Strategic Management Report on Wateen Telecom Ltd.

Program: MBA/M.PHILL

Due Date:28-April-2011

Submitted To:

Dr. Muhammad Imtiaz Subhani

(Iqra University Researcher Head)

Uzma Basheer Ghaus

Submitted By:

Syed Adnan Kaleem (8631)

Muhammad Farhan Farhat (9312)

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ACKNOWLEDGEMENT

Through this, we would like to thanks Almighty ALLAH, The most merciful, for providing us

the skills and strength to fulfill a task, which could not have seen and achieved without His

blessings.

Now, I can move forward but with great thanks and appreciation to those who has supported and

encouraged me throughout my report. This report would not have seen its completion without the

guidance from our senior teacher, Ms Uzma Basheer. This report reflects the knowledge, which

we have gained from our valuable teacher. We acknowledge with deep gratitude the invaluable

help extended to us by, and Sir Ehsan Durrani (Senior Teacher) and Special thanks to Dr.

Muhammad Imtiaz Subhani (Iqra University Researcher Head), without his co-operation it was

not possible for us to complete our report. He guided and helped us and specially the sympathetic

attitude, which inspired us for hard work.

Finally, I would like to thank all those people who helped me throughout this report.

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Table of Contents PageExecutive Summary: 5

Organizational Chart 5

Coverage 6

Core Values & Ethics 7

VISION Statement 7

MISSION Statement 7

Product portfolio 8

Telecom Industry Overview 9

Broadband Penetration 10

Subscriber Mix 11

Broadband tariff 13

External Analysis 15

Political & Legal 15

Economic 16

Social 18

Demographics 19

Technology 20

Competitive Edge of Wateen 20

SWOT Analysis 21

Porter Five Forces Model 22

Rivalry among competing firms; 22

Potential Entry of New Entrant; 22

Potential development of Substitute product; 23

Bargaining power of Suppliers; 23

Bargaining power of Consumers; 23

PORTER’S FIVE FORCES MODEL 24

External Factor Evaluation Matrix (EFE) 28

Competitive Profile Matrix (CPM) 30

INTERNAL ANALYSIS 31

Marketing 31

Management 32

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Financial Analysis 34

Internal Factor Evaluation Matrix (IFE) 37

TOWS Matrix 38

SPACE Matrix 41

INTERNAL EXTERNAL MATRIX 43

BCG Matrix 44

The Grand Strategy 45

Evaluation of Strategies from Matrices 46

QSPM Matrix 47

Lower Price 48

Improving or Development New & Innovative Product 49

Market Development or Finding or Searching New Market 49

Action Plan 50

Marketing plan 50

Production plan 50

Financial plan 50

R&D Plan 51

MIS plan 51

Projected plan for 5 years 52

Conclusion 54

Executive Summary

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Wateen Telecom Limited provides international voice retail and wholesale communication

services to carrier, corporate, and individual customers in Pakistan. It offers various networking

services, such as WiMAX, a wireless broadband access; direct to home television; Long-Haul

OFC network; metro OFC network for high bandwidth connectivity in various cities; and hybrid

fiber coaxial network, as well as VSAT products and solutions in support of various applications,

such as carrier class telephony networks; broadband, Internet, and multimedia access; corporate

enterprise private networks, including banking; rural telephony public network extensions;

government and military networks; and GSM and cellular applications. The company also sells

and deploys telecom equipment, as well as provides system integration services; and offers

international routing and termination of direct dial telephony traffic via voice grade switched

circuits to international carriers. Wateen Telecom Limited operates an infrastructure of optic

fiber network spanning approximately 10,000 kilo meters. It has strategic collaboration with

Wateen Multimedia (Pvt.) Limited; and a strategic alliance with Defence Housing Authority-

Lahore. The company was incorporated in 2005 and is headquartered in Lahore, Pakistan.

Wateen Telecom Limited is a subsidiary of Warid Telecom International, LLC.

Organizational chart

Coverage

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Naeem Zamindar Chief

Executive Officer

Furqan Qureshi Adviser to CEO

Syed Jibran Ali

Chief Commercial

Officer

Sajjeed Aslam

Chief

Financial Officer

Faisal Sattar

Chief Technology

Officer

• Abbottabad

• Bahawalpur

• D.I. Khan

• Faisalabad

• Gujranwala

• Gujrat

• Hyderabad

• Islamabad

• Jhelum

• Karachi

• Lahore

• Multan

• Okara

• Peshawar

• Quetta

• Rawalpindi

• R.Y. Khan

• Sahiwal

• Sargodha

• Sheikhupura

• Sialkot

• Sukhur

Core Values & Ethics

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Our values guide our behaviors and shine through in all our interactions with each other and our

stakeholders.

• Respect for others – We deeply value diversity in background, strengths, interests and

experiences

• Integrity and honesty – We conduct our business with uncompromising integrity

• Open communication – We believe in nurturing positive changes in the organization

and the community

• Customer satisfaction – We strongly believe in our passion for customers, partners

and technology

• Leadership – We practice and cultivate the will to excel and taking on big challenges

• Synergies and strategic partnerships – We value maximizing growth opportunities

and stimulate atmosphere of healthy competition

VISION Statement

Wateen’s vision is to take Pakistan into the digital revolution of the 21 st century by offering

complete communications and media solutions such as Telephony, Internet, Data and TV /

Multimedia to the public at large based on quality, affordability, availability and reliability. To

make Pakistan a regional communications hub, inter-connecting the East with the West and

Central Asia to the Middle East.

MISSION Statement

• Offer affordable communication services that cater to the needs of our customers

• Deliver high quality, flexible solutions that allow customers savings, choice and

enhanced efficiency

• Make ‘Broadband Pakistan’ a reality

• Achieve maximum customer satisfaction at all levels

• Provide innovative, efficient and creative solutions

Product portfolio

7

Wateen was launched in a fragmented and new market, leveraged by its infrastructure as the

unique selling proposition. The infrastructure comprised end-to-end consumer solutions ranging

from triple play for households (Voice, Internet &TV) and targeted corporate solutions across all

businesses and catering to all connectivity requirements. Wateen offer a unique product mix

allowing depth and breadth in the product portfolio to ensure that Wateen don’t just cater for

customers’ needs but become part of the customers’ life.

• WiMAX

• Metro Fiber

• Managed Capacity

• DPLC / IPLC & IP-transit

• VSAT [Very Small Aperture Terminal]

• Co-location / Tele-Housing

• Broadband Internet

• Telephony – Consumer

• Calling card / calling account

• Content &Media

Wateen brings it all under one roof as a one-stop-shop for world class

entertainment. Under this umbrella, Wateen offers Analogue and Digital TV,

Online Gaming, Infotainment Portal and many other first of its kind entertainment

products which are mentioned below:

• Infotainment portal

Wateen’s infotainment portal provides the most sought after information on the

Internet.

• Online Gaming

Wateen’s Online Gaming (WOG) targets avid gamers through dedicated servers,

and casual market through a comprehensive web gaming portal.

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Telecom Industry Overview

The Information and Communication Technology industry around the globe has evolved and

matured with an unsurpassed pace of growth and its diffusion has been exceptionally smooth.

The mandate of World Summit on Information Society WSlS) that more than half of world’s

inhabitants will have access to ICTs within their reach by 2015W has already been met. The

dynamism of fixed and wireless broadband now becomes a deciding factor for increasing the

broadband proliferation in any part of the world which would bring a lot more gains that what

mobile communications had offered us at the start of the new millennium. Therefore a large

number of countries are considering wireless broadband to overcome access gap, whereas

Nordic countries vigorously expanded broadband usage on the basis of fixed broadband

connection in 2002. Government policies also play pivotal role in proliferation of broadband. To

this end investor friendly policies arc formulated to facilitate broadband rollout through soft

taxation regimes, competitive market structures and fiscal incentives that result in giving

stimulus for growth to the local market.

