Regardless of the slow overall economic growth, the telecom sector registered positive growth in terms of teledensity, revenue and subscription. The sector was able to attract US$815 million in the year 2008-09. However most of the operators are foreign who have a pessimistic outlook of the economy due to the global financial crisis. Most of the operators adopted cost cutting measures to overcome negative impact of the economy. Pakistan Telecom Authority (PTA) is assigned with the task to regulate the sector and formulate policies to promote investment and encourage competition in the industry. The strategy adopted by PTA is that of a light regulatory approach with ensuring that all operators, large or small, have level playing field. The outcome of this strategy is a transparent and deregulated sector (PTA, 2009).
The Telecom sector remained the single largest receiver of the FDI receiving one fourth of the total FDI. Pakistan attracted US$ 19 billion in FDI in the last 5 years of which 34% was in the telecom sector (Fig 7.2). Teledensity in the country stood at 62% in 2009 (see Fig 7.3). Despite increasing the taxes and falling exchange rates, the revenue of the sector grew by 19% in 2009 and stood at Rs. 327.8 billion (see Fig 7.4). The sector also contributed Rs. 112 billion in to the national exchequer as taxes. Basic services such as fixed local loop (FLL), Wireless local loop (WLL), Long Distance & International (LDI), and Broadband services also witnessed growth in revenues and its contribution to the sector revenue stood at Rs. 121 billion (about 26%).(PTA, 2009)
Fig 7.2 Foreign Direct Investment (FDI)
Source: PTA Annual Report, 2009
Fig 7.3 Teledensity in Pakistan
Source: PTA Annual Report, 2009
Fig 7.4 Telecom Revenue
Source: PTA Annual Report, 2009
The telecom sector in Pakistan is constituent of a lot of services which include Mobile sector, Fixed Line sector, Wireless local loop sector, Payphone Sector and Internet Sector. The telecom industry in Pakistan is growing since the inception of cellular networks in 90s. The major reason was the strong marketing campaigns Cellular companies carried out. These campaigns increased the awareness level in general public and the utilities that were available in other parts of world. Cellular sector gave indirect boost to internet sector, payphone sector and wireless local loop sector. However, Fixed Land Line sector, being the direct competitor, is still struggling to break the new grounds.
Fixed Line sector
PTCL being the only landline provider in Pakistan enjoyed the monopoly for a long time but they still were not able to compete with the latest cellular companies. On 13th July, 2003 PTA announced a Deregulation Policy. The obvious reasons, for not being able to compete, are the different managerial styles, huge marketing campaigns, expansion strategies and the obvious globalize trend of using mobiles. There are other factors related to both sectors like convenience of use, value added services etc. PTCL, however, tried to maintain the market share by entering into Mobile sector. PTCL collaborated with Etisalat (UAE) and came up with a cellular company Ufone. Still the fixed line sector in Pakistan is not in good shape. According to board of investment the maximum subscribers Fixed Line services ever had was in 2006, when there were 5.24 million subscribers. This trend was steadied till 2007 but at the end of 2007 it declined to 4.8 million subscribers and it is declining ever since. One of the reasons for this decline was the inception of Wireless local loop sector in 2006. The WLL sector is growing ever since, with Fixed Land Line sector losing its place and Cellular sector maintaining its position.
Wireless Local Loop Sector
Wireless Local Loop services were introduced in Pakistan after deregulation of local loop sector in 2004. There were17 WLL licenses were issued out of which PTCL, World call, Telecard, Great Bear, Burraq, Mytel and Wateen are operational. WLL subscribers have shown rapid growth since 2003, Initially it was being predicted that WLL sector’s growth might be slow but it is steadily growing and it will attract a foreign investments internationally. But the WLL operators like Wi-tribe and Wateen shifted their investment towards the Broadband expansion and investing new technologies like WiMax. This gap provides an opportunity for investors to invest in fiber networks to secure a position in this segment of the industry.
Mobile Sector
The most profit making sector in Pakistan is the Mobile sector. It has grown with an average of 90% over the last few years. . According to Pakistan Board of investment, report published in 2008 mobile services are available in 7011 cities/towns and villages all over Pakistan. Pakistan Telecommunication Authority released a report in February 2010 Pakistani cellular Market concluded 2009 with 97,579,940 subscribers. PTA also released stats of the total number of subscribers of each operator and their respective market shares. The details are
Mobilink being the top service provider has 32% of market share and total 30,800,354 subscribers.
Telenor comes in second position with 23% market share and total 22,500,789 subscribers.
Warid and Ufone are neck to neck in the competition and hold 19% of market share with 18,847,315 and 18,510,175 subscribers respectively
Where as Zong, after the reestablishment of management, hold 7% market share and 6,920,234 subscribers.
The competition and survival in Pakistan cellular services is cutthroat and to survive companies had to cut down the tariff, come up with latest value added services. The prices were cut down to such extent that Pakistan cellular services were considered one of the cheapest all over the world.
Payphone sector
Card payphone services in Pakistan were deregulated in 1990s. Telecard is the first to commence this service in Pakistan. Growth of fixed line PCOs remained impressive till 2004-05 where it was going at an outstanding pace. However after the technology boom, Payphone sector’s position seems to be in jeopardy. According to the statistics released by PTA 90% of Pakistani population owns a cell phone. PTA permitted mobile companies to establish their PCOs. After 2004-05 growth trend of fixed line PCO declined but wireless PCO services prospered in Pakistan.
Internet sector
Internet service is becoming a fundamental part of life in Pakistan particularly in urban areas where large portion of the businesses are using it for different uses. According to estimates of ISPAK (Association of Pakistani ISPs), currently there are about 3.5 million internet subscribers all across in Pakistan whereas total users crossed 17 million mark. Currently around 3,002 cities are linked to internet. Broadband services are being offered with the help of various technologies such as DSL, Cable Modem, Fiber to the Home (FTTH), and Wi-max (worldwide interoperability for microwave access). However the growth rate is not increasing as it was expected, Cost of service is the major reason behind this slow growth. A major development for broadband market is the introduction of broadband services by the incumbent (PTCL) itself. PTCL has started offering its DSL services since June 2007 in major cities for home users with free installation services. It is expected that steps taken by PTA in collaboration with Industry will ensure better and economical broadband services in Pakistan. This step not only helped PTCL to gain market share but it also helped sustaining the Fixed Land Line Sector.
Deregulation policy
These all drastic changes were made after the deregulation policy announced by PTA in 2003. It opened a window for the investors all over the world and there was a clear boom in telecom sector of Pakistan. Even when the whole world was suffering from the economic depression, Telecom sector in Pakistan not only survived but showed a growth trend. This growth acceleration is steadying down and this whole sector has entered into the maturity phase, which might be concern for some of the major vendors operating in Pakistan. Nonetheless, an incipient trend is arising in the market powered by first movers, which have started to re-focus on profitability, applying cost reduction programs and strict control over their capital expenditures to face the negative economic conditions. Therefore, margins would start to recover from bottom peaks. The impact of deregulation on tariff would be significant. Market forces will ensure that consumers pay prices that are reasonable. If the market would be effectively competitive, suppliers would be few in number and their price and output decisions will impact market conditions. Any price increase not justified by market forces (e.g., higher costs or shifts in customer demand) will be counterproductive.
