ing to +D+9, provision of broadband internet,

/+9 based D00 are a few of the services and improvements that have come up after the privatization.

Re:"irement of 4nvestment. n interview with +usiness :ecorder of 9r Dalid 6rshaid, !roup "resident

and /:7 of "T/0 was published on the official website of the magazine on (anuary 4, #$3#. The interview

clearly indicates the future plans of "T/0 e'ecutives for improving the services by pouring in investment to

the tunes of billion of rupees between #$33 and #$3s Treas"ry . fter the privatization,

the government will have least or minimal intervention and most of the times it is 1ust the regulatory body

"T in case of "akistan& that would intervene to settle the conflicts between the telecom operators, if any.

!overnment is then left to policy formulation tasks only. >urther, government will not go for escalating

commitment or even if the situation is otherwise, this will cause reduced or minimal burden onto thegovernment treasury.

Gro?th of Teecom 4nd"stry. Dith improved profitability, advancement and development in technology,

better 1obs, more investment, fair competition, superior policies, least governmentHs intervention,

introduction of new and better products and services and compliance to the international industrial

standards "T/0 has certainly brought revolution into the telecom industry and the way it was thought to be

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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 e'chequer. This

contribution is to the tune of 3$$I billion of rupees. +etails from the year #$$%-$< to #$3$-33 are given in

table 5 below. The figures are in millions of rupees.

@ear GST Act Chg PTA De9 Misc Tota#$$%-$< #00 subscribers in #$$%-$


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different companies with different packages and with varying degree of customersH requirements and

customer satisfaction.

Reven"e. 2evenue from the telecom sector stood at 345,%


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during the year #$$


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decreased. tandard deviation has increased for ", 2 and Bol symbolizing volatility of the

market. The details of each are given in table *.

• our variables, which have

been used to measure the financial performance, are 7perating "rofit 9argin 7"9&, Aet "rofit

9argin A"9&, 2eturn on :quity 27:& and :arning per hare :"&. The details of each are

given in table *. 6t can be significantly made out that all the variables have declined after

privatization and have become more volatile. The ignificant Balue is greater than $.$% less for

7"9& indicating that no changes in these variables is significant statistically.

Mean SD S

"re " %.)) ).# $.$$

"ost " %%.3 3$./ of their own, but still there are manyplaces where they are dependent on "T/0. Therefore, "T/0 always has some dominant role to play in

provision of services by other companies in the market. s per the survey carried out by "T and

determination signed and published on 3% (uly #$3$ by the /hairman "T +r. 9uhammad Easin, "T/0 is

9" in almost all of the regions of the country "T, #$3$&.

#bigations to?ards Defense 00 communication has not

been e'tended by the +efense >orces as per their requirement. This is so because it is not financially

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feasible to undertake mega pro1ects to cover the length and width of the country by the defense forces.

Therefore, telecom requirements of defense forces are met by "T/0 in various remote places of the

country. >urther, apart from all this, "T/0 also supplements defense communication at all ma1or tiers. This

dependence has enhanced with improvement in the technology of "T/0 and provision of better and more

services like 6"TB, security solutions using //TB cameras, broadband internet and /+9 based D00.

The mobilit! and volatile nature o$ de$ense operations ?sometimes@ dictates compromising the securit! $or

the sake o$ maintaining impetus rmy, #$$)&.

PostBPrivatization on PTCL

C"stomer Satisfaction

survey was conducted online to find out the customer satisfaction level. fter a period of 3 month

online, the results of the survey were collected on % +ecember #$3#. 3 individuals responded to the

survey. The questionnaire was available online at C20 httpFJJkwiksurveys.comJappJrendersurvey.aspK

sidLzsu%#b#onwit3n5*%%8referL.


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*).3@ respondents think that privatization has improved the efficiency of "T/0 and )5.34@ are

satisfied with the services and products of the company.

S%#T Anaysis of PTCL

The arguments and artifacts given in the preceding paragraphs show diverse impacts and bearingsof re-regulation, reorganization and privatization process in telecom sector in general and "T/0 in

particular. Aevertheless, to know the e'isting internal situation Mstrengths and weaknessesN of "T/0 and

the present e'ternal environmental condition Mopportunities and threatsN in the telecom market vis-O-vis

"T/0, D7T analysis of "T/0 is done and anticipated as given below.

Strengths. The predictable strengths of "T/0 are as underF -

• "akistan largest telecom company and the backbone of basic telephony services with about

appro'imately #.4 million subscribers as on +ecember #$33 "T, #$3#&. >urther, "T/0 has a total

of appro'imately #.% million subscribers for 00, D00 and !9 "T, #$3#&.

