PTCL profit slumps 25%

[Faisal Yousufi]

Pakistan Telecommunication Co Ltd (PTCL) has reported a 24.7% fall in
net profit for the year ended 30 June 2007. PTCL generated a net
profit of PKR15.64 billion (USD258 million) compared to the previous
year's figure of PKR20.78 billion. PTCL's turnover fell 5.5% to
PKR65.28 billion, while operating costs rose 11.7% to PKR46.56
billion, thanks to a rise in marketing costs and property rents.

The main reason for PTCL revenue decline is because of Increase in
competition .It is expected that after 3 years there revenue may
decline to 30% or more if Etisalat fail to change the culture and
image of PTCL . Also heard from the sources that Etisalat Management
is now recruiting Telecom GURUS from Pakistan Telecom Market and now
they are very much focusing on new image building of the company.

Etisalat has a 26% controlling stake in PTCL. Last week the Gulf
operator said it was considering doubling its stake in the company
which clearly indicate that Etisalat have big plans for PTCL.

[Sameer Bokhari]

a related piece from DAWN

http://www.dawn.com/2007/09/18/top10.htm

 

Etisalat plans staff cut in Pakistan

DUBAI, Sept 17: The Emirates Telecommunications Corporation (Etisalat) said on Monday it planned to cut staff at its Pakistan Telecommunication Company affiliate after it reported a 25 per cent drop in annual profit.

“The fall in profit was expected because the company did not improve its performance that was weighed by high operation costs, especially staff, and low tariffs on incoming international calls,” Jamal al-Jarwan, Etisalat’s chief executive for international investments, told Reuters.

Asked if United Arab Emirates-controlled Etisalat planned to cut staff at Pakistan’s largest telecoms provider, Jarwan said: “Yes”. Pakistan Telecom employs 65,000 people and has 5.7 million customers, according to its website.

The state-controlled firm, which Etisalat manages and of which it owns 26 per cent shares, said last week that profit in the year to June 30 fell as rising competition in the world’s sixth most populous nation cut revenue.

Pakistan Telecom shares, which are up almost 13 per cent this year, closed down 0.4 per cent on Monday.

Etisalat chairman Mohammed al-Omran told Reuters this month that Etisalat was interested in raising its stake in Pakistan Telecom to 51 per cent.

Etisalat also planned for Pakistan Telecom to offer more broadband services allowing faster access to the Internet, Jarwan said. Less than 5 per cent of Pakistan’s population of 165 million had access to broadband services, he said.

“We believe there is great potential in this market,”

Jarwan said, unable immediately to say how much will be invested.

—Reuters

[Salman Ansari]

My two pennies worth:

 

The fall in profits is not just due to excess staff but a total incompetence in the PTCL Management team. Unfortunately, Etisalat has now sent in a third set of Management people who appear to be either totally clueless or are swamped by the hugeness, politics, open competition and complexity of the organization.

 

The fall in profits is due to a variety of issues:

 

1. Management direction and confusion: there are fours sets of parallel managements: The Arab camp, The old-old PTCL die-hards, The new-old PTCL team (one which came in a few years ago) and the new-new Management team. All work at cross purposes to the other. Politics, back stabbing, incompetence, hubris and self preservation drives the decision making.
2. Most do not know what to do and devise strange plans in their cloistered environments.  Etisalat is clueless about competitive environments – to the extent that their previous CEO pressed Shaukat Aziz to stop issuing new licenses, which the Government pressured the PTA to do – totally contrary to Policy. With 6 cellular, 15 LDIs, 30 LLs, 10 WLLs, 167 ISPs, 22 DNoPs…this was a totally silly exercise, as any more would not have made any difference. The Arab and the old-old Managements have no idea of competitive environments and can only think in primitive terms of ‘kill the competition’ but not by better and more innovative service but using self defeating anti-competitive barriers.
3. Result of this is that PTCL is rapidly going down the tubes. I had predicted the 25% reduction in profits and a 30% loss of market share by this year end but even they surprised me! The next crunch time will come in 6 months when the three new Optical Fibre networks come on line and the India- Pakistan cross border link becomes real for four operators. After having lost the market in cellular, in- and out-bound voice for international and domestic calling, they are all set to loose the market to International and Local BW provisioning. In 12 months PTCL will face a drop in revenues by 40% and another 15% in profits. The sector revenues were US$ 1.8 B before the tiger got out of the tank. Today these are in excess of US$ 3.8 Billion with PTCL having dropped from US$ 1.2 B to less than US$ 1 B.
4. As a Pakistani and a theoretical shareholder (the Government still holds a large majority) I am angry at the way the privatization was done and continues to be handled. A national asset is being systematically destroyed and we fiddle and wait for the worst. But wait: one will be told that the fortunes of PTCL will turn around. Sure if Etisalat will start developing the real estate market. Forget about Telecom. This is clearly evident in the SPA (Sale purchase Agreement) which should be a public document but is a top secret for obvious reasons – it is a total cynical sellout of an asset. I got hold of a copy by chance and it made me appalled. Out of the 200 odd pages, only 16 or so are related to the text of the SPA the rest is a listing of the real estate and properties. One of the state guarantees asked for by Etisalat is that the properties will be handed over to them free of encumbrances. It is for obvious reasons and today’s advertisement in the newspapers by PTCL for developing ‘twin towers’ in Islamabad is a good clue of what is in store. I wish they could have used a less ominous name then ‘twin towers’. Premonition perhaps?
5. Of the 16 pages only 2-3 pages relate to Telecoms. No mention of national obligations, roll outs, SLA, customer requirements,  Quality of service, non performance penalties, expansion, investments. Nothing. The ‘fantastic’ agreement to sell this at US$ 2.8 B is a sham. Only US$ 1.4 Billion will be paid the rest will be earned by taxing us in Pakistan and paying the Government – if there was anything sillier…!

