The mobile phone has depicted the greatest growth trend in the telecom sector of Pakistan
By SYED M. ASLAM
Feb 10 - 23, 2003
Pakistan reels from a low telephone density way below the average in the region. The fixed-line teledensity in the country is 2.6 per cent which is much lower than 8.6 per cent in the Asia Pacific. There are around 3.5 million fixed telephone lines in a population of over 140 million.
Bad as it is, the low telephone penetration has resulted in increasing demand for mobile telephone in the country the numbers of whose users have registered an exponential growth since 2000, But the number of mobile phone users in the country has registered over five-fold increase from just over 300,000 since 2000 to around 1.8 million at present. The introduction of CPP (Calling Party Pays) by the Pakistan Telecommunication Authority (PTA) has served as a catalyst for the growth of mobile phone in the country. The most visible impact is that first-time users makeup over half of the total subscribers of Ufone, (one of the four mobile companies operating in the country which entered the market in 2001).
Besides the CPP, the growing competition forcing the mobile operators to offer low priced packages also played an important role to fuel the demand for the mobile phones. Today the four mobile operators are trying to attract the potential subscribers by offering free outgoing calls during the non-peak hours and pre-paid cards which remain valid to receive incoming calls even if expired.
The average cost of using the mobile phones has thus been reduced significantly. The installation charges have been reduced and pre-paid cards have abolished the security deposit requirement by the operators. In addition, there has been an overall reduction in tariffs depending on the kind of package one choose to buy. Getting a mobile connection has become a much easier and less costly process.
The telecommunication sector of Pakistan is in the process of transition. Though the planned privatization of the Pakistan Telecommunication Company Limited has not fallen through its deregulation is in the process. According to the Minister for State and Information Technology, Muhammad Raza Hayat Hiraj the telecom deregulation policy will be implemented in next three months. One of the major beneficiary of the deregulation will be the mobile phone as the government intends to offer at least two new cellular licenses. The fixed-line telephone, both local calls as well as long distance and internationals network, will also be deregulated and it is proposed to grant 3 new nation-wide licenses for Long Distance and International fixed line telecommunications and up to three new local loop fixed line telecommunications licenses per PTCL region.
The low teledensity and penetration of phones — both fixed-line and cellular — in Pakistan should better be viewed in the context of its telecommunication infrastructure which is nevertheless large. The fact that the country reels from low telephone penetration highlights the immense potential that the sector offers to the private sector investment. The deregulation of the sector, thus, is seen by many as a great opportunity to attract mega dollars in the telecommunication sector. The minister for state said that 'the government was expecting a minimum of $ 15 billion." He also dispelled the impression that the entry of new telecom operators would adversely affect the PTCL's revenues saying that the state-owned company would still be enjoy the bulk of the business. The PTCL earned a net profit of over Rs 19 billion in 2001-02 compared to Rs 18 billion in 2000-01. PTCL's total gross revenue totaled about Rs 67 billion of which over Rs 47 billion came from the domestic market while the remaining Rs 19.5 billion came from the overseas. Corporate customers contributed nearly 70 per cent to the PTCL's revenue last year while the remaining 30% came from the general public.
If the past trends are any indication, the entrance of two new cellular operators in the near future will further heat up the competition the benefits of which would be filtered down to the subscribers. The introduction of the CPP regime and the entry of the new operator, the Ufone, a fully owned subsidiary of the PTCL, two years ago served as a catalyst for the growth of mobile phone use and the entrance of new operators is expected to once again heat up the competition resulting in substantial increase in the mobile phone users in the country.
The telecommunication sector in Pakistan has registered a robust growth in last two years in general and last one year in particular. The present government is giving the telecommunication the attention which it deserves and the entry of new cellular and fixed-line as planned would help improve the overall quality of service. In addition, the emergence of increased competition in the cellular sector and in the fixed-line telephone for the first time would result in greater value-added services in next few years.