Pakistan experienced a decade of exceptionally high telecom growth both in terms of

technologies and accessibility, however, this growth mostly remained limited to voice only up

till recently. It has been over 10 years now that Pakistan is connected to the World Wide Web

however, a negligible number of people have the opportunity to enjoy this facility. The basic

email and internet services that were introduced in Pakistan in 1998 were taken over by

broadband services in the year 2000 when World Call introduced the first ever high speed

internet through Hybrid Fiber-Coaxial HFC followed by DSL in 2002. With rapid advancement

in technologies latest developments kept pouring into the country compelling the Government to

revise and reform broadband friendly policy framework. As a result Pakistan received and

implemented its first ever broadband policy in 2004 with optimistic targets for five years. It was

the same time when Pakistan had entered the stage of telecom sector liberalization. It was

expected that Government’s enhanced focus on broadband and telecom deregulation would have

synergy effect on broadband proliferation in the country. However, contrary to the expectations

the broadband growth did not meet overwhelming results. There are number of economic and

technical factors attached to it which include low literacy rate, down beat, absence of computers

and allied equipment, inaccessibility of service, non availability of local content and very little

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awareness of the ICT innovation. As recent as 2008 the broadband was available only in three

metropolitan cities of the country.

Today Pakistan is standing at the verge of entering broadband revolution that will place our

nation on the road to ICT revolution with the rest of the world. There are over 0.9 million

broadband subscribers in Pakistan with three years average growth rate of over 150%. According

to Point Topics (a renowned international broadband research company) Global Broadband

Report for 4th quarter 2009, Pakistan stands among the top ten countries for annual Broadband

subscription growth. Similarly a global Broadband study was carried out by University of Oxford

in September 2009, sponsored by Cisco which has ranked Pakistan at 60th position ahead of

India and Indonesia which were given 62nd and 63 positions respectively.

Broadband Penetration

Broadband penetration in Pakistan today stands at 0.55% showing an average growth rate of

150% per year over the last three years. The broadband Broad band Penetration kicked off in

2008 when the Government took some major initiatives for its launch. Although there exists a

colossal demand and supply barrier with large parts sans access to the services, Pakistan has not

received the kind of investment that could coax robust broadband penetration. This was due to

the fact that the world’s strongest economics face a crippling financial situation that has been

trickling down over the years in to a gargantuan crisis of demand failure. On a positive note,

broadband density verges improvement. If we look at the growth in penetration it is very

impressive and stands at over 100% in the reported year

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Subscriber Mix

Broadband subscriber growth in Pakistan has truly been an amazing phenomenon over the Last

few years. From a handful of subscribers in 2005 to almost a million by the end of

FY 2009-10, broadband has transformed from a business luxury to a household necessity. People

from all walks of life, professionals, students, academicians, business executives and corporate

giants, all are at an equal footing to avail broadband privileges.

Broadband in Pakistan passed 900.648 subscriber marks at the end of FY 2009-10 as compared

to 413.809 at the end of FY 2008-09. The astounding growth rate of over l00% is constantly

being sustained by the industry for three consecutive years with 118% being the latest growth

rate figure. A total of 486.839 new subscribers have been registered by the broadband companies

during the FY 2009- 10, the highest ever. The continuous rise in the subscriber figure further

consolidates the opinion that broadband will be The Next Big Thing in the Pakistan’s telecom

market.

Among the major players, PTCL is the biggest operator with 474.387 subscribers and a 53%

market share combining both of its DSL and EvDO services. Wateen is the main competitor of

PTCL with 188,725 subscribers and 21% market share. World Call is the third biggest company

with 97,280 subscribers and an 11% market share. Wi-Tribe which started its services about a

year ago has stepped into fourth spot with 51,912 subscriber’s arid 6% market share. Link Dot

Net has 34.8 18 subscribers and a 4% market share. Figure depicts the rise of broadband players.

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It is evident that Wi-Tribe is by far the fastest growing broadband operator in the country with a

staggering 18 14% growth

Broadband is one of the most innovative telecommunication media, capable of carrying, heavy

applications and multi -services delivery. The technological and economical impact of broadband

especially in the context of ICT access has instigated policy makers and strategists for new

paradigm to dwell upon. Exploring newest technologies and facilitating the emergence of this

platform is among the main targets and goals of nations around the world. PTA has been keeping

a close eye on these global developments and maintains a balanced approach towards broadband

proliferation. On one hand, it assists the new entrants by providing technology-neutral license

and negligible entry level fees while on the other hand keeps the companies on their toes in terms

of quality of service and customer assistance. Pakistan stands out as among the few countries in

the world where multiple Latest technologies exist for both wired and wireless media. The

current rate and 49,200 net additions. Wateen holds the second spot with 158% growth along

with 115.747 new subscribers during FY 2009 10. PTCL despite holding highest share in the

market has the third highest growth rate at 129% and highest net new additions of 267,594

customers. WorldCaIl registered a 112% growth rate with 51,501 new subscribers during the FY

2009- 10.

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It is evident from Figurc-24 that wireless technologies WiMAX and EvDO) arc clearly gaining

on the market share like WiMax has total share of 28.6% and EvDOs share is 12.3%. The DSL,

I-IFC, FT[H arc rapidly losing their share where DSL lost its share of 64% to 53% in one year.

The main reason behind this trend is the deteriorating condition of fixed line infrastructure and

poor quality of services. Although the entry cost of wireless broadband is higher, customers

prefer to go for wireless media due to its robust and newly developed infrastructure. This trend is

in total contrast with the global situation where DSL dominates the market

Broadband tariff

Broadband proliferation, like any other emerging phenomenon, has certain attributes/constraints

which affect its penetration potential. Among the prime factors is the cost of service which is

perhaps the most influential one. Cost of service has been the main reason behind sluggish

growth of broadband till 2007 when market became feasible for private investors. Therefore,

several new companies like Watecn, Link dot Net, Link Direct. Wi-Tribe etc launched

broadband services mostly using wireless technology. Since then, a constant decline in monthly

charges has been observed as a result of competition in the market. The costly Customer

Premises Equipment (CPE) charges especially in the case of Wireless services remained a

hindrance for general people to rush into the broadband arena. However, wireless broadband

service providers are gradually bringing down the entry level charges (installation + CPE +

security deposit) to a minimum possible. PTA carried out a benchmark study on broadband

tariffs where level of broadband tariffs prevailing in Pakistan against other SAARC countries

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were compared to identify the areas where further improvements can be made for the benefit of

operators and users. The study concludes that Pakistan’s broadband tariffs are very competitive

as compared to those of other regions. This is a good sign for the telecom market of Pakistan

where low per capita income impedes the major portion of population to subscribe to broadband

services.

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External Analysis

Political & Legal

The last one decade has seen witnessed more concentrated form of political turmoil and

instability than ever before witnessed. Part of the reason is access to information and the media

boom of the 90s and early part of this millennium. But that is just one reason, the major reason

being that political forces used media and information channels to shape political debates and

provide a frame of reference under which the discussions was carried out. Media on the other

hand also used it substantial power to influence those shaping the political landscape of the

globe. Control over information has become a critical success factor in the political arena today

and while stakes are high, the battle is immense. Governments and the opposition both have

identified the importance of channels of mass communication and have invested heavily to

propagate their perspectives. Looking at the macro environment from the national and regional

level perspective, the last couple of years have seen a lot of turbulence in the political arena. This

as a result has translated into different measures from the government from setting curbs on the

media, imposing watchdogs like PEMRA, to declaring freedom of press and the right to freedom

of expression.

