State of Telecom Industry in Pakistan

Pakistan is in second place compared to other South Asian countries in terms of certain economic indicators according to a report from World Bank on global business ranking . The business rankings report highlights the business reforms which have been implemented in Pakistan and provides details of various aspects of starting and running a business. In terms of issues, energy shortage is one of the major problem in Pakistan just like other emerging economies.

Here’s a summary, taken from Dawn Blog.

A recent World Bank report has declared Pakistan as one of the top favourable economies in the world. The “Doing Business 2008″ report states that Pakistan is in second place compared to other South Asian countries in terms of certain economic indicators, such as: ease of doing business, dealing with licenses, and protecting investors.

Pakistan is quickly emerging as a powerhouse in the region, partly due to its fast paced IT industry. The government’s policies towards foreign investors have also contributed in helping the country stand out. These include 100 per cent foreign equity ownership, 100 per cent repatriation of profits for foreign investors and tax exemption for the sector till 2013.

An increasing number of foreign companies also prefer Pakistan for their outsourcing operations. This is due to the large pool of English-proficient professionals, cheap connectivity rates and competitive operational costs.

‘Doing Business 2008? is an annual report that evaluates the regulations that directly impact economic growth and provides objective measures of business regulations and their enforcement. The report evaluates business
activities based on regulation affecting the “10 stages” of a business’s life: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

Story via Telecom Grid Pakistan.

No matter whether one is a business executive or a technology expert, personal face-to-face networking is an important aspect of professional development. In Pakistan we are beginning to warm up to this approach. Warid recently arranged a CIO forum in Lahore, which seems to be limited to Warid’s executives and business partners (details are below). It will take a while to build the trust which brings competitive companies together to discuss solutions to common issues. I hope that in near future CIOs from all major telecom companies in Pakistan can come together and promote indigenous solutions.

From a press release sent to me by Warid’s public relations team.

Wateen Telecom and Warid Telecom under the Warid Telecom International umbrella are quickly evolving as major players in the emerging markets of South Asia, Africa and now Eastern Europe. The exponential growth and addition of complex set of services also poses CIOs with a number of challenges. Effective use of technology, alignment with business goals, standardization and recognition of emerging trends are just some of these challenges.

WTI CIO Forum has been created to address these challenges. The main objective of this forum is to bring together the IT management from across the group to share their experiences, discuss the technology roadmap, talk about various emerging industry trends and try to leverage a synergy that exists in various projects and operations.

Along with other top-level industry executives from major companies, Mr. Marwan Zawaydeh, Board of Director and CEO of Warid Telecom, Mr. Salman Khurram, Head of IT at Wateen Telecom, and Mr. Mohammad Ali, GM IT Warid Telecom, spoke at the forum. The forum partners included International Turnkey Systems, TechAccess, and Cisco.

Details of Voluntary Separation Scheme (VSS) at PTCL have emerged with information also provided at PTCL site which puts it like this in Urdu: Aap Ki Hidmat Ka Etraf  (We recognise your services).

Total cost is about Rs 35 billion, out of which 50 per cent amount will be paid by the good old Government of Pakistan. The intended / eligible target of VSS are PTCL employees who are not over 58 years of age – probably management does not consider them relevant to the latest technology and strategy. According to insiders, this scheme works well for those who are relatively new at PTCL. As I have written before, if PTCL management handles this well, then this could be good for both the company and its employees in the long run. Business Recorder provides more information.

The government has imposed ban on re-employment of those employees of Pakistan Telecommunication Company Limited (PTCL) who will opt for Voluntary Separation Scheme (VSS), informed sources told Business Recorder.

“The Ministry of Information Technology will ensure that optees who are granted voluntary separation will not be re-employed by PTCL,” the sources quoted Cabinet Committee on Privatisation (CCoP) as giving directions to the Privatisation Commission.

Read more »

Pakistan’s smallest cellular phone company by subscriber numbers, Instaphone has may have been sold to SK Telecom of South Korea with management control and majority shares, according to unofficial sources.

This was first posted at TGP by Uzair Ahmed. See my previous coverage of this topic. The official notification and details from SK Telecom is yet to be made so this deal is not certain yet.

As reported in the local media.

We had news of SK Telecom biding for Pakcom, which operates with brand name of Insta Phone in Pakistan. The situation got clearer in recent days when the officials confirmed the news. And now we are in good position to quote that Instaphone has been sold to SK Telecom. The details of the agreement are not made public; however, the agreement confirmation has arrived from both sides.

