Emerging markets: Telecom market review – Pakistan 2008

With annual growth around 100% for some years now, the mobile telephone market in Pakistan has been experiencing a period of strong and sustained development. However, Pakistan is suffering important economic turbulences which will have a direct impact on foreign operators in the country. Some of the reasons are:

• The decline in Rupee value against the US Dollar, the decrease in the interconnect charges and lower priced tariffs have resulted in an overall decrease of ARPU in US Dollar terms.
• The ongoing economic and political turmoil along with the worsening of security conditions in Pakistan have caused an increased outflow of capital from the country, causing the Rupee value to decline a further 13% against US Dollar in the third quarter.
• In light of the worsening economic conditions and the lack of prudent policies, the international rating agencies like S&P and Moody’s have recently downgraded Pakistan’s sovereign rating.

In the period of 2007-2008 the mobile sector has been characterized by:

• Falling ARPU
• Steady subscriber and revenue growth although a slight decrease in growth has been appreciated from the previous year.
• Intense competition by new international players coming to the market recently.
• Network deployment in the regions to increase addressable market as a measure against falling ARPUs.

Mobile services, despite high costs, still grow rapidly. Subscriber numbers increased from 68,000 in 1996 to 3.3 million by end-2003; since then the subscriber base has surged to reach 80 million in early 2007 and surpass 95 million in 2008. Penetration had reached the 58% mark, but judging by the commercial activity in the market there was still room for expansion. While progress has been made in the regulatory area, some rigidity in policies had been slowing growth. Some facts of the Pakistan’s telecom industry are:

• PTA successfully liberalized the telecom sector of Pakistan in an efficient, transparent and fastest deregulation of telecom in the region. The Government of Pakistan gave the status of Industry to Pakistan Telecommunication Sector.

• With de-regulation of telecom sector, PTA awarded 14 Long Distance and International licenses, 38 fixed local loop licenses and 17 Wireless Local Loop licenses.
• Under the deregulation process PTA awarded two new Cellular Mobile Licenses to Warid Telecom and Telenor Pakistan for US$ 291 Million through open auction, while renewed other 2 licenses for Mobilink and Paktel against same value.
• In 2007 Azad Jammu and Kashmir council adopted the Pakistan Telecom Act 1996, and PTA’s jurisdiction was expanded to reach AJK and NA.
• PTA awarded five Cellular Mobile Licenses for AJK and NA while 13 companies were awarded total of 24 licenses for Long Distance International, Fixed Local Loop, Wireless Local Loop and Class Value added services categories.
• Pakistan Telecom Authority is capable of tracking gray traffic (illegal traffic) thanks to a technical facility installed, after which PTA in collaboration with Police has raided and closed many illegal telecom businesses.
• PTA got implemented IMEI system to curb handset thefts, through this facility, customers can block their mobile phones if they provide IMEI and other details.
• Pakistan Telecom Sector successfully implemented the Mobile Number Portability (MNP) and became first country in South Asia to have MNP
• There is a Consumer Protection Directorate (CPD) at PTA to protect telecom consumer
• Almost 92 Percent of Pakistani Population has access to telecom services
• Total teledensity of Pakistan for Cellular, fixed, WLL is 60.4 percent – as of October 2008
• Total Mobile Subscribers in the country are 90.5 million with cellular teledensity of 56 percent – as of October 2008
• Total fixed line subscribers stand at 4.4 million
• PTCL share more than 90 percent share in Fixed line market
• There are total of 2.3 million Wireless Local Loop subscribers in Pakistan, WLL teledensity is 1.5 percent
• Total payphones working in the country, both fixed and wireless are 449,121
• Total broadband subscribers in Pakistan are 170,000
• Total dial-up users in Pakistan are 3.7 million
• Telecom sector of Pakistan has a share of almost 2 percent in National GDP
• In 2007/08 Telecom sector fetched total of US$ 1,438 million Foreign Direct investment, that counts 27 percent of total FDI coming in the country
• Total Investment made during 2007-08 in all segments of Telecom Sector was US$ 3,113 million
• Total Telecom revenues of Pakistan in 2007-08 reached Rs. 278 billion, which were 18 percent more than of previous year
• Mobile Cellular Companies share 56 percent of total telecom revenues
• Telecom sector is also a major contributor to national exchequer and deposited more than Rs. 111.63 billion only in year 2007-08
• Telecom sector submitted total of Rs. 44.61 billion as GST/CED to Federal Board of Revenue in 2007-08

Please find next a brief summary of the market. Enjoy.
Best regards. CVA