The cell phone population is estimated to approach
the level of 10 million by the end of the current year 2005. The
addition of around 0.5 million new connections every month to the
existing handset users indicates the mobile phone craze as well as
great attraction for the investors in Pakistan.
The official quarters were attaching hopes to
attract $15 billion investment in telecom and IT sectors in the next
few years. The World Bank projects it at $8 to 10 billion, however,
the local market players have their own assessment about the
investment which they see between $5-8 billion in Pakistan telecom
If these projected figures were not exaggerated,
this newly emerged sector would certainly contribute significantly to
the economic growth besides lending a substantial support to the
exchequer as every call made through mobile phone generates revenue in
the form of taxes and duties.
A careful review of the growth, however, reveals
that though the number of cellular phone users may continue to grow
yet how many of them can be placed as revenue generating customers, is
the pertinent question.
The cellular market at present comprised of six
companies after addition of recently inducted two more companies. The
overall picture of the sector includes Egypt-based Orascoms Mobilink,
Instaphone and Paktel that have partnership between a Pakistani group
and Millicom International Cellular of Sweden, and state-owned U-fone
is already operating here. Mobilink with its attractive customer
packages has more than 3 million subscribers out of 5.2 million. There
were only 200,000 cellular subscribers in 1999 when the first cellular
service started in Pakistan. So far penetration of mobile phones at
2.3 percent is quite low compared to the Asian region, as it should be
more than 10 percent.
It may be recalled that PTA had issued two licenses
for launching cellular services to UAE's Al-Warid of Chairman Shaikh
Nahyan bin Mubarak Al Nahyan and Norway's Telenor of Chief Executive
Officer Fredrik Baksaas last year. These companies are expected to
invest around $300 to 400 million besides paying $291 million as the
license fee to the telecom regulator, Pakistan Telecommunication
Authority (PTA). Scores of other foreign and domestic companies have
just lapped up licenses for investment in Long Distance International
(LDI), Fixed Local Loop (FLL) and Wireless Local Loop (WLL) services.
One of the most interesting aspects of the fast
emerging telecom sector relates to the age groups of the subscribers.
Generally speaking, the youngsters constitute the largest segment of
the total cell population around the world. It is a fun for them to
have a colorful handset with attractive ring tones, yet they are not
really revenue generating customers especially in our environment
where income generating level is much low as compared to rest of the
world. With this background, it is said that most of the revenue
generating subscribers have already been tapped by the mobile phone
The Chief Executive of a leading mobile phone
company who requested not to be quoted says that the addition of two
more mobile companies including Telenor and Al-Warid in Pakistan
market will add to cut-throat competition which has already eroded the
profitability of the existing companies.
As far as the market potential for the new
companies was concerned, it will continue to attract the foreign
investment, yet the low rate of return could discourage the new
comers. The situation calls for reduction in government levies and
fees for issuing new licenses so that the new and the existing
companies could survive. Heavy government taxes and license feel have
resulted in bankruptcy of many telecom companies especially in the
Western countries, he observed.
Recently, a Wireless Local Loop (WLL) license
holder company had come with ambitious plans and aggressive marketing
tactics, yet the company has started receiving complaints about poor
reception of income calls which may prove a setback to this new
segment of the telecom sector in Pakistan.
A total of 105 foreign and domestic companies
keenly competed in open bidding for these licenses. All told, they
paid a hefty total of Rs14.453 billion as license fees. PTAs total
revenues from grant of various license fees now stand at Rs48.453
billion. Twelve of these companies were granted LDI licenses, 73 for
FLL services, and 20 for WLL services. Pakistan had started its
telecom deregulation policy in 2003 to end the monopoly of the
state-owned Pakistan Telecommunication Company Ltd (PTCL). The entry
of LL operators in 14 telecom regions and LDI operations will
completely put an end to PTCL's monopoly over basic telephony, said
PTA Chairman, Shahzada Alam Malik.
According to data provided by the PTA, the number
of cell phone users is increasing tremendously in the current fiscal
year compared to previous fiscal year, which ended on June 30, 2004.