Under the 1973 Constitution, Fundamental Rights include security of person, safeguards as to

arrest and detention, prohibition of slavery and forced labor, freedom of movement, freedom of

association, freedom of speech, freedom to profess religion and safeguards to religious

institutions, non-discrimination in respect of access to public places and in service, preservation

of language, script and culture. The judiciary enjoys full supremacy over the other organs of the

state.

When discussing the impact of legal structures and regulatory bodies on the Telecommunication

sector; we can observe a spectrum where on one hand the government gave complete freedom

for Foreign Investment; while on the other hand the government curtailed basic civil rights,

imposed restrictions on un-license frequency bands, illegal internet gateways and banned certain

news channels. These controls were exercised through various instruments like regulations of

PEMRA, PTA, national security clauses in the constitution, and imposition of emergency.

Telecom sector flourished after General Musharraf seized power in a military coup in 1999, the

president publicly encouraging Telecom Industry.  This free hand brings a lot of froing

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investment. When President Pervez Musharraf suspended Pakistan's constitution early in

November 2007, he also clamped down on independent news reporting and later telecom

business in Pakistan stop flourishing.  Regulations were not imposed properly on incoming

foreign investment. As soon as the emergency imposed by President Musharraf, Foreign

investment was halted due to which there were massive cut layoffs were observed. On the other

hand PTCL under the government hand, get fully activated and started PTCL Broadband DSL

service. This increases the competition in a negative trend. Big telecoms like Wateen, Mobilink

and other started to cut down there profit margins, layoffs and stiff targets were imposed on sales

team.

Economic

With a per capita GDP of about $2600 in 2006, the World Bank considers Pakistan a developing

country. No more than 48.7% of adults are literate, and life expectancy is about 63 years. The

population, currently about 165 million, is growing at 2.09% annually. The Gross Domestic

Product in the country was $106.3 billion (est. in 2007) with an annual growth rate of 6.4 percent

in the same year. The following graph shows the annual average growth rate of the GDP in the

economy.

Source: http://www.indexmundi.com/pakistan/gdp_real_growth_rate.html

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During FY 2009- 10, Telecom sector continued to actively contribute to the national exchequer

through a steady state of revenue generation, subscriber growth and boost in tele density despite

difficult economic situation in the country. Telecom companies invested heavily in aggressive

marketing techniques and infrastructural expansion in far flung areas of Pakistan. USF

contribution for undertaking these investments lent a helpful hand in keeping the telecom

developments consistent. PTA’s contribution has facilitated a smooth growth of the sector. The

Authority has approached the concerned quarters of the government to reduce the tax burden on

the industry to ensure confidence building of the investors in the telecom sector.

Telecom Sector revenues improved steadily in the FY 2009- 10 and 6.5% growth rate was

witnessed. Total telecom sector revenues reached Rs. 357.7 billion in the FY 2009- 10 compared

to Rs. 333 billion the previous year. Cellular Mobile sector remained in the fore-front of revenue

generation. Its revenue increased by about 11% in the current year from Rs.212.423 million last

year to Rs. 236,046 million in the FY 2009 10. Its share in total telecom revenue stands at about

70% in the FY 2009-10 compared to 64% in the previous year.

During the past 5 years, telecom sector invested over USS 11 billion in total in all segments of

the sector and created millions of job opportunities in the country. Since the telecom sector is

heading towards maturity, investment is also contracting with time. In the FY 2009-10, telecom

sector invested over USS 1.13 billion in total which is about 508 million less than the previous

year. Cellular mobile share in total stake remained about 80% with coverage for infrastructural

expansion of over US$ 908 million extended to all regions of Pakistan.

Telecom sector attracted over USS 6.3 billion FDI in the last 5 years, which is an encouraging

response by the investors to Pakistan telecom sector policies. UAE, Norway and USA remained

the major sources for FDI during last five years. Out of total US$ 6.3 billion EDI in the sector,

UAE invested over US$2 billion and its share was more than 32% while USA and Norway

brought FDI worth USS 890 million and USS 639 million respectively. Share in telecom FDI of

both of these countries comes out 24%. China is another source of FDI for telecom sector with

contribution of USS 582 million in last five years and rest of the FDI brought by other countries

including Singapore, Netherlands, United Kingdom and Hong Kong etc.

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After September 11, 2001, and Pakistan's proclaimed commitment to fighting terror, many

international sanctions, particularly those imposed by the United States, were lifted. Pakistan's

economic prospects began to increase significantly due to unprecedented inflows of foreign

assistance at the end of 2001. Foreign exchange reserves and exports grew to record levels after a

sharp decline. The International Monetary Fund lauded Pakistan for its commitment in meeting

lender requirements for a $1.3 billion IMF Poverty Reduction and Growth Facility loan, which it

completed in 2004, forgoing the final permitted tranche. U.S. assistance has played a key role in

moving Pakistan's economy from the brink of collapse to setting record high levels of foreign

reserves and exports, dramatically lowering levels of solid debt. A major part of the $3 billion

five-year U.S. assistance package to address Pakistan's long-term needs in the health and

education sectors. Also, despite the earthquake in 2005, GDP growth remained strong at 6.6% in

fiscal year 2005/2006. In 2002, the United States led Paris Club efforts to reschedule Pakistan's

debt on generous terms, and in April 2003 the United States reduced Pakistan's bilateral official

debt by $1 billion. In 2004, approximately $500 million more in bilateral debt was granted.

Consumer price inflation eased slightly to an average of 8% in 2005/2006 from 9.3% in

2004/2005. Low levels of spending in the social services and high population growth have

contributed to persistent poverty and unequal income distribution. Pakistan's extreme poverty

and underdevelopment are key concerns, especially in rural areas.

Social

The socio cultural environment of Pakistan has seen some major shifts in the recent past as

Pakistan became part of the Global Village due not only to the technological advancements, but

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also due to opening up of the economy. As we became part of a global village, there was more

access to information about other cultures, religions and customs. There were imprints of this

openness as our society adopted some of these while rejecting others. Celebration of events like

Basant, Halloween, and Valentine’s Day were considered part of an alien culture but now these

events have made their way into our culture as well and these are celebrated by the young with

zeal and fervor. This can be attributed to not only the media influx but also awareness,

understanding of rights and political freedom. Over the past few years, there has been this

immense drive to break free, to express individuality, and to create a sense of harmony and peace

with other cultures and religions. The people are now more open to watching foreign channels

than before. TV viewing has increased manifold with the advent of dish antenna and cable TV.

Over the last few years, the Pakistani society at large has become more open to change, more

understanding and has developed more capacity to accept and absorb cultural differences. It did

not come as a surprise when at one of the places it was announced to celebrate Holi, the Hindu

festival.

Demographics

Pakistan’s population has been growing at a decelerating pace, from 3% in 1981 to 2% in 2004.

It took almost 23 years for population growth to decline by just over one percentage point.

Decline in the mortality rate owing to the elimination of epidemic diseases, improvements in

health facilities, and a modest decline in the fertility rate resulted in negligible decline in

population growth. About 50% of the total population falls in the age bracket of 0-19 years. In

absolute terms, about 83 million people, equal to the total population of Germany, in Pakistan are

below the age of 19 years. However, the decline in population growth and death rates indicate

the future changes in demographics of the population. The proportion of the 0-19 age brackets

will continue to decline, while the 20-39 age brackets will continue to increase. It is expected

that 30% of the population will be in the age group of 20-39 by 2015.