• =ub for the entire basic telecommunication infrastructure.

• ppro'imately #$$$ state-of-the-art e'changes all over the country Dikipedia, #$3#&.

• 6nternet facility on basic telephone line and +0 with speeds up to %$ 9bps B+0& "T/0, #$3#&.

• Dith the brand name GBfoneG using /+9 based D00 to provide services of fi'ed line on-the-go

and has a largest network across the country. 6t has around 3.5# million Bfone customers "T,

#$3#&.

• Cfone is a "T/0 subsidiary for mobile communication. 6t is countryPs third largest mobile phone

operator with 34.< @ market share, and about appro'imately #.* million subscribers as on 9ay

#$3#. ibid&

•

Cfone has the top class technology and services in mobile telecom sector. 6t is continuouslye'panding its coverage and customer base.

• Cfone has a balanced and e'haustive sales and after sales network. 6t owns 3) service centers,

%4 franchisees and 4 one stop shops all around the country Cfone, #$3#&.

• There is a consortium of the three Gubmarine /ommunication /ableG networks called 6-9:-D:,

:-9:-D: and :-9:-D: 5. "T/0 is part of the consortium.

• "T/0 has two 6ntelsat earth stations near ?arachi and 6slamabad. 6ntelsat provides international

voice connectivity and works as a hub for domestic satellite users. There are four standard

6ntelsat stations at !ilgit, kardu, !wadar and 6slamabad, for remote connectivity.

• "T/0 owns more than #$,$$$ km fully redundant, fiber optics +D+9 backbone network and

connecting over 3$/ or 7>A& to the

0+6s, local loop operator, 6"s, payphone operator and call centers.

• 6n "akistan, "T/0 has the fastest growing and largest network of broadband services. Dithin a

short time, it has acquired more than 3 million subscribers across the country in over 3$$$ cities,

since its launch on 34 9ay #$$) "T/0, #$3#&.

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• "T/0 offers Gdigital interactive televisionG services with the highest digital quality not =+& picture.

ppro'imately 3#$I TB channels are offered under the brand name of PTCL 5mart T- martTB,

#$3#&.

%eaknesses. The weaknesses of "T/0 are anticipated as followsF -

• "T/0 has a continuous downward trend in its revenue since #$$%. "T/0 had 2s.)%,4)# million

revenue in #$$% "T/0, #$$%& and it decreased to 2s.


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• 0arge unmet market with total population of appro'imately 3*3 million /ensus, #$3#&.

• 0arge e'isting infrastructure for land line covering the whole country which is already available with

"T/0 and must be e'ploited.

• "T/0 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 Qo provided by "T/0 compared to that provided by others.

• There is no dazzling competition in the landline market but "T/0 is still the 9" in almost all the

regions of the country.

• "akistan is the emerging market for the broadband 6"s and "T/0 has a huge bank of

subscribers. Total internet users in "akistan are to the tune of #.# million in ugust #$33

Dikipedia, #$3#&. 7ut of this, "T/0 has *4inancial performance of the company is one of the ma1or criterions for finding out the state of

the company in pre and post privatization era. The operating highlights and financial statements for the

year #$$< pre privatization& "T/0, #$$%&, #$$) post privatization& "T/0, #$$)& and #$3# to date&

"T/0, #$3#& are available in the "T/0 nnual 2eports for respective years. The analysis is done in the

proceeding paragraphs.

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The Director>s Pers9ective5 The management of "T/0 ever since its privatization totally understands

the need of diversification, e'pansion and broadening the horizons, if it has to compete in the highly

competitive and gung ho environment. >urther, this is needed to venture into new areas other than 1ust

repackaging its present offerings.

This behavior is very much obvious if we understand the nature of ventures "T/0 has beenentering into lately. >irstly, it entered into mobile sector by opening up a subsidiary by the name of MCfoneN,

which is a star for Cfone /! 9atri'& as it is continuously increasing in size and numbers. "T/0 also

ventured into the wireless phone by the name of MBfoneN, which is more of a +og in the CfoneHs /! 9atri'

because the revenues are decreasing and so is the share of the company. 0astly and most importantly is

the trade mark land line service of the "T/0, which was a cash cow on its decline. Aevertheless, "T/0

through its dynamic and energetic leadership has converted it into a star and it seems to be doing good.

Thanks to the 92T "=7A: offerings. lthough, its long term impact is yet to be seen on the financial

growth of the company. 7ne question mark that the company is facing is its ! :B7 product, which seems

a little ahead of time and might fully capitalize on its first moverHs advantage in this segment.

