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The craze

Nov 10 - 16, 2003

The mobile phone, an extension of the information technology, has assumed the role of a magic wand in today's life style.

The fascinating options offered by this technology at both ends of the users (dialing or receiving) while in movement give a sense of freedom to the people. Unlike the landline phones compelling the users to station at a certain place to talk, the cell allows to have a chat while you are sitting on a hill top or traveling in a car. This freedom of movement perhaps the major reason for phenomenal spread of this little wonder around the globe. There was a time when people use to carry, comparatively a much bigger handset, with them as a status symbol. Initially, it was a costly affair and only the privileged class of the society could afford the use of mobile phone. Despite being heavy in weight and longer to over 6 inches in size, people use to display their mobile set obviously to display their wealth, status and importance in the society. However, the time has changed, the every day innovations in this field have reduced the cell into a small object. Different mobile manufacturing companies have given attractive shapes, designs and colors with latest functions of information technology including photo-messaging, MSN, e-mail and other Internet options.

In the early days when mobile phones were introduced in Pakistan, people generally avoid to receive a call on mobile phone as the receiver of the call had to bear the cost to a certain level. However, the marketing experts realizing the cost as the major hurdle in the growth of this technology done away with the charges on receiving call and gave tremendous boost to the use of mobile phones. Besides the call charges, the price of a handset has also come down steeply from over Rs.80,000-100,000 to an average price of merely Rs5000. Easy access to the connection, has also played a vital role in the growth of mobile use in the society. Unlike the landline connections, where one had to fulfill a number of conditions to have a connection, the growth of mobile phones has smashed all bureaucratic hurdles of the landline phone connections. Market experts are of the opinion that call charges are still on higher side which are hampering further growth of this sector. They hope that further growth of this industry calls for reduction in call charges, as a large market was still untapped in Pakistan due to cost factor.

However, the overwhelming growth of cellular phones in a poor country like Pakistan is a win win situation for investors in this sector.

While the growing demand for cellular phone has created a number of openings on the economic front, it has made a widespread impact on the social life in the country. On one hand, it facilitates the young couples to maintain secrecy without fear of social curbs, it also helping the underworld in the commission of the crimes that is evident from the increasing number of holdups, car snatching and the burglaries. However the merits of this technology are so strong that it has to be opted with all social ills the mobile phone technology carries. According to a survey, the abuse of cell has helped formidable growth in crimes especially bank robberies and hold ups. In order to check the crime at financial institutions and other places of sensitive nature, the experts have developed a device which freezes the incoming and outgoing signals of the mobile phones. This device has become more popular for security reasons. Earlier, the managements of different organizations had to display notices or warning that to switch off mobile phones in this premises. However, now the device has made their job easy as the cell phones automatically become inoperative in the area wherever this security device has been installed.

Law breakers on the other hand have evolved novel ways in the commission of the crimes. A student was caught while using hand free mobile set for cheating in the examination hall. He was using the hand-free mobile on the pretext of hearing aid. Such crimes, however, are the part of the game and such a useful facility cannot be condemned on the basis of such happenings.


Pakistan has led its telecommunications industry into 2003 under a policy to promote strong foreign investment. The present government has implemented a policy of economic reforms, deregulation, and privatization in the telecommunication besides other sectors.

Prior to 2003, the Pakistan Telecommunications Company Limited (PTCL) controlled Pakistan's telecommunications market with 98% dominance of the market.

This dominance ended on December 31, 2002, when the government opened the vast Pakistani telecom market to competition. New telecom companies, backed by foreign investors, can now compete in local, national, and international telecommunications markets.

With the investment opportunities offered in the telecom sector, Pakistan is striving for improvement of existing infrastructure. Pakistan offers a large network and access to the markets of the Middle East, Central Asia, India, and The Far East. Currently, there are over 2.861 million telephone lines in use and over 2,635,982 mobile cellular. Leading cellular companies providing service in Pakistan are: Mobilink, Instaphone, U-Phone, and Paktel.

