|Issue:||Asia-Pacific I 1999|
|Topic:||Telecommunication Corporation,Global Access Though PTCL|
|Author:||Sultan Ahmed Hasan Pakistan|
|Title:||Director of Public Relations|
Telecommunication services were provided by the PT&T Department of the Government of Pakistan since 1947 which was responsible to run the service under the Telegraph Act, 1885. In 1962, the services were separated from the Post Office and a new entity called Telegraph & Telephone (T&T) Department was established under M/o Communications. In 1990 Pakistan Telecommunication Corporation (PTC) was established to take over the functions of the T&T Deptt. In October 1996, the Parliament of Pakistan enacted Act No.XVII of 1996 to re-organize and liberalize the telecommunication sector.
In the process of telecom sector restructuring, today PTC stands converted into PTCL, a stock listed public limited Company. The Government of Pakistan has, in line with international trends, taken policy steps to privatise and deregulate telecommunication sector. steps taken are listed below: Promulgation of Pakistan Telecommunication (Reorg.) Ordinance, 1995 which wasfinally passed and enacted by the Parliament as Act No.XVII of 1996 in October 1996. The transformation of PTC into PTCL through the vesting of the assets, rights, liabilities, staff and business of PTC to PTCL on 1st January 1996. PTCL is now operating the telecom system in place of PTC providing telecommunication services within its license area (whole of Pakistan excluding AJK and Northern Areas) under a 25 years license from Pakistan Telecommunication Authority with an exclusivity in Basic Telephony Service up to 31.12.2002 and tax holiday up to 30.06.1999. Establishment of National Telecommunication Corporation (NTC) independent of PTC to serve the Government and Defence needs. An independent regulator, Pakistan Telecommunication Authority (PTA), for issuing licenses and monitoring the functions of private operators, and Frequency Allocation Board (FAB) to allocate frequencies to all the operators were setup under the Ministry of Communications. A Statutory Trust, called Pakistan Telecom Employees Trust (PTET), was set up to manage the pension fund for the benefit of the staff transferred from PTC to PTCL and existing pensioners of PTC/T&T. PTA, FAB, NTC and PTET are now fully established – since 1996 they have independent management and offices and are functioning according to the new Law. GOP, in 1995 divested about 12% of its equity in PTC through a process of domestic and international floatation, which fetched GOP local currency of US$60million (Rs.3billion) & foreign exchange of about US$ 900 Million. GOP also issued Exchangeable Notes worth US $.150 Million to international investors in Feb 1997 through Numura International, UBS & Global Securities. These Notes were exchangeable into fully paid ordinary A shares of PTCL – about 3.3% of total issued share capital. In total as much as 15% of the stake of the PTCL is now held by the Pakistani public and foreign shareholders. It is interesting to note that through various equity disinvestment and securitization of PTCL revenue GOP has so far been able to receive about US$1.30 billion. Pakistan enjoys a strategic position in global telecommunications. It has extensive, modern and secure fiber optic cables systems, both land-laid and submarine, which forms an impressive and reliable network for PTCL. This is supported with state of the art international gateways exchanges and satellite earth stations. The digitalised switching and transmission network is one of the best in South Asia. PTCL continues to bring the people of Pakistan closer to the world by introducing modern telecommunication technologies. In recent years, the company has taken steps to increase its presence in the competitive international business environment. PTCL has invested in INMARSAT-P (ICO) confirming its equity participation in the global consortium for operating Global Mobile Personal Communication via Satellite system to provide satellite based mobile services. This new service across the world is commencing from the year 2000. PTCL expects that the experience of the Turnkey Project wil help them achieve lower equipment costs. The introduction of a 5 minutes pulse for local calls with the slight increase in monthly line rent is likely to bring in additional revenues. The Company with its increased capacity, better loading of the network and full utilisation of value-added services should be able to generate additional revenues which will meet the impact of the reducing Total Accounting Rates and the need to further reduce domestic long distance charges. It is expected that The present foreign exchange crunch and devaluation of the Pakistan rupee are not expected to have a serious impact the Companys operations as the International traffic will continue to provide foreign exchange revenues of about US$ 400 million. PTCL will remain the single largest corporate foreign exchange earning entity in Pakistan. The Government of Pakistan is fully committed to privatise PTCL. Goldman Sachs International(GDI) has been appointed Financial Advisor to the Privatisation Commission and the target set to find a strategic investor is June 1999. A work plan to further improve the shareholder value has been agreed between GSI and PTCL. Pakistan Telecommunication Company Limited (PTCL) is the only basic and international service provider in Pakistan. Their range of services include basic telephony, telegraph, fax, telex, public data, internet, E-mail, ISDN, universal access numbers and other value added services. PTCL is a professionally managed company and has initiated measures, with active support from the Federal Government, in the inculcation of corporate culture benefiting a business like corporate body. PTCL believes that it has an inherent potential that it can exploit to emerge as an important and active business entity. PTCL has the basic strengths and the potential that needs to be exploited into real business opportunities. The Directors of the Company feel that a firm and unwavering commitment