A substantial number of households run their own businesses or are self–employed. The major

businesses are import/export, manufacturing, and retail. The nature of business also varies by

region. Sialkot is the major centre for leather products, sports goods, and surgical instruments,

which are exported all around the world. Faisalabad is home to the textile sector, whilst the

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major hubs of the financial and industrial activity are Lahore and Karachi. People in rural areas

are mostly connected to agriculture. Recognizing the growth of the middle class, several

multinationals have expanded the scope of their businesses in Pakistan. Services have also

witnessed an enormous growth, offering attractive jobs and careers. IT is another sector that has

raised the bar with respect to pay scales, especially in the metropolitan areas.

Technology

WIMAX (Worldwide Interoperability for Microwave Access) is a telecommunication

technology that provides wireless data over long distances in a variety of ways (Voice, Internet,

Data and in future Multimedia). WIMAX enables users to access high speed Internet, Voice and

Value Added Services (VAS).It is the next-generation of wireless technology designed to enable

pervasive, high-speed mobile Internet access to the widest array of devices including notebook

PCs, handsets, smartphones, and consumer electronics such as gaming devices, cameras,

camcorders, music players, and more. As the fourth generation (4G) of wireless technology,

WiMAX delivers low-cost, open networks and is the first all IP mobile Internet solution enabling

efficient and scalable networks for data, video, and voice. As a major driver in the support and

development of WiMAX, Intel has designed embedded WiMAX solutions for a variety of

mobile devices supporting the future of high-speed broadband on-the-go.

Competitive Edge of Wateen:

Wateen WIMAX is a true broadband solution that provides an "always on" connectivity on

wireless technology. Wateen WiMAX provides customers hassle-free and immediate access to

high speed Internet and Voice services simultaneously. WIMAX is an internationally recognized

standard for wireless broadband connectivity and Wateen is proud to have commercially

launched the first 802.16e compliant network in the world and usher Broadband in Pakistan so

that people can enjoy revolutionary, affordable broadband communication and media services.

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SWOT Analysis:

Strengths Weaknesses

•        Strong management •        Decreasing profit margin

•        Sales •        Lack of skilled human resource

•        Own satellite HUB •        High Employee Turnover

•        Metro Fiber in major cities •        Increase in Debts

•        Own Long-Haul •        Customer Retention

•        Largest WiMAX Network •        Strategic direction

• Investors • Low revenue per user (ARPU)

  • No research and development programs

Opportunity Threats

•        Huge market size •        Satellite Provisioning by Mobilink

•        LTE Technology •        Metro Fiber by Multinet

•        Broadband services •        PTCL’s smart TV

•        Satellite solutions •        Managed Services

•        IP Transit •        DSL for WiMAX

•        Telephony [voice/video] •        Un-licensed or local fiber provider

• Increasing un employment rate • Increase in tax rate

• Removal of international trade barriers • High inflation rate

  • New competitor in broad band industry

  • Price war

  • Political Instability - Security issues.

Porter Five Forces Model:

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Rivalry among competing firms;

Pakistan’s Telecommunication market has a huge rivalry among the competing firms. Wateen, Mobilink, Cybernet, Supernet, Multinet and many others are offering services at low cost which result in the huge competition among the firms.

This happens due to the low FDI in recent years. Majority of the Pakistan’s Telecom industry is dependent on foreign investment, however due to global economic recession, Telecom industry receives low FDI which result in rivalry among the competitor and competition is fierce among the players. Wateen is offering 15% direct discount to any corporate customer which is not Wateen’s customer currently. Similar is the case with other players in the market. Even though many players have their individual competitive advantages (like Wateen’s WiMAX, own network long-haul) but due to country’s economic condition, and low FDI, competition is fierce.

Potential Entry of New Entrant;

Potential entry of new entrant is high overall due to huge investment required as a setup cost. As telecom is a service industry and due to the competition because of economic and low FDI conditions, profit margins are low and big giants like Wateen and LINKdotNET suffers heavily due to initial huge investment.

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Potential development of Substitute product;

The Last Mile services in telecom industry are divided into Wired and Wireless media in which all or many of the products are offered to the market size by all providers. Hence the development of substitute product is very high. Only for WiMAX product, there are 5 competitors [Wateen, Mobilink, Cybernet, Augere, Wi-Tribe] in the market. Hence the substitute product potential is very high in the market.

Bargaining power of Suppliers;

Bargaining power of suppliers in Pakistan’s telecom industry is very low as there are many companies providing equipments, last mile solutions, vendor services & other offerings. Hence the bargaining power of supplier is low overall in this sector.

Bargaining power of Consumers;

Bargaining power of Consumer is Telecom sector is very high. As there are many providers and rivalry among the competitors, they offer low rates to the consumer which eventually gives the advantage to consumer while bargaining. Also due to low FDI and economic conditions, companies are taking services from Telecom providers as a in a bulk which give bargaining power to consumers.

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PORTER’S FIVE FORCES MODEL

THREAT OF NEW ENTRANTS

S#

FACTORS

 HUF

AMUF

ANeutr

alMFA

HFA

  COMMENTS

      1 2 3 4 5    

1Economies of scale

Low

HighPakistan economy is not good because of inflation and war on terror influences

2Capital Requirement

Low

HighNeed a lot of money for starting a business in telecom industry

3Expected Retaliation

Low

HighEvery company in telecom industry already goes on to provide services in cheapest rate

4Government Actions

Low

HighPTA has the authority to take action in telecom industry in Pakistan

5Brand Loyalty

Low

HighPeople switch their service if they see some benefits on other service provider

(3+5+4+4+3)/5=3.8

EXIT BARRIERS

S#

FACTORS

 HUF

AMUF

ANeutr

alMFA

HFA

  COMMENTS

      1 2 3 4 5    

1Specialized Assets

High

LowOwn satellite HUB, Own Long-Haul, and Metro Fiber in major cities

2 Fixed cost of exit

High

Low We have already invest a lot of money in to our business

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3Strategic Interrelation -ships

High

LowThere is no as such cooperation from competitor side

4Government Barriers

High

Lowinvestment in expensive equipment deployment

(2+2+3+2)/4=2.25

(4+5+4+3)/4=4

BARGAINING POWER OF BUYER

S# FACTORS   HUFA

MUFA

Neutral

MFA

HFA

  COMMENTS

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COMPETITIVE RIVALRY

S# FACTORS  HUFA

MUFA

Neutral

MFA

HFA

  COMMENTS

      1 2 3 4 5    

1Composition of competitors

Equal Size

Unequal size

PTCL has a big market share and link dot net has a very small market share

2Market Growth Rate

Slow FastFrom 2009 to 2010, market growth rate is 135%

3Scope of Competition

Global Domestic

Domestic competition is high but there is also threat from the global market

4

Degree of Differentiation

Commodity

SpecialtyNot as such special service provide to customer

      1 2 3 4 5    

1Number of Buyers

Few       ManyFrom 2009 to 2010, number of users increased by 158.60%

2Threats of Backward Integration

High   

LowPTA have the authority to cancelled the telecom license

3Product Supplied

Commodity

    SpecialtySame kind of product and service provide by the competitors

4Switching Cost

Low     High People can easily switch to other service provider

26

(5+2+3+2)/4=3

(1+1+4+4+1)/5=2.75

Overall Industry Attractiveness

S# FACTORS Unfavorable Neutral Favorable

27

BARGAINING POWER OF SUPPLIER

S# FACTORS  HUF

AMUF

ANeutral

MFA

HFA

  COMMENTS

      1 2 3 4 5    

1Number of Important Supplier

Few     ManyYou have to take authority from PTA

2Switching cost

High 

  LowYou cannot switch from this business to other

3Availability of Substitute

Difficult     ManyOther companies also provide Broadband services

4

Importance of buyer industry to supplier

Low     HighPTA wants that people use internet services

5

Supplier’s product is an important input to the buyer’s business

Highly importa

nt

Less important

Internet service is necessity for the business

    < 2.5 3 > 3.5

1Threats of New Entrants

3.8

2 Exit Barriers 2.25

3Competitive Rivalry

3 4

4Bargaining Power of Buyer

2.75

5Bargaining Power of Supplier

2.25 5.75 7.8Average 3.16

External Factor Evaluation Matrix (EFE)

