Suffering from years of top line decline, a telecom giant has homework to do. And its current chief does not mince words about it. BR Research’s background discussions with the management and field visits suggest that Pakistan Telecommunications Company Limited (PSX: PTC) is serious about revamping its network infrastructure.
An ambitious network transformation programme (NTP) is underway to fix issues in the fixed network. The NTP aims to upgrade top hundred of the PTCL Company’s total 427 exchanges. Already underway, the programme is expected to finish somewhere in early 2019, at a capex of about Rs27 billion. Some 30 exchanges were revamped by the end of December 2017, with more to follow this year.
This exercise may help PTCL attack the root-cause of its recent woes. Earlier this decade, the Etisalat management focused on making the organisation lean in terms of HR. A couple of rounds of employee voluntary separation schemes (VSS) followed, helping streamline administrative overheads. But something still had to be done about the top line, which kept receding in recent years.
Last year, the corporate focus shifted to the patchy state of fixed network. The network had undergone wear and tear for years due to a variety of factors, but mainly cable damage due to civil works by town agencies across Pakistan. The network was kept up and running through reactive measures, which led to inconsistent service quality. Resultantly, more time was spent firefighting than focusing on quality services and network expansion in the promising, growing segments of DSL broadband and Smart TV.
The NTP is targeting exchanges located in affluent neighbourhoods and upgrading them so that triple-play service (data, video, and voice) can be seamlessly provided. Customers have a seemingly insatiable demand for unlimited data and PTCL can fill that market gap. Through the NTP, a rehabilitated copper network can give broadband speed up to 20Mbps; a pure fiber-to-the-home (FTTH) network can go up to 100Mbps. Besides DSL, this kind of network quality might improve the extremely low IPTV penetration.
The PTCL management is cautiously optimistic of NTP paying off over time. “We are aiming all the 100 exchanges to be up graded by 1QCY19. But again, the progress is coming online over time. The full impact will not be immediately visible, but you will see results by 3QCY19, by when all 100 exchanges will be fully functional,” Dr. Daniel Ritz, PTCL Group President told BR Research in a recent interview.Looking at PTCL latest financials, it is obvious that the company is stabilizing its revenue decline.
This might be the year that the growing revenue streams – DSL, corporate services, and Charji LTE – finally overpower the declining streams – PSTN (fixed-line voice) and EVO CDMA (fixed wireless). Some top line growth in CY18 may be one indicator to judge whether the NTP has started paying off.