Most of all the deregulation will help attract fresh private investment in the telecom sector, particularly the foreign joint ventures, would help facilitate induction of cutting-edge technology. The public-private partnership would also help improve efficiency and expertise. The deregulation will in no way diminish the role of the PTCL as the most dominant telecommunication carrier in the country as it has a fairly extensive network in the major urban areas and has also worked to improve rural communications as the only telecommunication system.
The deregulation of the PTCL in Pakistan will help the local telecom industry attract private investment, both local and foreign as well as joint ventures. It pumped a huge $ 1,445 billion in the global economy two years ago. The revenue from telecom services and equipment worldwide was expected to touch record $ 1,110 billion in 2001, $ 190 billion more than it was in 2000. Similarly, the sales of telecom equipment worldwide was projected to increase from $ 290 billion in 2000 to $ 335 billion in 2001.
The projected growth, however, failed to come in the aftermath of 9/11 and the bankruptcy of global telecom giant WorldCom. However, despite the setback the telecom sector is expected to grow in the years to come, particularly in countries like Pakistan reeling from low teledensity and growing demand to get, and remain, connected. The affect of the contemporary wired world is having a spillover affect on Pakistan.
As mentioned earlier the mobile phone has depicted the greatest growth trend in the telecom sector of Pakistan. Though the base of mobile phone still remains low in terms of the ratio of population, what is evident is that it has increased at a much faster pace than the fixed-line telephone population in the country. The growing demand for mobile phone in the country is primarily fueled by the convenience and easy access, it is associated with and also on the overall cost of using it in last two years.
In addition, the mobile phone should be viewed as one of the primary enabler of creating an IT culture in the country. Mobile phones today are no more mere voice carrying devices but are being used increasingly as data carrier, Internet tool, etc., etc. mobile phones are used today to send and receive data, picture, information, net surfing, etc. The increased used of mobile phones, thus, translates into increasing the share of Information Communication Technologies (ICTs) which is part of the services sector.
As is, the share of the ICTs in the service sector in the GDP of Pakistan remains a low 3.5 per cent. Pakistan, thus, has failed to benefit from the ICTs to give a needed boost to increase the share of services sector in the GDP. This is all the more important as compared to many other sectors, the ICTs is a less capital intensive sector and its primary raw material is the human resources, which we have in abundance here in Pakistan. The ICTs have helped pushed the share of services sector in almost all developed economies of the world. For instance, services sector is contributing around 80 per cent to the GDP of the USA, a good 30 per cent of which is coming from the ICTs.
The ICTs can play a similar role to increase the share of the services sector in the GDP here in Pakistan as well. A one per cent increase in the ICT means between $ 1-5 billion increase in the GDP. However, access to reliable, dependent and inexpensive voice and data infrastructure is a must to help achieve this goal.
True that the share of ICTs in the services sector in the GDP would happen overnight — it would and come with time provided the policy makers and the entrepreneurs start realizing its importance. Investing in services and ICT sector is thus imperative to help boost the Pakistani economy as they need less capital investment and more human investment, which we have in abundance here. Dependable, reliable and inexpensive telephone access, both fixed-line and digital, is thus important to usher a real IT revolution in the country.
Just as the IT is an enabler, the telecommunication is enabler's enabler. This is so as without a reliable, dependable and state-of-the-art telecommunication infrastructure the services and the ICT sector would fail to improve their share in the GDP. The low telephone penetration is the major hindrance but this apparent weakness can our very strength for attracting the investment required to induct latest telecom technology to offer the needed value-added services. The proposed induction of the two private cellular phone as well as the fixed-line operators in the months to come shows the keen interest of the private sector investors to reap the benefits that only a virgin market like Pakistan can offer. Deregulation differs from privatization in many ways — privatization means transfer of entire PTCL infrastructure, administration and services of the PTCL, deregulation will allow the private sector get involved in many projects which though heavily capital intensive allow fair returns.
