The growth in the telecom sector has helped Pakistan's economy grow at a much faster speed-the telecom sector having emerged as one of the largest contributors to taxes, and employment provider. As a result, the cellular operators are riding high, and the country is witnessing a huge growth potential of telecom services since the last couple of years.

Also, factors such as de-regulation and improved infrastructure have created immense opportunities in the market for operators and service providers who are ready to take a leap ahead in terms of conventional and new services. While collection of GST acts as a major contributor to government revenue, local and civic authorities also reportedly tax the telecom sector. Thus, a better regulatory environment for telecom coupled with less complications as compared to countries like India, keep Pakistan ahead in the region. Mobile penetration in Pakistan is reportedly more than 30%, which is more than India at close to 22%.

Zooming Ahead
The latest statistics released by Pakistan Telecommunication Authority (PTA) reveal that the total number of mobile subscribers in the country has reached 82.5 mn in March 2008, as compared to 78.7 mn in January 2008. While Mobilink continues to lead the market with a total subscriber base of 32 mn, Telnor Pakistan comes second with a total subscriber base of 17.9 mn and Ufone a close third with estimated 17.8 mn subscribers. The other important players who dominate the market are Warid, Zong, and Instaphone.

Interestingly, mobile penetration has shown a vast reach in all the regions across Pakistan. While Punjab transcended to 55.3% teledensity from 38.1% in March 2007, the Sindh region also showed impressive performance with a total teledensity increase of over 14%, to reach 59.2%. Moreover, because of favorable government policies in Balochistan, teledensity, which stood at a meager 14% last year, crossed the 25% penetration mark this year.

Thrilled with the booming market, cellular operators are now gearing up to move into the second phase, and are focusing on maintaining the same express mobile boom by rendering a complete portfolio of value added services and eye-catching bundled schemes to their subscribers. The companies are also looking at cheap call rates and lucrative SMS packages to magnetize customers of all segments. The SMS packages of operators vary from Rs 100-150 in which a consumer can send unlimited free messages during a month.

In an attempt to garner more market share, Mobilink recently introduced Club Red for its subscribers, wherein subscribers who cross the monthly usage of Rs 1,000, will be eligible to get a 50% concession on all calls to Mobilink numbers for the remaining days of the month. On a similar note, Warid Telecom, which claims to be the largest “post-paid” subscriber based in Pakistan, offered various schemes for its subscribers during its third anniversary celebration. Banking on value added services, Telenor Pakistan has also tried to draw customer attention with the launch of Telenor MusicBox, a dial-in service that allows Telenor subscribers to enjoy music on the move. The service is claimed to be the first of its kind in Pakistan.

The company has also launched the world's first in-flight mobile service in alliance with AeroMobile. The service allows Telenor's postpaid customers to use their GSM services while in flight on Emirates Airline aircraft equipped with the AeroMobile system. The service is available only on AeroMobile equipped Emirate aircrafts, under the standard international roaming terms.

The Flip-side
According to PTA's industry analysis study of 2007, of the 376 tehsils across Pakistan, almost 77% are covered with mobile networks. However, because of lack of initiatives from operators, the fixed line segment has failed to generate the same charisma as cellular phones did in the country. With total fixed line teledensity at just about 3%, fixed line cuts a complete sorry figure in the otherwise growing telecom economy. The reason for the poor fixed line penetration is the low investment appeal coupled with lack of resourceful thoughts and scaling heights of mobile and WLL services. Pakistan Telecommunication Company (PTCL), the incumbent operator, holds a monopoly in this segment with shares of over 96%.

Although, initially, LDI (long distance international) licenses given by the government attracted huge interest among operators, the continuous rise in competition is making it very difficult for new entrants. While maintaining profit margins are getting tougher for players, consumers are enjoying the low tariffs because of the competition. The sector is however poised to grow as the PTA, is keeping an eagle's eye on the complete situation and planning to take some strong and concrete steps to improve the situation.

Keeping in view the high demand for telecom services and the diversifying needs, WLL technology was introduced in 2004 in Pakistan. At present WLL services come in the frequency spectrum ranging from 450 Mhz, 479 Mhz, 1900 Mhz, and 3.5Mhz in 14 telecom regions of Pakistan. According to PTA, the overall WLL subscriber base reached 2.4 mn by April 2008, and is growing at the rate of 10.3% per month. The leading players in this space include PTCL, Worldcall, and Telecard. Operators like Wateen are also gearing up to hit the market soon. Meanwhile, PTA has also started a campaign against the sale of unverified SIMs in the country. The regulator is taking strong action against the unregistered users and has already blocked more than 1 mn unverified SIMs of all major operators.

