UFONE

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Assignment topic
is:

Price War in Pakistan Cellular Industry

Submitted By:
Name:
Muhammad Aftab Ahmad
Course:
MBA (Banking & Finance)
Roll No:
1632-211004
Study Batch:
14-SU
Session:
Su-2011-2014

Submitted To:
Sir Shahrukh Salman

PIMSAT
INSTITUTE OF HIGHER EDUCATION

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Research Background and
Organization:
Telecom Infrastructure and Economic Development
of Pakistan:
Role of telecommunication sector is indispensable for economic development.
Telecommunication infrastructural investment can lead to economic growth in
several ways: transaction cost of data collection, placing and receiving orders
have greatly reduced due to the availability of advanced telecommunication
infrastructure. It has put a positive effect on the output of individual firms and
in aggregate overall economy.
In the beginning of 1960 researchers started to study the effects of
telecommunication infrastructure on economic output. There are a lot of studies
[Jip (1963), Riaz (1997), Norton (1980)] that empirically prove the positive
relation between telecommunication infrastructures and economic growth
Communication tools such as internet and telephone are progressively more
important for the economic development. No one can ignore the importance of
internet for the society. The internet provides all types of information related to
the business, health, education, culture. This study is organized as follows:
Review of literature.
Description of research methodology.
Interpretation of regression results and analysis.
Questionnaire to Ufone employees.

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Literature Review
Here I take review of few important studies:
Jipp (1963) used following model to see the relationship between teledensity
and GDP in less developed and industrially advanced countries.
Dit= Yit (1)
or
LnDit = + lnY
it
(2)
Where
Dit = telephone density in DEL/100
Yit = GDP for the country in year

Results revealed positive and significant relationship between GDP per capita and
telephone density indicators.
Alleman (2003), developed following two models to show the relationship
between telephone penetration and GDP in 9 countries of Southern Africa.
ln (GDP)= + ln (DEL-1) (1)
ln (DEL)= + ln (GDP) (2)

By applying the data they proved positive relationship between
telecommunication investment/ telephone penetration and GDP in both cases.
Riaz Ahmad (1997, a, b), studied the effect of telecom sector on economic
development in Malaysia and found that advancement in telecommunication
infrastructure resulted in overall economic development of the country.
Hardy (1980) studied 15 developed and 45 developing countries for the
period from 1960-73 to find the impact of telecommunication on economic
growth. He concluded the positive and significant impact of telephone per capita
(teledensity) on economic growth while, other communication tool like radio
showed its insignificant contribution.

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Nortan (1992) empirically investigated the role of telecommunication
infrastructure in the economic development for the period from 1957-1977. He
took the data of 47 countries. He concluded the positive and significant
relationship of telecommunication infrastructure with economic development. He
further argued that telecommunication infrastructure reduces the transaction costs
since output rises.
Roller and Waverman (2001) empirically studied that investment in
telecom sector fosters growth, estimating a structural model that endogenizes
telecom investment, a data from 21 OECD countries over a 20 year period. They
showed that there exists a significant positive relation between investment in
telecom sector and economic growth.
Ding and Haynes (2004) investigated the role of telecommunication
infrastructure on long run economic growth in China for a sample of 29 regions
for the period from 1986-2002. They used following model:
GRTH it = + + 1 GRTH i, t-1 + 2 Ln (GDP) i, t-1 +
3 POP it + 4 INVit+ 5TELit+ ut
Where
GRTH it = annual growth rate of real GDP per capita
GRTH i, t-1 = lagged growth rate of real GDP per capita
GDP i, t-1 = lagged real GDP per capita
POP = population growth rate
INV =share of fixed investment in GDP
TEL =teledensity

Results revealed the positive and significant impact of teledensity and the
percentage of telecom sector investment in GDP on economic growth. While the
impact of population was negative on economic growth. Results reveal
investment in telecommunication sector is most successful in those countries
which are in the process of development.
Datta and Agarwal (2004) empirically investigated the role of telecom
infrastructure on economic growth. In his study he took the data of 22 OECD
countries, considered14 years period from 1980-1992. They proved the positive

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and significant impact of telecommunication sector on economic growth.
Colin (2003) stressed the importance of ICT and explained existing barriers
to universal access. He was in view that market inefficiency and misappropriation
of fund for investment in telecommunication sector negatively effect the
development of telecom sector. He concluded that liberalization of telecom sector
can have more positive effect on economic growth.
Easterly and Rebelo (1993) investigated that investment in
telecommunication is significantly related with economic growth.