Analysis utilizing an External Factor Evaluation Matrix can be very helpful in determining the

severity of threats and opportunities to Wateen Telecom. An EFE Matrix for Wateen Telecom

follows:

External Factor Evaluation Matrix (EFE)

  Opportunities

Weigh

t

Ratin

g

Scor

e

1 Huge market size 0.08 3 0.24

2 Broadband services 0.07 3 0.21

3 Satellite solutions 0.05 2 0.1

4 LTE Technology 0.06 2 0.12

5 IP Transit 0.05 2 0.1

6 Telephony [voice/video] 0.08 3 0.24

7 increasing un employment rate 0.03 3 0.09

8

Removal of international

trade barriers 0.03 3 0.09

  Threats

Weigh

t

Ratin

g

Scor

e

28

1 Satellite Provisioning by Mobilink 0.05 2 0.1

2 Metro Fiber by Multinet 0.08 3 0.24

3 PTCL’s smart TV 0.07 3 0.21

4 Managed Services 0.04 3 0.12

5 DSL for WiMAX 0.02 1 0.02

6 Un-licensed or local fiber provider 0.02 3 0.06

7 increase in tax rate 0.04 2 0.08

8 high inflation rate 0.05 4 0.2

9

new compititor in broad band

industry 0.05 3 0.15

1

0 price war 0.08 4 0.32

1

1

Political Instability - Security

issues. 0.05 4 0.2

  Total: 1   2.89

The matrix above summarizes and estimates the external factors that give a considerate view of

how effective the company’s strategies are used in the capitalization of their opportunities and

disclose the point of threats that are active. The weights are set between “0.0 and 1.0” depending

on its level of importance depending on how well Wateen responds to the above factors

considering its current objectives and strategies. The total weighted score of this matrix reveals

that it has a normal score of 2.89 which is higher than norms.

29

The competitive profile matrix for Wateen categorizes the competitors such as PTCL and World

Call. Companies are then evaluated on the basis of significant success factors of the Telecom

industry and the success factors are weighed and the ratings pass on to the strengths and

weaknesses by 4 being the major strength, to 1 for major weaknesses.

30

INTERNAL ANALYSIS

Marketing

Wateen having world largest WiMAX service provider with 25+ cities operational network over

WiMAX, started their marketing campaign as a WiMAX provider. Though this product is

marketed for Consumer customers only, however due to huge network, corporate sector also

started taking the same service.

The Advertising campaign was mainly for Wateen calling cards as well as for WiMAX services.

The strategy for selling is as follows;

• Consumer Sector – mainly home users or low cost tariff

• Corporate Sector – MNC, financial sectors, ISPs, Oil & Gas sector etc.

For Consumer Sector, Wateen opted to go in print and electronic media as seen in the below ads.

31

For corporate sector, Wateen started personal and direct selling, either by calling customer

directly or visiting customer, taking requirement from customers and provide tailored made

solutions to the customers.

Market Share

Management

After years of disturbance and mismanagement within the company, Warid Telecom seems to be

in safe hands after Dhabi Group announced on 8th of January the appointment of Mr. Zouhair

Khaliq to serve as Executive Director and represent the Group on the boards of Warid Telecom,

Wateen and Wincom, while Mr. Naeem Zamindar will hold the position as CEO of Wateen.

In his media statement Chairman of Abu Dhabi group, Sheikh Nahayan Mabarak Al Nahayan

said, “Both Zouhair and Naeem are visionaries, and competent executives, and are highly

qualified. Each will continue our Group’s strong commitment to the Pakistani market and the

people of Pakistan. They lead our efforts to enhance our operations and improve our

organizational effectiveness. For us, at the Abu Dhabi Group these new business leaders

32

represent the next generation of senior executives whose focus will be on setting corporate

strategies and policies, providing exceptional service to our customers and creating value for our

shareholders in times of constant change”.

The decision came following the annual report released by PTA in which Warid Telecom is

shown to have achieved negative growth in the year 2009-10 losing 0.9 million customers and

bringing market share to 17.1% from 18.9 % in 2008-09.

Sources confirm that negative growth of the entity isn’t the only reason behind management

change. Serious management issues during the tenure of Mr. Pervez Shahid and Mr. Bashir Tahir

caused Abu Dhabi group to face  legal notices from various vendors apart from continuous

declining revenue, loss of customer’s trust and brand image which left no other option for the top

man but ask for the resignation from both the gentlemen responsible.

With deteriorating performance after a successful start, Abu Dhabi group started selling its

telecom operations in 2009 and 2010 on global level and managed to sell its African and

Bangladeshi operations partially. After various attempts management at UAE failed to merge

Pakistani operations with several interested groups including Telenor, PTCL, and CM-Pak

because of alleged resistance from Parvez Shahid and Bashir Tahir.

33

Financial Analysis

In the annual report published for the year 2009-2010; Wateen Telecom Limited has posted PKR

8,608 million as revenues in the year ended June 30, 2010 (FY10) with the gross margin for

second half of FY10 increasing to 38% from 30% compared to the first half of FY10.

Although Wateen posted PKR 1,994 million as after tax loss for FY10, this was an improvement

over initially projected loss of PKR 2,071 million for the same period. Company’s financial

performance in FY10 has shown a positive trend marked by a positive EBITDA of 6% for

second half compared to negative 3% for first half of FY10.

Wateen Telecom outperformed management expectations through various cost rationalizing and

consolidation initiatives aimed at lowering operational overheads. This effort has resulted in

significant cost savings from initially projected. Overall, Wateen was able to cut more than PKR

700 million in operating costs which resulted in EBITDA of 4% for FY10 compared to a

projected EBITDA of 0%.

As a result of this positive trend; the sponsors have recently extended a support of over PKR

2,100 million to Wateen. This news has resulted in renewed investor confidence and a positive

impact on the share price.

Source: http://www.telecomrecorder.com/2010/10/14/wateens-performance-beats-forecast/

34

Analysis of Financial Statement

    Wateen Worldcall PTCL    2010 2009

CHANGE 2010 2009

CHANGE 2010 2009

CHANGE

        %       %       %

Operating Ratio                        

Gross Profit Margin  % 25.67  31.17  (17.65)   11.58  16.31  (29.01)   33.08  36.30  (8.87)

Net Profit Margin % (25.38) 6.02 (521.5

6)   (15.37) (5.84) 163.24    16.26  15.45  5.23 

                       

Performance                      return on Operating Assets % (11.85) 6.60 

(279.51)   (8.96) (4.05) 121.19    10.54  10.45  0.81 

Debtors' turnover     times times 2.44  5.55  (56.04)   3.70  3.97  (6.81)   5.62  5.50  2.11 

Return On Equity  % (48.00) 21.53 (322.9

4)   (11.21) (4.31) 159.94    9.32  9.21  1.19 

                       

Leverage                      

Debt equity times 6.06  4.93  22.78    1.15  1.01  14.53    0.51  0.55  (7.02)

Time Interest Earned times (0.57) 3.35 (116.8

8)   (1.02) 0.03 (3,589.6

5)   36.42  16.53  120.25 

                       