Mr. Shahid Feroz, CEO Insta Phone Pakistan, commenting on the acquisition said that this would be the opening of another success chapter in Pakistan’s telecom market. However, he didn’t reveal the details of the contract, but he was optimistic that the final agreement will be duly signed with in one month’s time. Mr. Feroz disclosed some of SK Telecom’s plan for Pakistan market. He said that the company is willing to rollout country’s first 3G network. He also told that the management rights will also shift away to SK Telecom along with majority of shares in Pakcom.

Insta Phone, which started its service back in 1990, hold 350,000 customers in Pakistan, operates using TDMA technology. Sources have told that Assessment of Pakcom was prepared by Hongkong and Shanghai Banking Corporation Limited (HSBC) and Deutsche Bank of Germany.

SK Telecom revealed three key business areas to be concentrated on. These are the furtherance of their global reach by expanding internationally, developing the convergence of telecommunications and broadcasting, and searching for new business opportunities.

With an aim towards becoming a major player in information communication under an economic umbrella that will be over all of East Asia, SK is actively seeking multifaceted business opportunities in overseas markets.

Established in 1984, SK Telecom has a number of interesting networks under its belt including CDMA 2000, HSDPA etc. True to the uniqueness of South Korean market, the company offers a number of wired/wireless and application services.

This article notes that a study at Cambridge University found that 40 million adults in Europe (around 9 percent of the adult population) experience problems using mobiles, and the number of people who encounter difficulty increased with age. The elderly can often have trouble using modern mobile phone keypads.

Well, in Pakistan some of our adult population has difficulty due to many other reasons including illiteracy and unfamiliarity with gadgets.

In India people are willing to spend big money on so-called vanity or premium mobile numbers. Economic Times writes:

Guess how much will it cost to own 9999999995? Please pay Rs 15 lakh! Or if you are interested in 9855555555, then put a minimum bid of Rs 2 lakh, say mobile phone marketers. 

According to industry sources, many operators reserve some special series for politicians and bureaucrats, which are doled each time a government changes. Thus, few numbers never get released in the open market.

The craze for VIP numbers is highest in Punjab - where often the price of a VIP registration number exceeds the price of a car. Says a Hall Bazaar (Amritsar)-based mobile distributor: “Until now, the highest bid we have received is Rs 7.5 lakh for the number 9800000001. But other numbers like 9780000091 or 9780000009 can be bought for upwards of Rs 1 lakh. The series is open for sale.”

From Korea. Samsung Electronics and LG Electronics achieved the most successful quarterly results at the 3rd quarter of this year, selling 43 million and 22 million. Stock experts predict that Samsung will record KRW 16 trillion in revenue and 1.7 trillion in operating profit, a big increase from the result of the 2nd quarter, and LG will show 9 trillion in revenue and 280 billion in operating profit, offset by low sales of home appliances.

Research In Motion Ltd. reported that its quarterly revenue and profit more than doubled from a year earlier. The handset maker signaled its intention to move more aggressively into the wireless-content space, outlining a new free service called BlackBerry Unite. The desktop software will allow small groups of users like families to share content like calendars, music and documents wirelessly.

Read more »

Good career opportunites in general are scarce in Pakistan. Internship opportunities in particular are quite limited. Internship programs take some effort to set up and not all companies support the internship programs. In my opinion good interns bring fresh ideas, perspective and energy and create goodwill and are well worth the effort. I asked a telecom student at SZABIST about his views on internship. His response:

It is very difficult to get opportunities in top notch mobile companies in Pakistan. Companies like Mobilink, Telenor, Ufone and Warid visit quite regularly or at least once a year in top notch institutions of Engineering and Business Administration like IBA, NED, UET (Lahore), LUMS and CBM and take evaluations tests. Later the short listed candidates are interviewed and the few lucky ones get through. Not to mention, there are always few candidates who use back door entry through good PR and other links with some1 in the management of that company to get in but by and large merit prevails in most of these companies. Its true that there are many talented individuals in Pakistan but not many opportunities exist for them so many go abroad.

On the TGP forum, another recent graduate of FAST-NU shared his internship experience:

I was lucky to secure an internship in the O&M dept of Telenor Pakistan comprising of six weeks last year, but a heavy majority of our first batch passed out without any “proper” internship where they could groom themselves professionally. There is another problem, that is of relative closeness of the Telecom sector. There maybe a lot of vertical growth in various organizations but there is less horizontal growth. We need right direction from the industry. More structured recruitment and internship programs shall be a great step in that direction.

Ufone and Telenor have ‘formal’ internship programs advertised on their site. Other job sites such as Mobilink, www.rozee.pk and www.finaljob.com.pk are also good places to search for internships and jobs. What about multinational companies such as Huawei and ZTE? These companies are popular with job seekers so it would be nice if someone can share information about internships or jobs there.

The excerpt from Ufone’s site below talks about a well-structured internship and leaves a good impression. The real question, as mentioned above, is how do we extend these opportunities to more talented students?