Research Methodology
This work is based upon the model of Alleman et. al (2003) who studied
the relationship between telephone penetration and GDP in 9 countries of South
Africa. Here it is used in modified form. For this study time series data have been
taken for the period from 1968-2007.The functional equation is based on
theoretical formulation, developed earlier in this section. The equation is given in
log linear form as:
GDP = 0+ 1 LTEL + 2 L IT+ ut Where
GDP = Gross Domestic Product
TEL = Teledensity
IT = Investment in Telecommunication Sector
ut = the stochastic disturbance term, capturing left over effects, having zero mean and constant
variance.
It is hypothesized that
L GDP / L 1 L TEL > 0
L GDP / L 2 L IT > 0

Gross Domestic Product (GDP) is taken as dependent variable. To show
the values of economic development GDP was taken. It is expected from the past
studies that both independent variables will have positive relation with GDP.

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Teledensity (TEL) is an independent variable. It is calculated as the total
number of fixed telephone and mobile phones per population (in millions) of the
country.
Investment in Telecommunication Sector (IT) is also taken as an
independent variable. Investment in transport and communication sector is taken
as a proxy for investment in telecommunication sector. Data for all dependent
and independent variables have been taken from various issues of Economic
Survey of Pakistan (1987-88, 2001-02, 2003-04, 2005-06,2007-08)
Regression Results and Analysis
This section deals with the results and interpretation of the impact of telecom
infrastructure on economic development. Various summary statistics, correlation
table, results of Augmented Dickey Fuller (ADF) test and regression results are
given below:
RESULTS OF ADF TEST
Variables Level/Difference Without trend Conclusion
GDP

TEL

IT

Level
First difference

Level
First difference

Level
First difference

0.49328
-5.6218

1.1287
-13.2337

0.37109
-5.5738

I(1)

I(1)

I(1)

95% critical value for ADF Statistics for all variables: -2.9422(without trend)

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Ufone Introduction:
Ufone GSM is a Pakistani GSM cellular service provider. It is one of six
GSM Mobile companies in Pakistan and is a subsidiary of Pakistan
Telecommunication Company. It is currently owned by United Arab
Emirates based Etisalat.
PTML is a wholly owned subsidiary of PTCL. Established to operate
cellular telephony. The company commenced its operations, under the
brand name of Ufone from Islamabad on January 29 2001.
During the year, as a consequence of PTCLs privatization, 26% of its
shares were acquired by Emirates Telecommunication Corporation
(Etisalat). Being part of PTCL, the management of Ufone has also been
handed over to Etisalat. During the year July 2005 to June 2006, further
expanded its coverage and has added new cities and highways. Ufone has
network coverage in more than 750 cities, towns and across all major
highways of the country.
During the year Ufone completed the network expansion of Phase 4 in
existing as well as in new cities and towns which amounted to more than
US Dollar 170 million. As a result the asset base of the Company has
increased from Rs. 20 billion to Rs. 30 billion.
Since its inception, Ufone has focused on the people of Pakistan,
empowering them with the most relevant communication modes and
services that enable them to do a lot more than just talk, at a price that
suits them the most. Along with the claim of lowest call rates, clear sound
and best network, during the year Ufone adopted the policy of simplified
tariffs with no hidden charges, which resulted in positive impacts on the
usage trends of subscribers as well as total subscriber base.

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Ufone introduce 3G in 2014 and currently caters for international roaming
to more than 288 live operators in more than 160 countries. Ufone also
offers Pakistans largest GPRS & BlackBerry Roaming coverage available
with more than 200 Live Operators across 122 countries. More recently,
Ufone has become a focused and intensive leader in VAS, constantly
introducing innovative services, which have been the first of their kind in
the Pakistani cellular industry.