Liqiudity Ratio                      

Current Ratio times 0.34  0.71  (52.34)   0.43  0.78  (44.78)   1.51  1.50  0.19 

Quick Ratio times 0.30  0.63  (51.77)   0.39  0.69  (43.86)   1.37  1.36  0.88 

                       

Valuation                      Earnings per Share(Before Tax) Rs (6.78) 3.46 

(295.79)   (1.75) (0.72) 142.03    2.80  2.75  1.86 

Earnings per Share Rs (4.43) 2.22 (299.5

5)   (1.33) (0.57) 133.33    1.82  1.79  1.56 

BOOK Value Per Share Rs 9.23  10.31  (10.49)   11.86  13.21  (10.24)   19.56  19.49  0.37 

                       

Historical Trends                      

Operating Results                      

RevenueRs(000) 7,961,103 

15,410,115  (48.34)  

7,464,404 

8,408,275  (11.23)  

57,174,527 

59,239,001  (3.48)

Profit Before TaxRs(000)

(3,091,546)

1,446,824 

(313.68)  

(3,091,546)

1,446,824  (313.68)  

14,281,118 

14,020,917  1.86 

Profit After TaxRs(000)

(2,020,513) 927,763 

(317.78)  

(2,020,513) 927,763  (317.78)  

9,294,152 

9,151,185  1.56 

Efficiency Ratio                      

Assets Turnover times 0.27  0.60  (55.54)   0.34  0.37  (7.96)   0.38  0.38  (1.39)

Return on Assets % (6.80) 3.63 (287.4

4)   (5.21) (2.15) 142.29    6.16  5.94  3.77 

Return on EQUITY % (48.00) 21.53 (322.9

4)   (11.21) (4.31) 159.94    9.32  9.21  1.19 EARNING POWER(EAT/T.A) % (6.80) 3.63 

(287.44)   (5.21) (2.15) 142.29    6.16  5.94  3.77 

SG&A to Sales % 19.50  11.86  64.42    21.78  16.13  35.04    16.38  18.15  (9.75)

Sustainable Growth Rate % (0.98) (1.05) (6.59)   (0.92) (0.81) 13.10    (1.20) (2.96) (59.37)

working capitalRs(000)

(16,098,958)

(3,028,679) 431.55   

(4,803,268)

(1,167,886) 311.28   

15,257,458 

18,133,919  (15.86)

35

PROFIT AND LOSS ACCOUNT  Rupees In Thousand

  2010 2009 CHANGE

Revenue 7,961,103  15,410,115  (7,449,012)cost of good sold 5,917,801  10,607,011  (4,689,210)gross profit 2,043,302  4,803,104  (2,759,802)OPERATING EXP     0 General & Admin Expenses 1,531,948  1,810,317  (278,369)Advertisment & Marketing Expenses 183,146  198,632  (15,486)Selling &Distribution Expenses 20,486  17,307  3,179 Depreciation& Amortisation Expenses 1,648,499  946,810  701,689 OTHER CHARGES 28,936    28,936 OTHER INCOME 75,822  189,656  (113,834)FINANCE INCOME 176,602  41,981  134,621 profit/(loss) before interest and tax or EBIT (1,117,289) 2,061,675  (3,178,964)FINANCE COST 1,974,257  614,851  1,359,406 profit/(loss) before tax or EBT (3,091,546) 1,446,824  (4,538,370)INCOME TAX 1,071,033  519,061  551,972 profit/(loss) after tax or EAT (2,020,513) 927,763  (2,948,276)EARNING PER SHARE (4.43) 2.22  (7)AVG NO.OF ODANARY SHARE in 000 456098 417911 38,187        b(1-div pay out ratio) 1.0000 1.0000  TA/SALES 3.7319 1.6594  

BALANCE SHEET ACCOUNT

  Rupees In Thousand  

       

  2010 2009 CHANGES

OPERATINE ASSET 17,045,929 14,050,553 2,995,376 

NET CR.SALES  7,559,076 16,553,214 (8,994,137)

TRADE DEBTS 3,097,982 2,982,561 115,421 

Share Holders Equity 4,209,667 4,309,427 (99,760)

Total Debts 25,500,725 21,261,870 4,238,855 

Total Assets 29,710,392 25,571,297 4,139,095 

36

Current Assets 8,201,388 7,345,991 855,397 

Quick Assets 7,353,860 6,509,056 844,804 

Current Liabitility 24,300,346 10,374,670 13,925,676 

Internal Factor Evaluation Matrix (IFE)

The Internal Factor Evaluation Matrix works similarly to the EFE Matrix. An IFE for Wateen

Telecom follows:

Internal Factor Evaluation Matrix (IFE)

  Strengths

Weigh

t

Ratin

g

Scor

e

1 Strong management 0.08 3 0.24

2 Sales 0.1 3 0.3

3 Own satellite HUB 0.03 4 0.12

4 Own Long-Haul 0.04 3 0.12

5 Metro Fiber in major cities 0.04 4 0.16

6 Largest WiMAX network 0.04 3 0.12

7 investers 0.05 4 0.2

  Weaknesses

Weigh

t

Ratin

g

Scor

e

1 Decreasing profit margin 0.1 2 0.2

2 Lack of skilled human resource 0.08 2 0.16

3 High Employee Turnover 0.07 3 0.21

4 Increase in Debts 0.08 2 0.16

5 Customer Retention 0.08 3 0.24

6 Strategic direction 0.08 2 0.16

7 Low revenue per user (ARPU) 0.08 2 0.16

8 No research and 0.05 1 0.05

37

development programs

  Total: 1   2.6

After evaluating and analyzing the weights of strengths and weakness of the company, the total

weighted score is 2.6 which slightly higher above the average score 2.50 and it clearly indicates

that Wateen needs to do some significant improvements in their internal operational structure in

order to achieve competency.

TOWS Matrix

A scan of internal and external environment is important part of the strategic planning process.

The company’s internal strengths and weakness are related to external opportunities and threats.

The analysis provides information that is helpful in matching the firms’ resources and

capabilities to the competitive environment which operates.

 

Strengths Weaknesses

Strong management Decreasing profit margin

Sales Lack of skilled human resource

Own satellite HUB High Employee Turnover

Metro Fiber in major cities Increase in Debts

Own Long-Haul Customer Retention

Largest WiMAX Network Strategic direction

Investor Low revenue per user (ARPU)

 No research and

development programs

   

   

Opportunity SO Strategy WO Strategy

Huge market size 1) Having own Long-Haul and

Metro-Fiber can provide reduction

in cost offerings to the customer

1) Wateen has decreasing profits

and lack of skilled workforce to

address huge market size

LTE Technology

Broadband

38

services

[S5:S4:O1]: Product development[W1:W2:O1]

Satellite solutions

IP Transit

2) Satellite penetration in remote

areas of Pakistan and Afghanistan

can provide high earning in cost and

overall reduce overheads [S3:O4]:

Market Penetration

Telephony

[voice/video]2) Using diversified portfolio, can

retain customers and improve

service quality and penetrate in

triple play services [W5:O6]

increasing un

employment rate

Removal

of international

trade barriers

 

3)We can increase our sales by

starting a new campaign and

provide new technology ( telephony

Voice/Video) [S2:O6]

We can work on our profit margin

by expending our business by

providing our service to other

countries [W1:O8)

  4) Largest WiMAX network can

provide feasible solution to cater

huge market size[S6:O1]

 

   

     

Threats ST Strategy WT Strategy

Satellite

Provisioning by

Mobilink

1) Metro fiber can provide an edge

over PTCL smart TV service

[S4:T3]

1) Increase in Debts & reduced

profit margin can be a threat to

Smart TV applications & managed

services [W1:W4:T3:T4]