In financial year 2003-04, only 2.5 million people were using mobile
phones in Pakistan.
Official figures indicate that till the end of the
last year, the Mobilink was on the top of the list of four existing
cellular companies, as it has the biggest subscriber base. Till
October 31, 2004, the company had some 4.23 million subscribers in
Pakistan, U-fone had 1.61 million users, Instaphone 0.56 million
subscribers while Paktel has just 0.35 million.
Pakistan's state telecommunications' regulator is
projecting investment of $5 billion to $8 billion in the country's
cellular and fixed-line phone network over the next five years, fueled
by the industry's recent deregulation.
PTA estimates that expansion in telecom sector is
likely to create 370,000 new jobs, while the telecom sector's share of
gross domestic product is likely to increase to 3 percent from 1.7
percent in the fiscal year ended June 30. It didn't say how much it
expects phone networks to expand in the next five years.
Pakistan's telecom deregulation has attracted many
private players to the sector which consequently bringing an end to
PTCL's monopoly in the country. Norway's Telenor ASA (TELN) has
already started operations with attractive products and services to
grab the market share.
The government also announced plans recently to
sell a strategic 26 percent stake, along with management control in
Pakistan Telecommunication Co. Ltd (PTCL) as an integrated company to
maximize its value and generate international interest.
Since deregulation, cellular phone subscriptions
have been growing robustly. There were 6.5 million subscribers in
September this year, from 2.4 million at the end of 2003. Pakistan's
teledensity reached 2.9 percent in the last fiscal year from 2.2
percent in 2000. The authority said another 118 licenses were issued
for card payphones services in the last fiscal year, six for audio
telephone services and five for non-voice network communication
Shahzada Alam, Chairman PTA said in his annual
review that he was conscious that despite we have achieved key
milestones this year, there is much more to be done. Any issues which
are likely to emerge after liberalization of the telecom services will
be appropriately handled.
Foreign direct investment of $207.1 million came
into the sector in the last fiscal year, from $6.1 million in the
previous year, through the sale of two cellular licenses. Separately,
the authority generated Rs30 billion through initial license fees for
mobile services, long distance international services, local loops and
wireless local loops. In all, the authority has awarded 33 companies
84 local loop and 12 long distance licenses, while it issued 108
licenses to 20 companies for wireless telephone services.
Foreign direct private investment has started
flowing into Pakistan's hot and huge telecom and IT sector with the
amount projected at more than $2 billion this year. But, telecom
industry watchers say "it will not be surprising if the
investment goes up to $3 billion."
Investment, according to immediate plans in
cellular companies is estimated at $600 to 800 million, besides $1, 09
million in Fixed Local Loop (FLL), and $240 million in Long Distance
and International (LDI) projects. Other operators are fine-tuning
their investment plans and installation schedules. In that case, it
will triple the overall FDI investment in all sectors that had totaled
just $1.0 billion in 2004.
The deregulation of the telecom sector is designed
to provide increased service choice to customers at competitive rates,
increased teledensity and expanded telecom infrastructure,
particularly in the un-served and under-served areas.
The scope of investment is also evident from the
fact that in this country of 159 million, teledensity is as low as 2.8
per cent, compared to an eleven percent average for Asia. Out of
50,000 villages, 31,000 villages are still without telecom facilities
In view of Pakistan's location and linkages to
Gulf-Middle East in the West and Central Asia in the north, its
targeted GDP growth of 6.6 percent for 2005 and 8.0 percent for 2007,
the teledensity should have been eight to 10 percent.
Paktel, Pakistan's pioneering mobile operator has
come forward to help the victims from one of the worst natural
calamities of human history — the tsunami tragedy that has claimed
more than 80,000 lives in South Asia and Africa, the sources said
here. According to officials, Paktel would donate the entire income
from its SMS services for the period December 31st, 2004 to January 1,
2005 in the cause.
The CEO of a leading mobile phone company in
Pakistan feels that the boom in the cellular industry was about to
reach saturation point in the country.
