Blekinge Institute of Technology School of Management Master Thesis of MSc. Business Administration “The IMPACT OF PRIVATIZATION” “Managing the Process of Privatization and its impacts on Performance and Development: A case Study of Pakistan Telecommunication Limited” Supervisor Dr. Stefan Hellmer Authors Muhammad Anwar Jamal Shah Haroon Ur Rashid Hussain Ullah Sheraz Ahmed June 2009 i ACKNOWLEDGEMENT The profound thanks goes to ALLAH Almighty, most gracious, most Merciful, whom alone we worship and ask for help. We are indebted to many here at BTH who contributed (directly or indirectly) in preparation of our Master Dissertation. First of all we are highly acknowledged to Mr. Anders Nillson whose lectures regarding Research Studies have added new dimension to our knowledge. We would like our deep gratitude to our supervisor Dr. Stefan Hellmer whose co-operation and dictations about the deficiencies in our dissertation have made us capable of timely completion of our working. Our appreciation also goes to Mr. Benno Engstrom (Projektledare BTH) whose fruitful discussion and provided materials has contributed a lot to our dissertation. Lastly we would like to pay our homage to our friends here at BTH whose support and co- operation makes us capable of presenting our Dissertation. Muhammad Anwar Jamal Shah Haroon Ur Rashid Hussain Ullah Sheraz Ahmed ii ABSTRACT Title: “THE IMPACT OF PRIVATIZATION” “Managing the Process of Privatization and its impacts on Performance and Development: A case Study of Pakistan Telecommunication Limited” Authors: Muhammad Anwar Jamal Shah, Haroon Ur Rashid Hussain Ullah, Sheraz Ahmed Supervisor: Dr. Stefan Hellmer Objective: The purpose of the thesis is to evaluate the impacts of privatization on Growth, profitability and employment of Pakistan Telecommunication Limited, So that the organization may be able to get the fruitful impacts of this globally recognized phenomenon. In such a situation where privatization is still a matter of suspicion, it will make some positive contribution. Methods: In our dissertation we have followed the Qualitative method, while our main sources of information are reports, and other published materials i.e. our main dependency during this study remains on Secondary data. Results: We have compared the privatization of PTCL with the Privatization of Telia. Comparison with the Telia has extracted very useful steps for PTCL. The main result during comparison was adoption of different strategies which Telia has adopted after privatization. Conclusions: The main conclusions of our study for Pakistan Telecommunication is to enhance its poor quality service, adopt the latest Technology, and focus on Publicity and media campaign in order to coup with the diverse environment of Telecom Sector. Key Word: Impact of Privatization, PTCL, Telia, Telecommunication, Privatization of PTCL, Telecom Privatization, Comparison between Telia and PTCL. iii Table of Contents 1. INTRODUCTION ..................................................................................................................... 1 1.1. Research Background.......................................................................... 1 1.2. Problem Discussion .............................................................................. 2 1.3. Research Question ............................................................................... 4 1.4. Research Methodology ........................................................................ 4 1.4.1. Literature.................................................................................................................... 4 1.4.2. Archival Records ........................................................................................................ 5 1.4.3. Internet Sources .......................................................................................................... 5 1.4.4. Interviews................................................................................................................... 5 1.4.5. SWOT and Porter’s Analysis ...................................................................................... 5 1.5. Research Aim & Objectives ................................................................ 5 2. PRIVATIZATION & TELECOM RE-REGULATION .............................................................. 7 2.1. Privatization ......................................................................................... 7 2.2. Privatization Trends ............................................................................ 7 2.3. Why Privatization ................................................................................ 9 2.4. Determinants of Privatization ........................................................... 10 2.4.1. Political Preferences ................................................................................................. 10 2.4.2. Hard Budget Constraints ........................................................................................... 10 2.4.3. Legal Origins............................................................................................................ 10 2.4.4. Stock Market Liquidity ............................................................................................. 11 2.4.5. Competition and Efficiency ...................................................................................... 11 2.5. Privatization Techniques ................................................................... 11 2.5.1. Asset Sales ............................................................................................................... 11 2.5.2. Share-issue privatizations ......................................................................................... 12 2.5.3. Voucher privatizations .............................................................................................. 12 2.6. Telecom Re-regulation ...................................................................... 12 2.6.1. Latin America .......................................................................................................... 12 2.6.2. Asia .......................................................................................................................... 13 2.6.3. Africa ....................................................................................................................... 13 2.7. Special Issues of Telecom Reforms in Developing Countries .......... 14 2.7.1. Incomplete Infrastructure .......................................................................................... 14 iv 2.7.2. Scarce Human Resources .......................................................................................... 14 2.7.3. Paucity of Information .............................................................................................. 15 2.7.4. Undeveloped Local Capital Markets ......................................................................... 15 2.7.5. Weak Legal, Regulatory, and Institutional Framework .............................................. 16 2.7.6. Limited Interest of Foreign Investors and Banks ....................................................... 16 2.8. The Impact of Privatization .............................................................. 16 3. RESEARCH METHOLODGY ................................................................................................ 18 3.1. Scientific Methods.............................................................................. 18 3.1.1. Qualitative Method ................................................................................................... 18 3.1.2. Quantitative Method ................................................................................................. 18 3.2. Methods of Research ......................................................................... 19 3.3. Different Inspection Methods............................................................ 19 3.4. Data Collection................................................................................... 20 3.4.1. Primary Data ............................................................................................................ 20 3.4.2. Secondary Data ........................................................................................................ 21 3.4.3. Internal Data ............................................................................................................. 21 3.4.4. External Data............................................................................................................ 22 3.5. Discussion ........................................................................................... 22 3.6. Literature Review .............................................................................. 22 3.6.1. Introduction of Theoretical Sources .......................................................................... 22 3.6.2. SWOT Analysis ....................................................................................................... 23 3.6.3. Porter’s Five Forces .................................................................................................. 24 3.7. Limitations ......................................................................................... 25 4. PAKISTAN TELECOMMUNICATION (PTCL)..................................................................... 27 4.1. History of PTCL ................................................................................ 27 4.2. Reforms & Expansion of Pakistan