PTCL’s Rising Portfolio Vs. Falling Profits

PTCL-logoUntil the turn of the century, and possibly beyond, acquiring a phone line at your residence was an expedition of great mystery. In fact, the following tale personifies the tormented past of Pakistan’s premier telecommunication provider, PTCL, and offers one of the best examples of a journey that has been covered by the burdened giant.

A Story from the Past:

A young man beginning his professional chapter of life in the late 1980s applied for a telephone line to be connected at this residence in Karachi. The process at that stage was to wait for a demand notice to arrive at the specified residence which was needed to be paid in advance of the line being connected.

In simpler forms, it was a registration fee that doubled as an address verification system. Clever!

The young man waited for this notice day after day, while continuing his grind of work and life. As time passed, the young man ended up being posted to other cities and eventually settled in Islamabad.

Then one day, he received a phone call at his current residence from the tenant of the Karachi place he had occupied several decades ago. A demand notice had arrived from PTCL for a telephone connection in the man’s name, and the tenant wanted to have the connection installed.

The above is not a vengeful attack on PTCL, but highlights a plight that is likely to be resonated by many across the country. And be mindful, similar cases exist in the telecommunication industry across the world; from the most developed to the under-construction nations.

Betterment After Privatization:

Since the privatization process in 2006 handed management control of PTCL to the Emirates Telecommunication Corporation, ETISALAT, a rapid process of transformation has been undertaken on all fronts.

In addition to bringing the technology at par with the Middle East, as a minimum, there have also been great strides in rebranding the telecommunication company and revamping its image in the public eye. The new logo and color scheme, the inviting décor of sorts, coupled with some professionalism in customer service, has made the experience of dealing with PTCL quite a bit better now.

On the technology front, it would be hard for one to state anything detrimental to the moves made. From the updated helpline to the multitude of services now available through the very same copper wire that was always entering your home boundary, it has been an increasing portfolio month after month.

Falling Revenues: 

However, the financials reported by the company for the year ending 2010 are not as impressive as expected. In the 6 months till December 2010, classified as the first two quarters of the current fiscal year, the group recorded a 4.5% rise in revenue compared to the same period in the previous financial year. At the same stage, there was also a 10% rise in costs for the group, resulting in an overall drop of 4% in gross profit. In the split between segments, Wire line operations saw a 6.5% drop in revenue while its Wireless counterpart saw a 16% rise.

The Why Part:

This shift between segments appears to fall in line with the general trends across the telecommunication segment in many countries, where fixed line revenues have dipped as consumers move towards the many options in the wireless portfolio. Most operators have resorted to diversification in the portfolio, including acquisitions of wireless start-ups, as means of increasing the revenue streams.

PTCL retains its hold on geographical reach and the technical backbone. However, it appears that improved products like Smart TV and DSL have not managed to attract a better return from the market. Despite holding off strong competition on both fronts, the increase in subscriber numbers have not provided any increase in revenues.

While analysts do attribute some of this fiscal drop to the competition, there is also the group’s own portfolio acting as a double-edged sword. The convenience of Wireless may be attracting the very same consumers who would have taken the Wire line services a year or so ago.

And with more companies offering Wireless solutions, the battle for a larger share of the market is tighter to handle. Of course, the competition currently remains restricted to the urban centers, with PTCL utilizing its extensive exchange network to offer its vast services across many towns and rural regions. However, if ARPU is the main purpose of any operation or investment, the urban population is convincingly stronger on that front.

As cellular operators evaluate the saturation they are reaching in their industry segments, it is likely that more amalgamated options will be introduced from service providers in a bid to make the one consumer a revenue generator through multiple services. The convenience for the customer is having to deal with only one service provider; something that still escapes PTCL and its owned subsidiary, Ufone.

With 3G, 4G and all other Gs being proposed in the telecommunication industry, as well as partnerships between cellular operators and ISPs, the market is shaping towards more battles on the complete solution front. An interesting scenario for consumers; hope PTCL is up to it.