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MEC interview with Paltel
Sept. 2001 Issue
The following was published in the Sept. 2001 issue of Middle East Communications (MEC).
Intro: Paltel's Executive Vice President and Chief Financial Officer, Mousab Khorma, provides an update on the state of the Palestinian telecomm market. The interview was conducted with the assistance of Mai Jabi, Paltel PR Officer and Translator.
The Palestine Telecommunications Company (Paltel) is a public shareholding company, established in 1997 with a capital of $95 million. There are 5,000 company shareholders (making it the most widely held stock on the Palestinian securities exchange) made up from local and international institutions and private
Investors. The top 15 Paltel shareholders own approximately 65 per cent of the company; these include the Palestine Development and Investment Company (PADICO), Arab Bank, Palestine Commercial Services Company (PCSC) and Cairo Amman Bank. The telecomm sector share in GDP was approximately three percent in 2000, although this figure is expected to rise substantially during 2001.
The Palestinian Ministry of Post and Telecommunications regulates all tariffs.
MEC: What were the results of the latest Paltel shareholders meeting?
MK: Paltel's Annual Ordinary General Assembly meeting had convened on 25 July 2001. It adopted the Board of Director's recommendations and the financial statements for fiscal year 2000.
Net profit for fiscal year 2000 totaled $12.1 million, which represents a 35 per cent increase on the corresponding period in 1999 (net profits were $9 million in 1999). Total assets grew to $332 million as of 31 December 2000, up from $268 million as of 31 December 1999. Total shareholder equity reached $135 million as
Of 31 December 2000, up from $99.5 million for the previous year - approximately $23.5 million of this was a result of an increase in the company's capital. The Board of Directors also decided not to distribute any dividends because of the current political uncertainty - instead, the funds will be reinvested to further expand the company's networks. The current share price is US$3.25 (JD2.30), up from $1.41 (JD1.00) when Paltel was part privatized. The share price reached its peak at $6.2 (JD4.4) after the company's capital was increased, but has declined recently as a result of the prevailing political situation in Palestine.
MEC: How much has been invested in telecomm sector and what is planned for the future?
MK: Paltel's has invested approximately $350 million as of 31 December 2000 and an additional $100 million worth of investment is scheduled for the next 18 months in order to complete our fixed, mobile and data networks. Furthermore, Paltel's Board of Directors recently decided to restructure the company, placing heavy emphasis on the commercial aspect of the business (e.g. sales, marketing and customer services). As a result, we are about to embark on a very aggressive roll-out of 'One Stop Shops' that will serve as sales outlets for all our services. They will also be used as collection and customer service centers and provide retail space for Jawwal and various ISPs.
MEC: What is Paltel's current fixed and mobile line capacity?
MK: Our fixed line network has a capacity for 540,000 lines, although only 450,000 lines are currently equipped. Paltel has 300,000 fixed line subscribers. Our sister company, Jawwal, - the Palestinian cellular company that recently spun off from Paltel - has an existing 120,000 mobile line capacity. Further network
Coverage and expansion will increase this to 216,000 lines in the near future. It is worth mentioning that we currently cover 95 per cent of the PNA controlled areas and we aim to cover the remaining five per cent in due course. Also, the average waiting time for a phone line is now three days compared to ten years before privatization.
MEC: Is the current level of technology and capacity enough to capture new business?
MK: We are forecasting growth at around 15 per cent per annum. Paltel has introduced several costs cutting initiatives that should significantly increase our efficiency, profitability and margins.
Remember that we are less than five years old so the quality of our networks is all state of the art.
MEC: How is Paltel planning to increase Internet usage within its market?
MK: Paltel realizes the importance of this sector and has made great efforts to develop the sector and increase Internet usage in Palestine. Our main goal is to provide the ISPs with the data backbone infrastructure, but we do offer data and Internet services to corporate customers and universities. The services we currently
Provide include dedicated leased and frame relay lines. We will be providing, by the year's end, ADSL services as well. We plan to work closely with the ISPs in order to increase the Internet penetration rate to ten per cent (or approximately 300,000 users) within the next 12 months. There are currently 15,000 Internet
Subscribers in Palestine and approximately 60,000 users. We also have our domain, www.paltel.net, and an Arabic portal, www.alburaq.net.
MEC: What new services Paltel plans?
MK: We currently have one of the most advanced digital telecommunications networks around and can provide all services you would expect (e.g. redial last number, calling last number received, follow me, call waiting, conference call, wake up call, caller ID, abbreviated numbers, voicemail and ISDN services. We
are in the process of evaluating bids for a new billing system and are investigating areas of synergy with in regards to billing. The new billing system will give us greater flexibility as far as services and pricing plans for our customers are concerned.
MEC: How has the new international dialing code (970) been received?
MK: The 970 country code has been accepted by 115 countries around the world so far and we expect this number to increase substantially as we are in the process of finalizing more agreements elsewhere.
MEC: Although the company currently enjoys a monopolistic position in the PNA-controlled areas do you envisage competition of sorts?
MK: Although Paltel has a ten year exclusivity period for fixed line services and five years for mobile services, this exclusivity has never been a reality. We have been in fierce competition with all four Israeli cellular providers, who as you know have very large subscriber bases and are very well financed. Despite this illegal
activity we have competed well and have a very healthy subscriber base and revenue growth rate. We believe in and very much look forward to legal and fair competition.
MEC: What are the chances of a strategic sale of Paltel? MK: We are currently in discussions with several international investment banks with the aim of advising on the sale of an undetermined percentage of the company to a strategic partner. We believe this sale will become a reality once the political climate becomes a little more stable. MEC: What is Paltel's vision for the future?
MK: We aim to be the premier telecom operator in the region, offering the best quality services and the latest technologies all at competitive prices. We are also focusing more on our own human resources and aim to be less dependent on the outside world.
Paltel's main objective is to develop, operate and manage the telecommunications sector in Palestine and to provide state-of-the- art, high quality telecom services. We plan to increase customer satisfaction and build shareholder value by continuously increasing our market share, broadening our client base, applying suitable tariffs and developing all our networks.
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