Despite improvements, the telephone lines are still not accessible to the majority of the rural areas. Seventy percent of Pakistanis live in rural areas. This may be disappointing news for some, but if you're in the prepaid phone card business this underdeveloped infrastructure can make you money. The lack of coverage in the rural areas has created a need to set up Card Payphone Facilities all over the country to ensure universal access to services. In 1992, the first installations of card payphones occurred. By 1998, card payphones were popping up all over Pakistan, indoors and out. Today, with deregulation, PTA was able to reduce its royalty from four percent to two percent and thus create a huge demand for pay phone operators. In light of PTA's modern open policy, a large number of licenses were issued to card payphone operators. The major card payphone companies of Pakistan have displayed a significant increase in booths and coverage of their Public Call Offices (PCO). The top three payphone operators are World Call, with 21,929 payphones, Dancom with 15,951 payphones, and Telecard with 10,385 payphones. In summation, there are 98,759 payphones throughout Pakistan making prepaid phone cards a demand especially in rural areas. The phones are user-friendly to accommodate the 42.7% literacy rate.

The PTA, paying special attention to foreign investors, has implemented new policies and tax regulations to promote a friendly foreign business environment. Pakistan allows foreign investment on a repatriable basis. Investors register their company with the Securities and Exchange Commission of Pakistan, under the Companies Ordinance 1984, and inform the State Bank of Pakistan of their business.

The future in Pakistan telecommunications sector looks effulgent. The government is acknowledging infrastructure and private enterprise. This governmental reform has already experienced rewards of a deregulated system. In 2001-02, the mobile industry grew by 47%, payphones increased by over 17%, and listed phone service rose 7.8%. ISP service is available through direct subscription from over 100 operators and indirectly through Internet cafes. Overall, the foreign investment opportunities are budding as more and more feel the need to communicate, conduct local and international business, and utilize technology, to increase efficiency and lower costs throughout the developing country.


















August 2003


Pakistan Telecommunication Authority (PTA) has announced that two new cellular mobile companies would be awarded licenses through open bidding in a fair and transparent manner to cope with the rising demand of mobile phone users.

According to the Chairman PTA, Maj. Gen Shahzada Alam Malik, the process of granting licenses to the new entrants would be initiated after floating Expression of Interest (EOI). The party giving the highest bid would be granted license for operation in the country. The new licenses valid for fifteen years would be technology neutral and the whole process of issuing new licenses would be completed within five to six months. The entry of new operators is expected to bring huge investment in Pakistan.

Referring to the recent public forum held by PTA on PTCL tariff proposal, the Chairman has said that PTA had accorded approval to the tariff proposal submitted by PTCL stipulation the relief on NWD and ISD customers from 15% to 23% respectively. He said that earlier PTCL had excluded 12 countries from the list allowed tariff reduction but according to PTA determination all the countries would be enjoying reduction in tariff up to 23% for ISD calls.

During a recent presentation to the President and the Prime Minister, PTA had proposed reduction in taxes on telecom systems and services for the growth and development of the sector and attracts investors. The proposals submitted by PTA for reduction in taxes would receive encouraging response and after their approval substantial relief would be available to the telecom service users, it is hoped.

The existing operators whose licenses were going to expire in the coming years would be given letter of comfort stating that their licenses would be renewed provided they paid the fee equivalent to the amount fixed for new operators through open bidding. The telecom industry was growing at a much faster rate in Pakistan and within three years the number of fixed and mobile phone users are likely to touch the figure of 6 to 7 million.


The mobile phone industry experienced better than expected sales, as worldwide mobile phone unit sales totaled 112.7 million units, an 18% increase from the first quarter of 2002.

"The mobile handset industry rode the crest of a wave of robust replacement demand to realize record levels of sales to end-users for the first quarter. Significant demand was recorded across all geographical regions during the quarter, and annualized sales trends based on these results suggests the market could be on pace for a double-digit rate increase for the full calendar year.


(Thousands of Units)


1Q03 Sales

1Q03 Market Share (%)

1Q02 Sales

1Q02 Market Share (%)

Growth (%)

























Sony Ericsson












Total Market






Nokia, with a 35% market share in the first quarter of 2003, continued to have more than double the market share of its nearest competitor. Despite market share of more than 50% in almost all GSM markets in Europe and Asia/Pacific, Nokia is still positioned to grow market share in these core markets through the remainder of the year.

According to a market analysis, the remainder of 2003 will see Motorola and Samsung battle for the No. 2 position, while Sony Ericsson and LG will try to hold the No. 5 position. Both South Korean vendors are solidly entrenched in leadership positions in the CDMA segment, and both continue to make inroads into GSM markets across the globe.

In 2003, an explosion in the availability of color screen and camera phones is expected in mature markets, such as Western Europe, and the market players predict that many customers will be tempted to replace their existing mobile phones. Photo messaging, or 'disposable photography,' is expected to be the cornerstone service in mobile network operators' marketing campaigns throughout the year.