 

I had written to the Ministry (Dec 12, 2006) when I got hold of a copy of the SPA but, as was expected, total silence:

 

Baqai sahib:

 

I have got a copy of the SPA sent in by some anonymous benefactor and have gone through it.

 

This is an SPA for purchase of property and not a Telecom company. Baqai sahib: if you are aware of all this, I am surprised that you have just meekly gone along.

 

No wonder this has been a top secret document. Now I understand why I have been such a pain in the side of the PC and the people pushing this since I had been asking for transparency, adherence to the requirements of the interests of Pakistan including IT development, holding the spirit of deregulation paramount, wanting the issues of guarantees of professional management. See my many letters to the PC and the Ministry.

 

What makes me so sick at this is that the name of Gen. Musharraf is used whenever anyone says anything against this agreement. I am sure that he has not been briefed on the actual implication of this deal and the effect this will have on an asset in which the government has a majority share. I hope someone does convey this to him that this was a really bad deal done under his watch.

 

Some interesting observations:

 

• Only 16 pages out of 199 are the Agreement text. The rest is detail of the properties.
• Critical conditions all relate to:
• Making sure that 98% of these properties are handed over to the buyer in a ‘marketable condition’. This now validates the feedback from the PTCL employees that the emphasis of the management on developing these properties and total lack of interest in running the company.
• The government has to ensure that a LAW is passed to exclude this from PPRA and all government accountability. No wonder the interesting deal with Huawei. I thought this would be repugnant to the laws of Pakistan. But then, this agreement has gone further to state:
• The Pakistan government will be responsible for any claims against Etisalat brought about by any illegality in this process/transaction (the rules/laws of privatization have been seriously violated). No wonder they seem to be taking PTA with such impunity.
• This constitutes the full and complete agreement, so any thing being done more than this is not documented. Like violation of the Policy of no new licences.
• NO clause in this agreements relates to Telecommunications (!) or any obligations to:
• run and manage this like a Telecom company or
• honor the obligations for the development of IT as was demanded by MoIT (at least in my time there) from the PC,
• retain profitability or grow the company, or
• anything that relates to taking over an asset of Pakistan (we are still 68% owners, right??),
• nothing on assuring national security – a small engineer impacts national security (he is still in jail due to a pharonic judge) but this deal is kosher to our security agencies. Wow!

 

I speak seriously when I say that if the intent of Etisalat was to only acquire properties, can we not have them take the requisite properties valued at US$ 1.4 B + the NPV of the remaining value and get the Telecom part out of this deal. Pay some major operator like BT to come and run it at US$ 100M a year and complete the transformation as a public private company.

If this continues unchecked as it is going today, the PTCL may cease to exist in the current competitive environment. As to the laws and the validity of this agreement, a change in the government, a strong constitutional petition and an aggressive judge will cause a lot of grief to all concerned. This will come together with a massive erosion of the PTCL market share in the next few months.

 

Baqai sahib: who is insuring my and your 68% share in this company as citizens of Pakistan?