Broadband: Yet to Happen
The broadband market, despite raising big hopes, has not been able to mark a big presence in Pakistan. The country is facing similar concerns as India. With a total subscriber base of over 1.3 mn, the growth has not been able to raise standards the way it could have. While high cost is acting as the biggest roadblock, poor quality of service and lack of customer-friendly packages present a bad picture for the country. Infrastructure issues and lack of interest among operators in providing broadband penetration in small towns is making the task much more difficult for the government and masses. Furthermore, issues such as poor literacy rate, low PC penetration, cultural barriers, lack of localized content, etc, are adding up to worsen the situation.

Currently, in Pakistan, over 60% of broadband connections are based on DSL, while HFC and WiMax comprises 32% and 7%, respectively. Although the incumbent operator PTCL initiated the process and started broadband services through DSL in 2007, there is a need to make broadband a commodity through the help of lower tariffs and effective business models to make masses connect globally. The government also needs to take important steps and create an atmosphere with effective policies for speedy broadband deployment. With the introduction of WiMax services, the country is optimistic of improving the broadband picture in a very short span of time. Furthermore, newest developments such as introduction of triple play services, rural tele center projects, widespread infrastructure rollouts, growing bandwidth demands and investments from the government can certainly improve the situation to a great extent.

The launch of commercial WiMax services has placed Pakistan in the early adopter category in the region, which will certainly give an edge to consumers in Pakistan. The WiMax services will enable subscribers in Pakistan to make video calls and telephony from their WiMax enabled handsets and provide faster Internet and broadband services as compared to the typical dial-up or fixed line. Presently, global player Wateen Telecom and regional player Mytel, have set up commercial operation of WiMax. Then there are several players like PTCL, Z-WLL, etc, who are in a trial phase of deployment of WiMax services and are planning to bring WiMax services under their umbrella latest by the end of this financial year.

High Aspirations
Pakistan has placed itself as one of the fastest growing telecom economies in the world. Although operators are positioning themselves to make a wide impact on consumers by lucrative schemes and introduction of many innovative value added services, the reality is that in the scenario of falling ARPUs, growing competition, and declining profit margins they have started finding various mediums in order to get a maximum share from the customer's wallet. PTA has, in a notable move, decided to increase the approved settlement rate (ASR) from 2.5 cents to 10 cents per minute in wholesale, which will eventually make calling Pakistan from outside the country much more expensive than before. Although it is a strategic move to increase margins in long distance calling, the possibility of intensifying grey markets can also lead to a difficult situation for the government. It should be worth mentioning here that PTA had earlier, in 2006, reduced the ASR by 38.6% in order to reduce financial incentives in grey telephony.

In an important announcement, Abu Dhabi-based Warid Telecom awarded a $300 mn contract to Ericsson to expand its network in Pakistan. Under the agreement, Ericsson will upgrade the GSM/GPRS network of Warid, the country's fourth largest cellular operator, which could eventually help it to expand additional capacity in nearly 100 cities for more than 5 mn customers. Warid has also launched GSM and WiMax services in Uganda and GSM services in the Democratic Republic of Congo.

In a strategic move to provide basic telephony and data services to the population in unconnected areas of the Balochistan districts, PTCL has entered into a contract with the universal service fund (USF). The said contract will enable PTCL to launch new services in the yet un-served areas of Balochistan that include Pishin, Killa Abdullah, and Quetta. Also, in an attempt to leap to the second stage, Ufone has also announced to spend $200 mn on network expansion in order to guarantee quality and affordable services to its 17 mn subscribers during the current financial year.

However, the telecom sector in the country could feel the heat in the future with growing competition between operators and declining quality of services. Coupled with proper business practices, effectual policies, and expanding connectivity channels to rural and far-flung areas, the country can keep on the right growth path.

Broadband explosion could be the next big push for the telecom sector in Pakistan. At present there are just over 1.30 lakh broadband subscribers in the country, which is very encouraging for operators and service providers. In addition, effective measures also need to be taken to enhance rural coverage where in spite of some long-term efforts of the government, the results are not very encouraging so far. Although the country is having a successful ride in telecom for the time being, there is need to look into the unexplored, which could help the nation to become a leader in the region.

Jatinder Singh
jatinders@cybermedia.co.in