Business plan for wireless payphones in Pakistan

Abstract

Telecommunication business in Pakistan is in a growth stage which provides ample oppo1tunities for new companies to establish themselves in the pay phone sector of telecommunication industry. The competition is limited to few major players only in the sector and there is demand supply gap of 33,400 payphones in Pakistan. The distribution networks of competitors involve a parent company that provides pay phones at different kiosks and sell smart cards to retailers. The retailer is only responsible for selling cards to customers and has no responsibilities in regard to maintenance and security of payphones. The companies lack competitive edge on the location and security of payphones. The competitor's main media of advertising and promotion are newspapers, billboards and trade discounts. The average discount given to retailers is 15%. The barriers to entry are low and barrier to exit are high. The barriers to exit are high because of high investment made by companies which will induce heavy competition in the industry during favorable circumstances. The objective of business plan is to come up with a strategy that brings high return on investment. Strengthen the distribution network, enhances the sales and creates high awareness among customers. Telecom business in Pakistan 1s m growth stage. At present there are 2.2 million telephone lines in Pakistan to satisfy the need of 130 million people. The international penetration level standard for developing countries is 2.4%. The low penetration level of I . 7% in Pakistan provides a huge opportunity for the new companies to enter the business. The present population growth rate in Pakistan is 3.0% which will result in a high demand of phone service. 2 The total market size of pay phone service in Pakistan is approximately Rs 4.8 billion. The market is expected to grow at a rate of 3% which is the growth rate of Pakistan's population. The payphones are to be installed in urban, semi urban and rural areas of Pakistan in line with PTCL requirements as explained below: Tier I 30% paypl~ones (population of over 100,000) Tier 2 40% payphones (population between 5,000 and 100,000) Tier 3 30% payphones (population of less than 5,000) This plans includes installation of 46,901 supervised payphones according to the tier wise allocation requirement and 3, 099 standalone payphones. Installation will be carried out over a period of 27 months. The total cost of the project including development expenditure is Rs 4.5billion (US$79.3m) financed 49. 1 % by debt and lease and 50.9% by equity. Summarized project cost along with the proposed financing plan is given in the following tables, details of which are provided in later sections of this document.