Ufone offers paid 6-8 weeks internship programs to fresh graduates, college students from various disciplines in all the major departments. This program is designed in such a way that it ensures maximum learning in your chosen career area and provides you an insight into our company, work and people. You will receive valuable on-the-job training, opportunities to learn, coupled with challenging projects and assignments.

The internship at Ufone is objective/assignment based. These are reviewed and evaluated at the end of internship. In addition, interns are paired with a mentor for further guidance. A project summary is required to be submitted to the supervisor and HR at the end of your internship.

Spotted this at RegulateOnline. The news item suggests that a new competition commission is in the making which may take over the pricing policy responsibility from PTA. However the details about the division of regulatory authority between PTA and the new competition commission are unclear. Apparently the telcos are upset about the lack of openness about the process.

An article in Pakistan’s Daily Times reports that the country’s telecom operators are in favour of the government’s move to replace the Monopoly Control Authority with an independent competition commission, but are concerned that “secrecy around the process is making the whole exercise counter-productive”.

According to the Daily Times operators are asking for a transparent consultation process “to ensure that this new regulatory body will have well-defined areas of authority”. According to the article the new commission “is likely to restructure the required law and initiate step-by-step changes in price management policies for the local market, which includes price monitoring, determination of demand, supply and production levels and implementation of policies with the help of private sector.”

Daily Times adds that the ministry of law and finance has jointly prepared the draft of the ordinance, which is currently with the Prime Minister.

Green & White, a blog about technology, start-ups and hiring in Pakistan is  stepping up its efforts to support entrepreneurs in Pakistan. This is a blog on which I contribute as well. The timing for G&W 2.0 is great because we see a number of interesting changes in the technical landscape, both globally and in Pakistan. Essentially the Pakistani society is moving away from the traditional modes and professionals are willing to take more chances.

Blogs and online discussions have a unique place for the various stakeholders (entrepreneurs, investors, media, students, businesses). There are only a handful of folks who are active in this area and Green & White has taken a lead at providing interesting analysis and information for many technology and growth areas. My advice: It takes a lot of time to cause change so build and expand networks, provide information and insights which helps others and … keep going.

In case you are wondering about the coffee cup up there, it represents “coffee sessions” with Osama Hashmi, the managing editor of G&W!

Here’s a sampling of some recent interesting stories from G&W:

• TiE Launches Khudee
• Telenor Launches Comics on D Juice
• Flexible storage business and other implications of the e-crimes bill 2007
• Orgoo - All-in-one Communicaiton Kit

Media is abuzz with news about reduction in force and restructuring at PTCL, which has 65000 employees. We have provided various views and news about PTCL at this blog before. Going through the time lines since last year, one can see that PTCL is at a critical junction. Depending on who you ask, PTCL is a management fiasco or a great opportunity. The stakeholders in this story include staff and workers (who have a union), Etisalat which manages PTCL with its 26% stake (and would like to get additional 25%) and the Pakistan government. The PTCL union leaders have announced their opposition to cut jobs. The state has not responded yet.

Significant questions have been raised by concerned public in media, blogs and online discusion forums about strategy and operations of PTCL. There are those who question the whole privatisation deal and whether it was good for Pakistan. Others point out to the hefty price paid by Etisalat and feel that this was the best possible option. Anyway, there is no going back to the days of state-owned monopolies in the telecom market of Pakistan.  It is clear that Etisalat is trying to turn around a big ship and it will face considerable difficulties on the way.  Even though job cuts are hard, in the long term there is no way around them. I want PTCL to get its act together and thrive in a fair and just manner.

According to Farhan Bokhari in the Gulf News:

As Etisalat moves to increase its stake in PTCL, it will inevitably be left with few options other than to work towards a robust plan for reforming the company with the ultimate objective of tackling its falling profits. Unless PTCL’s profits are not just lifted but turned into significant gains, the company’s long term outlook is likely to suffer.

While PTCL has been privatised for some time now, the Pakistani public is yet to witness the fruit of the change of management from public sector to private sector. Pakistani consumers may have seen the benefit of this change in ways such as much easier access to new telephone connections that once took several years to be provided.

But the quality of service by PTCL’s staff in areas such as dealing with complaints from subscribers still remains of simply pathetic quality. Stories such as subscribers waiting for several days before the PTCL staff were able to deal with out-of-order phone lines in rain drenched neighbourhoods still make the rounds across Pakistan.

Read on for more background.

Read more »

Pakistan Telecommunication Co Ltd (PTCL) on Friday reported a 24.7 percent fall in net profit for 2006-07 financial year, as rising competition led to a decline in revenues from call traffic. Sources: Reuters and other news sources.