/ompany also realizes the need to restructure and reorganize its /apital structure, which is a long

term process and is a reason for unstable and fluid financial figures. The +ebt to :quity 2atio has changed

from 3F*) in year #$$% to 3*F*# in year #$3#.

The


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new management has shed off appro'imately 3%,$$$ 1obs by Boluntary eparation cheme B& and this

process started since the new management took over in #$$%-$< and is still continuing. 2esultantly, 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 3 i.e. PTCL privati/ation #as to improve the e$$icienc! o$ the compan! , stands proven.

8y9othesis (5 PTC( *as to be made state+of+the+art organi)ation *ith latest technology and

services by !rivati)ation5

"T/0 switched to advanced technologies soon after privatization. 0atest equipment was brought in

and more products and services were introduced. The first step it took was to shift from old multiple'ing

techniques and multiple'ers to +D+9. econdly, backbone was e'ponentially enhanced to #)$ !, which

is a very big river to make many canals out of i.e. provision of services to the subscribers. dvanced

e'changes were brought in to replace the "7T and provide diversified services like /06, /all Daiting, /all>orwarding, /all 2ecording, 7bservations etc. >urther, many new products have been introduced that

includes Bfone that provides landline services on-the-go, "T/0 broadband up to the speed of %$ 9bps

using B+0, 6" "hone for video conferencing J calls, :B7 /loud and :B7 Aitro for speeds up to 4.

9bps with multi devices support, :B7 "hone and :B7 Tab with :v+7 services, "T/0 mart TB for

provision of digital quality 3#$I channels at affordable price, security solutions like ientry and many more

such products and services.

These are clear indications that "T/0 has improved upon its technology manifolds and introduced

the latest products and services matching the international market and standards. >urther, the amount of

money that was required to transform "T/0 what is today was quite huge vis-O-vis the budgetary allocationto "T/0 in the annual budgets. This amount was to the tune of millions of C+s. This transformation would

have been impossible without """ or privatization or any other such venture. Therefore, hypothesis # i.e.

PTCL #as to be made state"o$"the"art organi/ation #ith latest technolog! and services b! privati/ation ,

stands proven.

8y9othesis *5 oP !rivati)ed PTC( to follo* international binding agreements on free trade

market 5

lmost all of the international organizations that fund the poor and developing countries are

dependent on the policies made by the developed western countries. 0ikewise, once they fund any pro1ect

in the less developed countries, they come with their conditions to control the market economically.

"akistan 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 !o". +, 69> and Dorld ank are

a few of the international donors. /oncept 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. 2evenues from telecom sector are almost guaranteed.

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>urther, "akistan is also a signatory of DT7. DT7 and !T bounds its signatories to give open

access to private sector and foreign investment to almost 3


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satisfaction has risen e'ponentially that tells that there are many more horizons that "T/0 can still meet

and can compete in the market with other telecom sector companies.

7verall, there may be problems or corruptions in the process of privatization. =owever, "T/0 has been

groomed well after privatization.

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'ibiogra9hy

dlung, 2. #$$$&. ervices Trade 0iberalization from +eveloped and +eveloping /ountry "erspectives, in

!T #$$$F Aew +irections in ervices Trade 0iberalization .

khtar, 9. 8. #$$5&. 0iberalizing telecom sector in "akistanF issues and prospects.

rmy. #$$)&. *rm! Communication Doctrine ?&''>@

/ensus. #$3#&. 2etrieved #$3#, from httpFJJwww.census.gov.pkJ

+o:. #$$4&. Position Paper on the Telecom 5ector in ,ndia b! Department o$ 3conomic *$$airs 9inistry of

>inance, !overnment of 6ndia.

>inance +ivision, !. #$$%-$inancial Eear #$$%-$


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"T. #$3#&. *nnual Cellular 5ubscribers. 2etrieved #$3#, from "T 7fficial DebsiteF

httpFJJwww.pta.gov.pkJinde'.phpKoptionLcomRcontent8taskLview8idL#


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Dikipedia. #$3#&. Pakistan Telecommunication Compan! Ltd . 2etrieved #$3#, from Dikipedia.orgF

httpFJJen.wikipedia.orgJwikiJ"akistanRTelecommunicationR/ompanyR0td

Dikipedia. #$3#&. Telecommunications in the Inited Kingdom. 2etrieved #$3#, from Dikipedia.orgF

httpFJJen.wikipedia.orgJwikiJTelecommunicationsRinRtheRCnitedR?ingdom

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6 ptcl privatisation paper

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