Metro Fiber by

Multinet

PTCL’s smart TV 2) Satellite HUB deployment and

market penetration by other

providers like Mobilink can be

catered by taping the remote areas

of Pakistan and Neighboring region

of Afghanistan [S3:T1]

Managed

Services

2) Metro fiber and managed

services can be a threat to customer

retention [W5:T2:T4]DSL for WiMAX

Un-licensed or

local fiber

provider

3) Low strategic direction can

result in unmanaged services,

Triple play and IP transits

39

[W6:T3:T4]

increase in tax

rate 3) To cater managed solutions by

rivals, bundled services can be

offered related to corporate

solutions [S4:S5:S6:T4]

high inflation rate

new compititor in

broad band

industry

price war 

4) Use Fiber & WiMAX as a

alternate solution for regulations

from PTA related to unlicensed

fiber provider [S4:T6]

Political

Instability -

Security issues

40

SPACE Matrix

The strategic Position and Action Evaluation (SPACE) Matrix is one of the significant

techniques to recognize the type of strategy company has to choose. The matrix consists of four

different areas with a specific strategy in each. The axis of the SPACE matrix represent two

internal dimensions (functional strength and competitive advantage) and two external

(environmental stability and industry strength) which are important in order to identify

company’s overall strategic position.

Financial Strength (FS)   Environmental Sustainability (ES)

 

Return on Investment 2 Technological Changes -1Leverage 3 Inflation rate -5Liquidity 2 Demand fluctuation -3Working Capital 1 Price bracket of competing

products-2

Cash Flow 3 Entry barriers into the market -4Debitor Turnover 4 Pressure from competitors -1earnings per share 1 Easy exit from the market -3price earning ratio   Price elasticity of demand -4Total 16 Risk involved in Business -2Competitive Advantage (CA)   Total -25Market Share -2 Industry Strength (IS)  Product Quality -2 Growth possibility 5Product Life Cycle -4    Customer Loyalty -2 profit potential 5Competition’s capacity utilization -3 Financial constancy 2Technological skills -1 Technological knowledge 5Control over distributors and suppliers

-3 Resource consumption 3

Total -17 Ease of entry into the market 4    Productivity, capacity, utilization 3

41

-1

-2

-3

-4

-5

    Total 27                     FS 2.2857    CA -

2.4286   

ES -2.7778

   

IS 3.8571           X-Axis 1.4286    Y axis -

0.4921   

Wateen falls on competitive profile side which means that Wateen has a major competitive

advantage in a high growth industry. It can work on market penetration, market development and

product development.

  

42

   FS

CONSERVATIVE   AGGRESSIVE5

4

3

2

1

DEFENSIVE COMPETITVE

   CA    IS     -5   -4   -3   -2   -1 1     2     3     4        5

   ES

INTERNAL EXTERNAL MATRIX

  IFE WEIGHTED SCORE

EFE WEIGHTED SCORE

4 STRONG 3 AVERAGE 2 Weak 1

High            3      

Medium    2    

Low             1      

EFE=2.89

IFE=2.6

The Internal-External (IE) Matrix is a strategic management contrivance that

is used to analyze the strategic position of a business. The IE matrix is

supported by the total weighted scores of the IFE matrix on the x-axis and

the EFE matrix on the y-axis. The matrix spots an organization into nine cells

and the matrix can be divided into three major sections that have dissimilar

allusion. The IE matrix is almost similar to BCG matrix and it has two key

dimensions including the scores in the x axis and EFE total weighted scores

on the y axis. Total IFE weighted score of 2.6 falls in X axis and the Total EFE

weighted score of 2.89 fall in the Y axis and both the whereas both the

values are slightly above average. According to the IE matrix below, Wateen

falls in the fifth cell and so as they should follow the strategy of “hold and

maintain”. This strategy mainly focuses on both market penetration and

product development

43

The BCG matrix reveals the company’s market share position in the industry to the market share

detained by the largest competitor in the same industry. The matrix displays the companies on a

graph of the market growth vs. market share relative to competitors. The BCG Matrix is divided

into four types of circumstances, the Stars, Cash Cows, Dogs and Question Marks.

The following BCG Matrix shows the proportion between relative market share and industry

growth rate of Wateen. With a relative market share of 0.21 and industry growth rate of 135.53

% the position lies in the first cell ‘Question Mark’ which represents the strategies of market

development, market penetration, product development and divestiture.

44

The Grand Strategy

The GS matrix is one of the popular tools to identify and formulate alternative strategies and

companies can be positioned in one of the four quadrants which represent different strategies.

The following grand strategy matrix of Wateen evaluates competitive position and market

growth in the current similar market industry.

Rapid Market Growth 

Quadrant II Quadrant I   Wateen Telecom 

Weak Competitive Position         Strong Competitive Position 

Quadrant III Quadrant IV    

Slow Market Growth

According to the Grand Strategy Matrix, the position of Wateen Telecom lies

in the first quadrant which reveals that the company has above the average

competitive position among the competitive market with rapid market

growth as the industry growth rate is really high. The strategies

recommended are market development, market penetration, product

development, forward, backward, horizontal, and related diversification.

45

Evaluation of Strategies from Matrices

By analyzing and evaluating all the matrices, the strategies more used are in

all the matrices are market development, market penetration and product

development. The alternative strategies developed according to the three

strategies accordingly and used in the QSPM.

46

Strategic Alternative1 2 3

QSPM Matrixlower Price

(Value Chain) Market Penetration or Increase Market

Shares

Improving or

Development New &

Innovative Product

Market Developme

nt or Finding or Searching

New Market

key factors Weight AS TAS AS TAS AS TAS

  Strengths              1 Strong management 0.08 3 0.24 4 0.32 4 0.322 Sales 0.1 4 0.4 3 0.3 3 0.33 Own satellite HUB 0.03 4 0.12 3 0.09 1 0.034 Own Long-Haul 0.04 3 0.12 3 0.12 1 0.045 Metro Fiber in major cities 0.04 3 0.12 3 0.12 2 0.086 Largest WiMAX network 0.04 3 0.12 3 0.12 3 0.127 investors 0.05 4 0.2 3 0.15 3 0.15

  WeaknessesWeight

Rating

Score

Rating

Score

Rating

Score

1 Decreasing profit margin 0.1 3 0.3 3 0.3 3 0.32 Lack of skilled human resource 0.08 1 0.08 3 0.24 2 0.163 High Employee Turnover 0.07 2 0.14 3 0.21 2 0.144 Increase in Debts 0.08 3 0.24 1 0.08 3 0.245 Customer Retention 0.08 3 0.24 2 0.16 2 0.166 Strategic direction 0.08 3 0.24 2 0.16 2 0.167 Low revenue per user (ARPU) 0.08 3 0.24 1 0.08 1 0.08

8No research and development programs 0.05 1 0.05 4 0.2 0 0

  Total: 1   2.85   2.65   2.28

  OpportunitiesWeight

Rating

Score

Rating

Score

Rating

Score

1 Huge market size 0.08 3 0.24 2 0.16 3 0.242 Broadband services 0.07 0 0 1 0.07 2 0.143 Satellite solutions 0.05 0 0 1 0.05 2 0.14 LTE Technology 0.06 1 0.06 3 0.18 2 0.12

47

5 IP Transit 0.05 0 0 3 0.15 2 0.16 Telephony [voice/video] 0.08 0 0 3 0.24 2 0.167 increasing un employment rate 0.03 0 0 0 0 0 0