The mobile terminals market in 2003 will be characterized by 'device diversity' as mobile terminal manufacturers launch a wide range of new handsets with features, such as gaming, music and video. However, the majority of worldwide sales will remain in the low-tier, low-function segment.

While the worldwide mobile phone industry has reason to be excited by 1Q03 there are several risks unique to 2003 market supply and demand dynamics that could impact the industry during rest of the year.


LG Electronics (LGE) while focusing LCD, mobile terminals as growth engines for winning new business, has taken steps towards the goal of becoming part of the global top three in the electronics and information communications industries by 2010.

LGE Vice Chairman S.S. Kim aims to accomplish mid- and long-term visions by pursuing three core objectives: putting LG the top spot in winning core businesses, fostering promising business for the long-term and reinforcing profit-oriented mindsets to secure growth foundation. LG plans to move towards its goal with product leadership and differentiated marketing by fostering LGE as a premium brand.


On the economic front, this sector has the strong potentials to attract investment worth $6 billion over a period of seven years after the deregulation of the telecom sector in Pakistan.

Awais Ahmad Khan Leghari, Pakistan's Minister for Information Technology has recently said in his keynote address at Telecom 2003 conference held at Geneva that the market is ripe for getting more and more competitive nimble players. Since Pakistan is stick to the economic reforms introduced three years back with a strong commitment for maintaining consistency in the economic policies, there would be no mid-stream changes in the policy. The minister was heading the Pakistan delegation to the event organized by International Telecommunication Union every four years.

Pakistan government with its Telecom policy had come out with better terms and agreements than the World Trade Organization (WTO). The policy assures up to 100 percent foreign ownership, a committed policy on number and technology neutrality, five-year policy review and 20 years license period, low upfront license fee and performance bond, independence of regulatory bodies and regulations, transparency and licensing process.

The initiatives were committed by Pakistan in the interest of fast growth in an under-penetrated Pakistani market with a telephone density of about three percent.

The local players in Pakistan were on strong grounds both in the fixed and mobile phone sectors that helped to attract some key regional and global players in Pakistan's market. The much greater opportunities for multinational companies and operators invite them to be proactive to venture and joint efforts with local players.

The telecom landscape around the world was also changing fast with liberalization and deregulation bringing about basic changes in the telecom sector paradigm. The crunch both in telecom service and equipment supply market has influenced the way operators, manufacturers and local entrepreneurs strategize business approaches. The plummeting technology stocks and equipment prices were now a reality facing the industry.

The centre of activities in the telecom landscape for next seven to ten years is going to be more towards emerging markets of Asia Pacific, Middle East, Latin America and African continent. These regions would dominate as major telecom growth centers.

The priority for high-profile new range of services such as 3G mobile, broadband wireless and fiber-based services in the developed world were sure to continue but the developing countries would be the markets for core telecom equipment and services.

The local and regional entrepreneurs can make significant difference in expansion of telecom activities compared to few years ago when such opportunities were availed only by big players.

Keeping in view the regional context of South Asia, Far East and Central Asia, the local entrepreneurs have started contributing more significantly because of the awareness and demand for variety of low cost services, availability of cost effective local equipment, low cost human capital and skilled manpower as is the case with China and Malaysia.

Currently, Pakistan has some 300 data network operators, Internet service providers, pay phone and pre-paid card operators, cellular mobile service providers and a host of value-added entrepreneurs were successfully providing a broad range of services.

According to an estimate, even limited telecom liberalization initiatives (4-5 years) have attracted investment of about a billion dollars in Pakistan. The private sector entrepreneurs had contributed more significantly in countries like Malaysia, Thailand, Sri Lanka, Philippines and India.


Phenomenal growth of cellular industry in Pakistan besides strategic location of the country has convinced the investors to establish mobile phone industries within this country. So far the cell phones being used in Pakistan are imported from different countries. However, some mobile phone companies in collaboration with some leading software houses in Pakistan are on their way to set up mobile producing projects in Pakistan. Hopefully, this trend may open new doors for investment, employment, exports and development in Pakistan.


Pakistan with its Telecom policy had come out with better terms and agreements than the World Trade Organization (WTO). The policy assures up to 100 percent foreign ownership, a committed policy on number and technology neutrality, five-year policy review and 20 years license period, low upfront license fee and performance bond, independence of regulatory bodies and regulations, transparency and licensing process. In the backdrop of these incentives, experts are of the opinion that the tremendous investment is in the offing during next three to four years in Pakistan.