 

Regards

 

Salman

 

 

 

---

From: telecom-gr...@googlegroups.com [mailto:telecom-gr...@googlegroups.com] On Behalf Of Sameer Bokhari
Sent: 18 September 2007 11:47
To: telecom-gr...@googlegroups.com
Subject: TGP: Re: PTCL profit slumps 25%

 

a related piece from DAWN

http://www.dawn.com/2007/09/18/top10.htm

 

Etisalat plans staff cut in Pakistan

DUBAI, Sept 17: The Emirates Telecommunications Corporation (Etisalat) said on Monday it planned to cut staff at its Pakistan Telecommunication Company affiliate after it reported a 25 per cent drop in annual profit.

"The fall in profit was expected because the company did not improve its performance that was weighed by high operation costs, especially staff, and low tariffs on incoming international calls," Jamal al-Jarwan, Etisalat's chief executive for international investments, told Reuters.

Asked if United Arab Emirates-controlled Etisalat planned to cut staff at Pakistan's largest telecoms provider, Jarwan said: "Yes". Pakistan Telecom employs 65,000 people and has 5.7 million customers, according to its website.

The state-controlled firm, which Etisalat manages and of which it owns 26 per cent shares, said last week that profit in the year to June 30 fell as rising competition in the world's sixth most populous nation cut revenue.

Pakistan Telecom shares, which are up almost 13 per cent this year, closed down 0.4 per cent on Monday.

Etisalat chairman Mohammed al-Omran told Reuters this month that Etisalat was interested in raising its stake in Pakistan Telecom to 51 per cent.

Etisalat also planned for Pakistan Telecom to offer more broadband services allowing faster access to the Internet, Jarwan said. Less than 5 per cent of Pakistan's population of 165 million had access to broadband services, he said.

"We believe there is great potential in this market,"

Jarwan said, unable immediately to say how much will be invested.

--Reuters

[Babar]

Salman,

Very interesting (but sad) information and comments. Of all the
business units in ptcl, Ufone seems to be doing pretty well, is there
a difference in its management or is it just market momentum?

Babar

[Muhammed Nasrullah]

Incompetent management appears to be a recurring theme with most arab
backed ventures in pakistan. Or maybe we pakistanis have perfected it
into an art form?

[Salman Ansari]

The interesting part is that Ufone is largely unaffected by this change
since it is semi-independent and Etisalat had the sense not to put in its
managers and advisors.

Ufone is managed by Pakistanis.

Salman

-----Original Message-----
From: telecom-gr...@googlegroups.com
[mailto:telecom-gr...@googlegroups.com] On Behalf Of Muhammed
Nasrullah
Sent: 19 September 2007 03:25
To: telecom-gr...@googlegroups.com

[Shehzad Abbas]

Salman Sb,

Very insightful analysis! something however doesn't add up. If it is a sinking ship, and a front for their ulterior and infinitely more profitable interests in the real state, why would they be interested in acquiring another 25% shares?

Rgds,
Shehzad Abbas

On 9/18/07, Salman Ansari <sal...@super.net.pk> wrote:

My two pennies worth:

 

The fall in profits is not just due to excess staff but a total incompetence in the PTCL Management team. Unfortunately, Etisalat has now sent in a third set of Management people who appear to be either totally clueless or are swamped by the hugeness, politics, open competition and complexity of the organization.

 

The fall in profits is due to a variety of issues:

 

1. Management direction and confusion: there are fours sets of parallel managements: The Arab camp, The old-old PTCL die-hards, The new-old PTCL team (one which came in a few years ago) and the new-new Management team. All work at cross purposes to the other. Politics, back stabbing, incompetence, hubris and self preservation drives the decision making.

1. Most do not know what to do and devise strange plans in their cloistered environments.  Etisalat is clueless about competitive environments - to the extent that their previous CEO pressed Shaukat Aziz to stop issuing new licenses, which the Government pressured the PTA to do - totally contrary to Policy. With 6 cellular, 15 LDIs, 30 LLs, 10 WLLs, 167 ISPs, 22 DNoPs...this was a totally silly exercise, as any more would not have made any difference. The Arab and the old-old Managements have no idea of competitive environments and can only think in primitive terms of 'kill the competition' but not by better and more innovative service but using self defeating anti-competitive barriers.