8Removal of international trade barriers 0.03 0 0 0 0 0 0

  ThreatsWeight

Rating

Score

Rating

Score

Rating

Score

1Satellite Provisioning by Mobilink 0.05 2 0.1 1 0.05 2 0.1

2 Metro Fiber by Multinet 0.08 3 0.24 2 0.16 1 0.083 PTCL’s smart TV 0.07 3 0.21 1 0.07 1 0.074 Managed Services 0.04 1 0.04 2 0.08 1 0.045 DSL for WiMAX 0.02 2 0.04 1 0.02 2 0.04

6Un-licensed or local fiber provider 0.02 0 0 0 0 0 0

7 increase in tax rate 0.04 0 0 0 0 0 08 high inflation rate 0.05 3 0.15 0 0 3 0.15

9new competitor in broad band industry 0.05 0 0 3 0.15 3 0.15

10 price war 0.08 4 0.32 0 0 2 0.16

11Political Instability - Security issues. 0.05 0 0 0 0 0 0

  Total: 1   1.4   1.38   1.65  Total:     4.25   4.03   3.93

Lower Price

For using this strategy, we have to reduce our cost which decreases our profit margin like general

and admin expense, interest expense and operating expense. We are paying 1.97 billion Rupees

in finance cost which belongs to markup long term and short term loans. Our stocks is now

cheaper than our loans so we can reduce this cost by raising money from stocks and paid to

loans. The second highest expense is interest expense which makes the income statement

negative. The third highest expense is general and admin expense which is based on salaries, rent

repair etc., where there are unemployment rate is too high in Pakistan, we can hire the staff at

low salary. After cutting cost, we will be able to cut our product selling price which increases our

sales and market penetration.

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Improving or Development New & Innovative Product

In second strategy, we have to focus in our research and development department. We have to

spend money in this department for invent a new technology or product. It will increase our sales

because we will be the only one who will offer that technology. It will built up competitive

advantage and market penetration

Market Development or Finding or Searching New Market

In this third strategy, we have to find some new town and selling present products or services in

new markets. We have to take actions like targeting promotions, opening sales offices and

creating alliances to operationalize a market development strategy

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Action Plan

Marketing plan

We have to do Customer analysis by doing customer surveys, analyzing consumer information,

evaluating market positioning strategies and developing customer profiles. Right now we are

focusing on corporate level user which is not sufficient coverage. We have to target home user

also and home users want something more with internet service. We have to focus youth. So in

marketing, we spend money in advertising, sales promotion and publicity in which we relate our

product with some sports game.

Production plan

In corporate level, we can offer high speed broadband internet and portable device like ptcl

provide Evo to their user. And in home user, we have to give something more with internet like

TV channels, software, movies, games, etc., for taking competitive edge from our competitor.

Financial plan

Financial report already shows that company is working insufficiently. Admin, finance and

operating expenses is too high which make our income statement negative. We have to focus on

those expenses especially on done credit bases. We are not utilizing our assets properly. Also we

have long term and short term debts on which substantial amount of cash out flow. We are now

paying 25% of total revenue for financial cost. So we have to take immediate steps to reduce

interest expenses. The current ratio diagnose that wateen has not enough resources to pay its bills

over the next 12 months which shows bad cash management. We have to increase debtors

turnover which indicate up word trend towards sales. Receivables are not collected reasonably in

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accordance with their terms; management should rethink its collection policy. Here receivables

are excessively slow in being converted to cash, liquidity could be severely impaired. In this case

we have to work on to generate efficiently profits from the assets employed. Here negative ratio

indicates an inefficient use of business assets. Asset turnover is quite low shows efficiently

profits are not being generated from the assets employed in the business. wateen faces high

financial risk leverage is 6times over its equity. Management has to take immediate corrective

action on financial position of wateen.

R&D Plan

Right now we do not work on R & D department. We are already buying new technology from

other sources. Some portions of those technologies are still a part work-in-progress in which

wateen group have already invested substantial amount in it. R&D required a lot of investment

and time to invent a new product and in our case invent a new product is more costly than

purchasing new technology from outsider. But if we invest on R&D and make something new

then we will take competitive edge in the market.

MIS plan

We have to make our MIS department stronger because managerial level takes decision on the

basis of information. Management information system receives raw information from both the

external and internal evaluation of an organization. It gathers data about marketing, finance,

production, and personnel matters internally; and social, cultural, demographic, environmental,

economic, political, government, legal, technological, and competitive factors externally. Because

organizations are becoming more complex, decentralized, and globally dispersed, the function of

information systems is growing in importance.

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Projected plan for 5 years    FY1 FY2 FY3 FY4 FY5

SalesRs(000)

15,000,000

18,000,000

21,600,000

25,920,000

31,104,000

CostRs(000) 9,000,000

11,250,000

14,062,500

17,578,125

21,972,656

Gross profitRs(000) 6,000,000 6,750,000 7,537,500 8,341,875 9,131,344

Opereting expRs(000) 1,800,000 2,070,000 2,380,500 2,737,575 3,148,211

Profit/(loss) before interest and tax or EBIT

Rs(000) 4,200,000 4,680,000 5,157,000 5,604,300 5,983,133

InterestRs(000) 750,000 525,000 367,500 257,250 180,075

Profit/(loss) before tax or EBT

Rs(000) 3,450,000 4,155,000 4,789,500 5,347,050 5,803,058

TaxRs(000) 1,207,500 1,454,250 1,676,325 1,871,468 2,031,070

Profit/(loss) after tax or EAT

Rs(000) 2,242,500 2,700,750 3,113,175 3,475,583 3,771,987

Earning per share Rs 3.02 3.64 4.19 4.68 5.08

common stock financing    recession   normal   boom

Earning Before Interest & taxRs(000)

1,600,000  

4,200,000  

5,157,000

INTERESTRs(000) 0   0   0

Earning Before taxRs(000)

1,600,000  

4,200,000  

5,157,000

TAXRs(000) 560,000  

1,470,000  

1,804,950

Earning After taxRs(000)

1,040,000  

2,730,000  

3,352,050

Number of Shares (000) 742475   742475   742475Earning Per Share Rs 1.40   3.68   4.51

Debt Financing    recession normal boom

Earning Before Interest & taxRs(000

) 1,600,000   4,200,000   5,157,000

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INTERESTRs(000

) 1,974,257   2,982,257   3,183,857

Earning Before taxRs(000

) -374,257   1,217,743   1,973,143

TAXRs(000

) 130,990   426,210   690,600

Earning After taxRs(000

) -243,267   791,533   1,282,543Number of Shares (000) 617475   617475   617475Earning Per Share Rs -0.39   1.28   2.08

1 2 30

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

debt financing

debt financing

Conclusion

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We have to take immediate action and raise funds through equity and payout our debt which

carry heavy financial cost. Reduce admin expenses by eliminating layers of management and

inefficient employee. Work on value chain and curtail irrelevant cost. Immediate lounge

marketing campaign with proper targets and pay them accordingly. Create variable pay plan to

motivate efficient and effective employee. Requires a policy approved by top management that

states objectives and provides a commitment to improve performance. Requires procedures for

Hazard Identification, Risk Assessment, Risk Control, Identifying Legal & Other requirements

maintaining documented objectives Maintaining Management Programs for achieving its

objectives including designating responsibility and authority, means, and timeframes for

achievement. Procedures should exist to ensure information is communicated to and from

employees and other interested parties. Employees should be involved in development of

procedures and consulted when changes affect their workplace. Establish qualitative and

quantitative measurement processes, both proactive and reactive. Maintain procedures for

handling investigations; mitigating the consequences; initiating & completing corrective actions;

and confirming the effectiveness of corrective & preventive actions. Maintain procedures for the

identification, maintenance, and disposition of records. Records shall be legible, identifiable,

traceable, readily retrievable, and protected against loss and / or damage.

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