towards the provision of a complete range of market driven telecommunication services to its customers, using state-of-the-art technology, proven products and customer care is essential rapidly expanding telecom market. The telecommunication sector around the world is going through a process of radical change from a monolith state controlled culture to an open market competitive environment. The customer is becoming more and more conscious of the value of telecom services in a changing business environment. The advent of digital systems, increasing application of computer technologies and development of wide-band systems has generated new customer needs. Innovative products and services, such as cellular mobile, facsimile, high-speed data, Internet etc are much in demand. The current decade has proved to be the period of sector restructuring and growth globally. To keep up with the changes and to meet the emerging new demands, PTCL has adjusted its programmes to meet the requirements of the market. Traditional telecom monopolies like PTCL need to explore new avenues of technology and financing in order to accomplish a quantum leap in growth and bridge the gap between demand and supply, still remaining financially viable. The Company has taken initiatives, resulting in gradual change visible in expanded capacity, increasing revenue and emerging culture. During the year under review PTCL decided to cope with the challenges of competition that it will be faced with within the next few years. The initiatives taken resulted in the establishment of 100% PTCL owned subsidiaries like Pak Telecom Mobile Limited, Pak-Net and Pak Telecom Pay-Phones Services Limited. These new entities will provide cellular mobile, information technology, Internet, payphone prepaid calling cards and other range of services. PTCL made a conscious decision to enter the cellular business due to its tremendous potential and an accelerated annual growth of about 60% which is likely to continue for many years. The Financial Advisor on Privatisation has agreed with the PTCL management that it will add substantial shareholder value. The option to purchase equity in an existing cellular company was abandoned in view of grant of a new mobile license through the support of the principal shareholder, the Government of Pakistan. PTCL has been successful in obtaining a Cellular Mobile License for its subsidiary and has selected GSM 900 state of the art technology which is growing at a much faster rate Internationally. Pak Telecom Mobile Limited was incorporated on 18th July, 1998 to establish and run this new business independent of PTCL with full accounting separation thus creating a level playing field for industry competitors. PTCL is regulated by a business-oriented policy to associate private entrepreneurs in telecom sector development. The options are based on interconnect and revenue sharing arrangements with license operators and through out sourcing revenue sharing with O&M contractors as business partners. PTCL has successfully entered into arrangements with foreign and local telecom companies and has signed three contracts for Prepaid Calling Card service to promote International traffic. The Government of Pakistan has encouraged the growth of the telecom sector to enable Pakistan to keep up with the rapid technological advancement in the field of telecommunication . The tariff structure remains under constant review to rationalise it from the level of providing adequate returns to the telecom operators, tap the tremendous potential of the growth in the demand and provide service at affordable prices. The GOP has also reduced the CED on telecom services to encourage the use of value added services with special emphasis on the proliferation of Internet. It has also reduced the import duties on telecom equipment and given some tax exemptions. Conclusion A number of private operators have established their telecom systems and brought services into operations through international arrangements,within the PTCL exclusivity. The private sector has invested about US$100million (Rs 5.0 billion) in the telecom sector, which has also helped increase revenue for PTCL. About 200,000 mobile telephones are in operation and the market has potential to grow faster. Entry of PTML, the subsidiary of PTCL will be a welcome step for mobile customers. A good number of pagers and card-pay phones are also operated by the private sector . Presently there are only 12000 payphones but the Pakistani market has a tremendous potential for growth. PTCL as a corporate policy, encourages more payphones to substitute private PCOs a source of revenue leakage.Private sector data and Internet Service Providers are operating these services under license and revenue share arrangements. Internet and information technology services are now very popular and a number of new entrants are competing, providing PTCL an opportunity to lease capacity and load its available IT and Internet infrastructure both for private sector licensed operators and PTCLS own customers. PTCL is launching a three-phased project for IT and internet to expand the service to cater for 300,000 customers including the needs for infrastructure of private license holders. During the year the company earned a total revenue of US$920million Rs 46,47 billion against US$800million Rs 40.59 billion in the last financial year which ended 30th June 1997, equal to an increase of 14.50%.Total assets stood at US$2.5 billion (Rs 125.29 billion) as at 30th June 1998 compared with US$2.3billion (Rs 116.15 billion) on 30th June 1997. The gross operating fixed assets were US$2.2billion (109.96 billion) on 30th June 1998 compared to US$2billion (Rs102.17 billion) on 30th June 1997. Trade Debtors on 30th June 1998 were US$300million(Rs 14.93 billion) compared with US$220million(Rs 11.35 billion) last year. PTCL has made concerted efforts to collect arrears of dues from its customers. A special Task force has been constituted for this purpose. PTCL is considering advance collection, which is already the practice followed by the Mobile Phone companies.