1. Result of this is that PTCL is rapidly going down the tubes. I had predicted the 25% reduction in profits and a 30% loss of market share by this year end but even they surprised me! The next crunch time will come in 6 months when the three new Optical Fibre networks come on line and the India- Pakistan cross border link becomes real for four operators. After having lost the market in cellular, in- and out-bound voice for international and domestic calling, they are all set to loose the market to International and Local BW provisioning. In 12 months PTCL will face a drop in revenues by 40% and another 15% in profits. The sector revenues were US$ 1.8 B before the tiger got out of the tank. Today these are in excess of US$ 3.8 Billion with PTCL having dropped from US$ 1.2 B to less than US$ 1 B.

1. As a Pakistani and a theoretical shareholder (the Government still holds a large majority) I am angry at the way the privatization was done and continues to be handled. A national asset is being systematically destroyed and we fiddle and wait for the worst. But wait: one will be told that the fortunes of PTCL will turn around. Sure if Etisalat will start developing the real estate market. Forget about Telecom. This is clearly evident in the SPA (Sale purchase Agreement) which should be a public document but is a top secret for obvious reasons - it is a total cynical sellout of an asset. I got hold of a copy by chance and it made me appalled. Out of the 200 odd pages, only 16 or so are related to the text of the SPA the rest is a listing of the real estate and properties. One of the state guarantees asked for by Etisalat is that the properties will be handed over to them free of encumbrances. It is for obvious reasons and today's advertisement in the newspapers by PTCL for developing 'twin towers' in Islamabad is a good clue of what is in store. I wish they could have used a less ominous name then 'twin towers'. Premonition perhaps?
2. Of the 16 pages only 2-3 pages relate to Telecoms. No mention of national obligations, roll outs, SLA, customer requirements,  Quality of service, non performance penalties, expansion, investments. Nothing. The 'fantastic' agreement to sell this at US$ 2.8 B is a sham. Only US$ 1.4 Billion will be paid the rest will be earned by taxing us in Pakistan and paying the Government - if there was anything sillier...!

 

I had written to the Ministry (Dec 12, 2006) when I got hold of a copy of the SPA but, as was expected, total silence:

 

Baqai sahib:

 

I have got a copy of the SPA sent in by some anonymous benefactor and have gone through it.

 

This is an SPA for purchase of property and not a Telecom company. Baqai sahib: if you are aware of all this, I am surprised that you have just meekly gone along.

 

No wonder this has been a top secret document. Now I understand why I have been such a pain in the side of the PC and the people pushing this since I had been asking for transparency, adherence to the requirements of the interests of Pakistan including IT development, holding the spirit of deregulation paramount, wanting the issues of guarantees of professional management. See my many letters to the PC and the Ministry.

 

What makes me so sick at this is that the name of Gen. Musharraf is used whenever anyone says anything against this agreement. I am sure that he has not been briefed on the actual implication of this deal and the effect this will have on an asset in which the government has a majority share. I hope someone does convey this to him that this was a really bad deal done under his watch.

 

Some interesting observations:

 

• Only 16 pages out of 199 are the Agreement text. The rest is detail of the properties.
• Critical conditions all relate to:
• Making sure that 98% of these properties are handed over to the buyer in a 'marketable condition'. This now validates the feedback from the PTCL employees that the emphasis of the management on developing these properties and total lack of interest in running the company.
• The government has to ensure that a LAW is passed to exclude this from PPRA and all government accountability. No wonder the interesting deal with Huawei. I thought this would be repugnant to the laws of Pakistan. But then, this agreement has gone further to state:
• The Pakistan government will be responsible for any claims against Etisalat brought about by any illegality in this process/transaction (the rules/laws of privatization have been seriously violated). No wonder they seem to be taking PTA with such impunity.
• This constitutes the full and complete agreement, so any thing being done more than this is not documented. Like violation of the Policy of no new licences.
• NO clause in this agreements relates to Telecommunications (!) or any obligations to:

• run and manage this like a Telecom company or
• honor the obligations for the development of IT as was demanded by MoIT (at least in my time there) from the PC,
• retain profitability or grow the company, or
• anything that relates to taking over an asset of Pakistan (we are still 68% owners, right??),

• nothing on assuring national security - a small engineer impacts national security (he is still in jail due to a pharonic judge) but this deal is kosher to our security agencies. Wow!

[Salman Ansari]

Hmm… conspiracy theories abound. Make the share price sink before making a bid to buy low the next set of shares… but maybe people are too unkind!

 

---

[Shaheer Khan]

In Dawn today, I read that Etisalat is restructuring the top-
management of PTCL - not clear whether the reason is because of the
low profit turnout, or because they want to get rid of the
inefficiencies.

Moreover, I read that they plan to downsize their labor force by as
much as 40%.

*Fingers crossed*