Outlining the overall picture of the cellular
industry, he observed in an exclusive interview that like elsewhere
around the world the local market was in the grip of mobile phone
craze which is reflected in the overwhelming growth. The cell phone
connectivity has already taken over the landline users by crossing 8
million mark and the overall cellular phone domain is going to attain
the level of 10 million which be believes may be a saturation point in
view of the market depth.
The existing four mobile companies have already
grab the major share of the market while two more licenses issued by
the government to new companies will obviously accelerate the pace of
new connections. Among the new arrivals i.e. Al-Warid and Telenor, the
later one which is a major telecommunication company from Norway has
also started full-fledged operations in Pakistan with an impressive
investment worth around a billion dollar in this country.
The mobile phone users would be the ultimate
beneficiary of the on going cut-throat competition among the six
players resulting in improved and better services with declining call
To a question about the contribution of the
cellular industry towards government revenues, he said that every call
made through cell phone is subject to central excise duty and other
taxes which contribute significantly to the exchequer. He said that a
culture of willing tax payer has yet to develop in this country and
till that time the government has no option but to collect taxes
through such utility services. Without revenue how the government
would carry out its business, hence justified the existing levy of
taxes collected through telecom sector. He, however, suggested that
heavy license fees charged by the government for issuing licenses to
new companies may prove counter-productive towards a sustainable
growth of the industry. He cited examples of various eventualities of
bankruptcy of mobile phone companies due to heavy government charges
in different countries. Rationale and affordability is a pre-requisite
to enable these companies to carry on their business. Lost of economic
interest results in collapse of any business.
Non-resident Pakistanis were yet another factor who
can bring a revolution by bringing back their money and technology
they acquired during their stay abroad. It is unfortunate that usually
they find it difficult to initiate a business here due to unfriendly
and arrogance of the people occupying the key positions in the system.
The non-resident Pakistanis have a great zeal to get settled with
their investment in the telecom sector of Pakistan.
However, they would not come back unless the
rampant corruption which is a major hurdle in the way of smooth
sailing was effectively weeded out of the society. In the existing
system things cannot move unless you are willing to please the greedy
ones or having a strong "Sifarish" recommendation even for a
genuine work. In fact, a strongly developed culture based on social,
human and economic values with a focus to help out people purely on
merits is the key of success in the developed economies like Europe
and the United States. Unfortunately, we are missing such an
environment here in our country.
The hassles created by the corrupt officials are
the real irritants and bottlenecks deterring foreign investment in our
country. As a matter of fact, majority of the overseas Pakistanis have
a great love for their homeland and they really want to bring huge
investment in this country, however, the discouraging attitude of the
corrupt elements forces them to stay away from Pakistan. It is amazing
to note that attractive incentives are offered to attract foreign
investment by the governments. To tell you the truth, the overseas
Pakistanis could prove a great asset for this country and can bring
investment which could be suffice to overcome the entire financial
constraints of the economy provided they are protected from the hands
of the cheats and the corrupts who are out to distort the image of
this country only for a few bugs of bribe.
The present telecom policy has, however, produced
positive results which have changed the course of telecom history in
The robust growth witnessed in the telecom sector
during last three years was of course unparallel in the history of
this country for which the credit goes to the economic managers for
attracting investment in the telecom sector.
The present telecom policy evolved by the
government of the day has brushed aside all those barriers depriving
people of the easy access to telephone facility which is not a luxury
or status symbol any more. By and large growth of the telecom sector
is a positive sign and may help achieving the economic and social
targets of providing an improved living standard to the people at the
grass root level.
The telecom industry, having enormous economic
potential, can go a long way to give a real strength to the national
economy besides bringing positive change in social and economic
behavior of the people. This industry requires a subtle handling
especially in terms of levying taxes or other levies.
The companies operating in Pakistan will continue
to generate revenue for the government kitty provided they were
allowed to sustain and flourish by providing level playing field.