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QUESTIONAIRE FOR UFONE
ORGANIZATION:
Introduction:

I am students of PIMSAT conducting a research on "Price War in Pakistan
Cellular Industry". I selected UFONE to conduct the survey. I require your humble
cooperation to fill the questionnaire handed over to you. I assure you confidentiality of your
identity for it will be solely used for class project and will not be disclosed. The information will
be carefully disposed after use to ensure confidentiality.

If you would like to contact us for any information or inquiries please don't hesitate to contact
me AFTAB AHMAD, +92-323-4939489, Aftab.pimsat@yahoo.com

Basic Instructions:

- Please fill in all the questions dont leave blank answers.

- If any question is not clear please leave it and ask our researchers to help you with it.

Name (optional):____________________

Age: ________________

Gender: ________

Designation (post):_____________

Experience at the hospital (in terms of year):_____________

Department: ___________

1.
Your tasks are predefined and outlines like a job description given to
you?
Strongly agree Agree Not Sure Disagree Strongly disagree
2. Every Employee performs their own duties and no one else has to do it?
3.
You frequently have to work over shifts or cover shifts of absent other
employee?

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8.
You are satisfied with your
salary?
9.
You are doing job elsewhere because of
insufficient salary?
10
.
Employees are given various incentives like
transport, bonuses?
11
. Your seniors are supportive and encouraging?
12
. You are appreciated for good job done by you.
13
. Your subordinates are very supportive?
14. Your subordinates are efficient in doing the assign task?


15. The hospital management supports you against quarrelling attendants of patients?

4. Some employees in your department have high absenteeism rate?
5.
Your weekly and monthly hours of duty are
fixed?
6.
Long working hours affecting your house life
badly?

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16.
People are very
cooperative?
17. Coworkers support you?

18. The rates of Progress is high?

Q#19: What factor of your company differentiates your network from other
networks?
Ans: Brand name and NDC 0333
Q#20: Why you do so much promotion & how you compensate these costs&
how much this effort attracts potential customers?
Ans: Promotion is made to attract and retain customers. Our marketing campaigns are usually
prepaid and preplanned so we do not have to pay extra cost in terms of launching ads on
television. Most of the potential customers are attracted by our promotional efforts.
Q#21: In which area within your Organization you think need more
improvement?
Ans: Coverage, signal strength, Quality management, Culture and discipline.
Q#22: If you fall in the category of STAR then what is the reason behind
this? why you are not an ideal CASH COW?
Ans: Our some package falls in the category of stars and some in the category of cash cows but
still because our main target market is youth which is increasing day by day weve to make
investments on promotion to attract them so we are somehow stars.
Q#23: How much Profit you generate from international customers or how
much it beneficial for you?

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Ans: We do not have international customers. Customers with international roaming are not
considered to be international customers because these are local customers visiting outside
Pakistan for a temporary period of time
Q#24: What types of annual, long run & strategic plans/goals you have?
Ans: Maintaining prominent market presence as well as quality & availability of network. Sales
force automation, U shops and retailer outreach programs and to become a market leader in
terms of MNP.
Q#25: Sometimes your network held, what is the reason behind that and
what kind of planning youve to resolve this problem?
Ans: Power shortage is the biggest problem and we have power generators for that.
Q#26: Which Micro & Macro environmental factors influence you the most?
Ans: Employees moral, Fragility in operations, Lack of strong corporate culture, Law& order
situation, Political instability, PTAs Regulations.
Q#27: Dont you think that your some packages have some social
drawbacks?
Ans: No, I dont think so. Even if there are some social drawbacks, the target market accepts
these packages because these packages are created for market so its up to people how they use
these packages either in negative or positive way.
Q#28: Where do you see yourself after 5 years or where you want to see
yourself after 5 years?
Ans: Somewhere at the same place with a little improvement in market share.
Q#29: Any other thing you want to tell us or any Comment?
Ans: As you know that our slogan is Its all about U!! we always try harder to fulfill our
slogan requirement by putting our customers wants on top. There is always room for
improvement so in future as well well try to maintain our slogan by satisfying our customer
well.
Thank you

UFONE

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