November 05, 2007	Monday	Shawwal 23, 1428

While the special secretary to the ministry of finance makes a statement in Washington against joblessness in Pakistan, he is all praise for the various privatisation programmes some of which resulted in high levels of unemployment, golden parachutes notwithstanding.

For, severance package may provide sustenance for some time but is not a source of employment unless one starts up a venture that may or may not work out well as many salaried employees are not given to risk-taking and doing small business.

The fact remains that retrenchment leaves employees in various fields displaced, dislocated, and disoriented due to non-availability of alternative employment opportunities. PTCL’s employees are to be axed next. A frightening figure of 29,000 employees is to be separated soon. This is not a ‘lay off’ as laid-off employees are expected to be recalled once the going is good. This is a virtual termination for good and from an organisation that is profitable and not doing all that bad either.

PTCL is a large listed firm whose net profit fell for the six-month period ending December 31, 2006 from Rs10.83 billion during the same period in the preceding year to Rs8.37 billion in the six months to December 31, 2006. This was a drop of 22.71 per cent as compared to the previous half-year. This decline was attributed to a decline in the revenues from international calls. Due to competition after deregulation in 2002, PTCL had slashed tariffs on international calls. But, it could not make its service competitive.

The call traffic could, therefore, not go up despite tariff reduction. So, the revenues could not increase. The outlook for the next half-year was, however, bright. While it did look up for international call revenues that increased by five per cent during the year 2006-07 as compared to last year, domestic call revenues fell by six per cent. Net revenues also fell by six per cent during the same period.

A separation of employees has been announced by PTCL whose charge was handed over to UAE-based Etisalat in April 2006. Etisalat was given 26 per cent shares with management rights. This telecom giant ought to have been turning PTCL around in a professional way with least or no human injury as is required in the third world experiencing high levels of unemployment and human deprivation.

The PTCL reported in September 2007 that their earnings for the year ended June 30, 2007 dropped by 25 per cent and net revenues decreased by six per cent as compared to the previous year. A comparison of 2007’s with 2006’s further shows that PTCL’s operating profit decreased by 32 per cent in 2007 as compared to 2006.

While financial charge increased by 52 per cent during the same period, PTCL’s non-operating income from financial and other assets increased by 42 per cent thus effecting a reduction in profit before tax by 23 per cent. Had it not been for non-operating income, reduction in profit before tax would have been higher. A more than 50 per cent increase in financial charge is significant some of which was due to bank and other charges.

While revenues decreased by six per cent during the period, operating costs increased by 12 per cent whose break-up is important to know. While increase was recorded in fuel and power, printing/stationery, and technical services fee; bad debts amounting to

Rs533.6 million were written off and a heavy increase in provisioning amounting to

Rs5178 million was recorded for loans, obsolete stores, and doubtful debts. It is mainly because of the impact of this heavy provisioning that operating costs increased by 12 per cent for the year ending June 30, 2007.

Otherwise, operating costs would have been of the order of Rs41, 386 million that would actually be less than that for the year ending June 30, 2006. Profit after tax might then have been higher or comparable in 2007 to that in 2006 despite a decrease in revenues and significant increase in financial charge. Granted that heavy provisioning might have been necessitated, it should not serve as a smokescreen for poor financial performance and thereby employee separation.

To do heavy provisioning in just one year, cry profit decline, and then make a case for layoff is not acceptable further on the ground that the component of salaries, allowances, and other benefits of employees actually decreased over the year by five per cent. Where then is the case for such a heavy employee retrenchment in PTCL?

PTCL’s 65,000 employees together get Rs14, 025 million per annum that is an average of Rs17,982 per capita per month. In contrast, PTCL’s top brass comprising some 120 executives get Rs274 million per annum that is an average of Rs190, 529 per capita per month which is more than 10 times what each ordinary employee gets. To now show the low-paid employees the door is not just callous but may not even be prudent management.

Why the low paid employees of PTCL are to be sacked in such large numbers is absolutely unclear especially when the decline in profits this year is due to infrequent heavy provisioning not expected to be repeated so heavily in the following years? As shown herein, the workers and their meagre salaries are in no way responsible for the profit squeeze this year when the salary bill actually decreased by five per cent.

It might be argued that the salary bill is the largest cost component comprising 30 per cent of total operating cost. It may well be that but depreciation and amortisation is comparably high at 28 per cent of total operating cost. Depreciation and amortisation increased by six per cent during the year under review. Would the PTCL next contemplate cutting back its physical assets to reduce its operating costs?

In all probability, it will not as there is always greater regard shown for machinery, equipment, and technology than for human capital that PTCL has in abundance but that it has been failing to turn over into higher revenues despite a change in management and despite an induction of foreign investors. While more access lines were installed during the year under review, access lines in service declined and one would like to know why that is the case under a much hyped private management.

This problem with PTCL has been becoming serious since 2005 onwards. After deregulation in 2002, PTCL’s profit after tax increased from Rs19.8 billion in 2002 to Rs29.2 billion in 2004 and net margin increased from 29.83 in 2002 to 39.35 per cent in 2004. Since then, profit after tax declined steadily to Rs15.6 billion in 2007 and net margin to 23.96 per cent in the same year. While the financials for the five-year period require closer scrutiny to know the reasons behind the above trends, suffice it to say that PTCL has to become competitive in the wake of a deregulated market.

Etisalat was supposed to do just that. Currently, PTCL is not competitive with service having actually deteriorated in the last one year. Never before have phone complaints appeared so frequently in the letters to editor column as they have recently. This is one gauge of the quality of service being given by PTCL under a private sector management.

For PTCL to gain competitive advantage, it has to learn to manage its human resource strategically so as to give quick response and add value through efficiency and service. Unless it views its human resource as an asset, it will not be able to give customer satisfaction at which stage it currently is far from customer delight that it should be aiming at. PTCL’s current slogan is, “it takes two to make a difference” and its “two” include “us” and customers.

It is unclear what PTCL means by “us”. For, PTCL’s unhappy and insecure employees can never make the customers happy. PTCL can target the customers only by targeting the employees. Employee-targeting is not retrenchment and addition to the country’s burden of unemployment. Rather, it is to tap into the knowledge-base of workers and make it work to accomplish organisational mission.

Unless a strategic approach to PTCL’s human resource is taken, it will be deprived of its asset base of workers in the interest of short-term profitability for foreign investors who wish to increase their shareholding to 51 per cent and thereby repatriate more of PTCL’s profits. Not only will the government be deprived of its dividend earnings, Pakistan will lose out on the potential that PTCL has in telecommunication and that could be developed for national benefit. This potential needs to be saved from the current sledgehammer approach to nowhere for us!