PTA has recently issued licenses against heavy
amount of fee charged from the companies. This attitude might
discourage more investment in this sector. For example many telecom
companies financially collapsed in Europe due to exorbitant charges of
3G, which they had to pay to their respective governments. It is in
the interest of the economy that such eventualities are not allowed to
take place in our country. It is recommended that PTA after receiving
half of the total fee should revert to Revenue Shuttering for
receiving the remaining amount of the fee. The growth of the telecom
sector is reflected in the fact that three lakh connections were sold
in 10 years in the past.
At present only one company was selling three lakh
connections in just one month which gives glimpses of the turnaround
The advanced technology of CDMA has already
established on sound footings in many countries in the region. While
PTA has issued licenses for CDMA only a few month back. However,
several new companies are launching their projects in Pakistan also.
There is a need for reduction in the tax fee on the mobile connections
to allow the growth of the market which would ultimately pay back to
the exchequer in the long run besides creating a culture which helps
developing economy on a much faster speed.
In case of Pakistan, it is the time for the
decision makers to initiate with attractive incentives to attract
investment in the field of manufacturing of the mobile handset within
the country. If the idea of setting up plants by the leading companies
like Nokia materializes it would not only add to our foreign exchange
earnings but place Pakistan on the map of the world telecom industry
as well. The enormous economic activity generated by the cellular
industry can play an important role in poverty alleviation programme
which is on top of the agenda of the present government.
Steps are required to immediately address the
problems of the potential investors without going into complexities
and formalities. Such helping out behavior is of vital importance to
rebuild the confidence of the potential overseas investors.
By and large, the investment climate is improving
gradually due to friendly policies of the government in general and
PTA in particular. However, there is a lot of room for improvement
especially to check the blackmailing attitude of various
We have to strike at all these social ills
effectively so that the enormous resources available within the
country can be transformed into progress and prosperity of the people
of this country.
Cellular phone which has already taken over 1.5
billion people on earth by storm is poised to rule over the life of
every civilized individual in the years to come. According to an
assessment, the cellular technology is steadily heading to replace
computers, web-cameras, email, telephone and fax besides absorbing
audio-visual capability of radio and the television.
The story does not comes to an end, cell phone is
also going to cater to the needs of the readers by offering books and
magazines and movies of the choice on the mini screen. The industry
promoters claim that nearly 1.5 billion of the 7 billion population of
the world already owns a mobile phone.
In Pakistan, the cellular phones were introduced in
early 90s. The official figures reveals that the number of mobile
phone users was even less than 200,000 in 1999 obviously because of
high price which was beyond the reach of the common man. At that time
owning of a handset was considered as a status symbol and people used
to display large size of mobile phone by demonstrating the long
antennas of the mobile phone in their hands. The drastic cut in prices
and improved version of the services attracted the people so rapidly
that the number of users jumped to 1.2 million in 2002 and according
to latest reports it has already surpassed the landline subscribers
and is poised to hit the milestone of 10 million in next two to three
Recently, with the addition of two more companies
which have also entered the arena is likely to give way to a
cut-throat competition in terms of call charges, connection charges
and innovative customer services. The cut-throat competition might
reduce the income of the cellular companies yet the subscribers would
obviously be the real beneficiary of the competition. Free roaming
services and free connections are the glaring examples of the hot
competition among the cellular companies to attract the subscribers.
According to PTA, the attractive products and services helped to add
some 400,000 new connections only in two days, which speaks about
growth potential of this industry in Pakistan.
Most of the cellular phone companies have focused
on urban centers while a huge market in the rural areas where 80
percent of the population dwells was yet to be explored.
Pakistan is an agriculture-based country and it is
the rural population which plays the role of a spinal cord in the
economy of this country. It is hoped that introduction of cellular
phone culture would significantly help the growers to exactly know the
current market rates so that they could get the actual prices of their
hard earned crops. Currently, due to lack of communication, the middle
man takes advantage of communication gap between farm and the mark.
Hopefully, the negative role of the middleman will be phased out with
the spread of the cellular technology in the rural areas in the days