The full results are not available on the investor section of PTCL site as of this writing but I hope that the details will be posted there soon. It will be interesting to watch the stock performance after these results and the recent announcement by Etisalat about acquiring controlling stakes. The analysts comments below are worth reading.

Highlights of PTCL financial results 2006-07:

1. PTCL earned net profit of 15.64 billion rupees ($258 million) for the year ended on June 30, down 25% from previous year. Earnings per share fell to 3.07 rupees from 4.07 rupees. This was in line with the market expectations of 15.41 billion rupees to 17.69 billion rupees range. 
2. The company said its revenue for the year fell to PKR65.28 billion, from PKR69.08 billion a year earlier.
3. Operating costs increased to PKR46.56 billion, compared with PKR41.69 billion a year earlier.
4. PTCL announced a cash dividend of 2.0 rupees per share, its first payout for 2006-07.

Analysts Are Optimistic

As reported by Reuters, Analysts said the fall in profits was a result of lower revenue from international and domestic call traffic and increased competition from new market players.

“Since the implementation of deregulation policies in the domestic telecom sector, the company is facing immense competition from new players, especially in the long-distance and international calls segment,” said Abrar Hussain, an analyst at First Capital Equities Limited.

But analysts said PTCL’s profitability is expected to rise in coming years as it expands network and attracts more customers.

“We anticipate an 11 percent annual growth in net profit of the company during the next three years,” said Abrar Hussain, an analyst at First Capital Equities. PTCL’s profitability growth is to result from the cumulative impact of expanded fixed line network, including profit of 20.78 billion rupees last year.

“The company has potential to grow in the longer run if the management succeeds in implementing steps for network expansion, service customization, cost-cuttingand the introduction of new services and efficiency measures,” said Hifza Zia, an analyst at Atlas Capital Market.

Read more »

Daily Times has reported this interesting statement. As we have been discussing, Etisalat’s last transaction (26% shares and management control) is under scrutiny these days in Pakistan. Now Etisalat is thinking about taking its stake to 51% to get full control. How will the market react to this? And how much will this lift up the PTCL stock?

The news item adds:

The state-owned United Arab Emirates company is now considering whether to increase that to 51 percent by buying more stock from the government, Etisalat Chairman Mohammed Hassan Omran said in a telephone interview with Reuters in Dubai.

“We are evaluating that option and once we’ve arrived at the decision that this is positive, we will talk to the government,” Omran said, declining to give further details.

Pakistan, the world’s third-fastest growing market for mobile phone users, has a moratorium on the sale of new mobile licences. The only way for international companies to enter the world’s sixth-most populous nation is by buying into existing operators.

“We are already in Pakistan, so if we have an additional share this will add to our array of operations,” Omran said. Etisalat has no immediate plans to spend on PTCL’s infrastructure, Omran added.

The fall of corporate giants like ENRON and WORLDCOM left many learning impressions for both public and private sector enterprises besides stakeholders including governments, employees, Board of Directors and strategic partners. In both of the above mentioned historical cases, the core reason was fraudulent conduct by the corporate level management. The top officers consistently kept hiding the true financial facts and figures bearing losses and public reports kept displaying healthy financial results and profitability, which strengthened the trust of shareholders and partners to keep investing besides helping the share price to grow further in the stock market.

Unfortunately, we might have another big financial scandal in Pakistan in upcoming days – this is about privatization of PTCL. As you may recall Etisalat acquired a 26% strategic stake along with management control in 2006 after months of deals and bargaining on the actual value of the deal. Now the scandal reported in the papers claims that PTCL was worth a lot more. PTCL no doubt is one of the strongest corporate enterprises not only in Pakistan but also in the continent known as Asia. Therefore, if the news story becomes true, it will have a devastating effect on the Pakistan’s Telecom market, Economy and Pakistan’s political stability. Pakistan’s image, which already is in crisis, will be hurt further. The business schools around the world surely will have another good case study.

Jang, one of leading Urdu newspaper in Pakistan, has highlighted news on the secret contract over privatization of PTCL as shown above. An ex-Senior Vice President has claimed the privatization as Pakistan’s Biggest Financial Scandal. PTCL former official further commented that the deal was closed on 2.6 billion dollars including U-fone & Paknet, however only U-fone had enterprise value of more than 6 billion dollars which does not include assets of U-fone. Moreover, pricing decisions were made through old records instead of determining current market value, which means, it was like Buy One Get 2 Free offer. It has been reported further that in September 2006, when Etisalat had refused to honor the deal, they were offered a secret price discount of 394 million dollars along with commitment to lay off 20,000 employees and to bear the 50% cost of layout. Supreme Court of Pakistan has already given decision against the privatization of PSO and Pakistan Steel and if PTCL’s privatization gets challenged on true facts, it will bring horrifying results.

Read more »