Increased used of mobile telephone is also an indicator of how well connected certain country of society is. It is also a barometer of the strength of a national economy, particularly the potential for the trade, financial and economic activities within a country. The flow of voice and data traffic is also seen by many as a barometer of a how strong a national economy is.
As stated earlier, the latest mobile phones are not a mere voice communicator but are built to send or receive data anywhere in the world. The latest generation of mobile phones are no more mobile phones they are built to perform the services of a hand-held lap-top on the go. One can now send or receive a message, surf the web, chat on line, order merchandise from a location across the globe, make and seal a business deal in matter of seconds. In bits and pieces the latest mobile technologies have started filtering down their benefits to the subscribers in Pakistan who can now send a message anywhere in the world and on a limited scale the use of Internet through mobile is also taking place.
However, much remains to be done to remain on top of these developments taking place in the developed world so that we can at least benefit from the latest technologies at least in part. The PTCL's infrastructure still much remains geared towards voice to meet the growing flow of data traffic. World standard show that 70 per cent of the revenues of the telecom companies in the developed world is coming from voice — only services while the remaining 30 per cent is coming from the data-related services. In PTCL's case, however, less than 5 per cent of the revenue is coming from the data service while the rest is coming from voice services, about one-third from international calls and two-third from domestic calls, voice and traffic.
The share of data services in PTCL's revenue thus remains much below the globally accepted standard and even increased internet and mobile contribute a megligible share in the overall earnings of the PTCL. Without offering the value-added data services the PTCL's revenue would keep coming from the voice-related services instead of data-related services which offer greater potential of earnings for the company. It is thus imperative for the PTCL to make the required changes in the infrastructure to meet growing demand for data-related services. The planned deregulation of the PTCL should look at creation, a separate set-up to provide reliable and efficient data collection, storage and transfer services. With the induction of private sector the creation of a separate data department in the PTCL should now be taken over by the private sector. This help PTCL to increase its revenue bringing it at par with the global standards to supplement its income from data service.
Just imagine how the availability of a dependable, reliable, inexpensive and value-added data services would benefit the economy by turning mobile phones into hand-held PCs surfing the net in search of business, trade, opportunities and pleasure. While much has changed much still remains to be changed to exploit the benefits of the creation of real IT culture in the country.
The economic realities of a developing economy like Pakistan make it imperative to follow the model of 'shared resources.' This is particularly true as Pakistan reels from a low per capita income of around $ 450. The low per capita income in turn has resulted in low Purchasing Power Parity (PPP). To better understand the affect of PPP let's highlight the example of the US where average retail internet rate per month is $ 20, and that too for unlimited access, and the per capita income is $ 20,000. On the other hand, users in Pakistan are paying highly un-proportionate internet prices compared to the per capita income.
Without lowering the telecommunication tariffs — be it monthly line rent on fixed-phone, local, domestic or international calls, mobile phone, internet, etc., the economic realities and the low per capita income would keep depriving the mainstream population to make use of these and other services.
Pakistan has put its very own satellite (PAKSAT) into orbit recently. The satellite is in would serve strategic and commercial interests of Pakistan and would be capable of providing a wide range of basic and advanced communications and broadcasting services.
It is time for the PTCL to invest in data services system which thus far remains primarily voice-based to be better in tune with the changing demands and too for its own good. Telecom operators worldwide have created a separate entity to better meet the growing demand for data services in addition to the traditional voice-base business, the PTCL too should no more remains indifferent to the growing demand for data service and the immense revenue potential that it offers.
The mobile phones would revolutionalise the way we do business here in Pakistan, like they have already done in the developed world. They have, and will, replace the traditional ways of doing business bringing any and all inherent advantages.
The revamping of the PTCL should be seen as a beginning to usher in a new era of increased data flow to be in tune with the global trends that show revenues of the telecommunications operators from voice service is on a decline while the revenues from data service is on the rise.
Trends also show that subsidiaries of many a national telecommunication collaborate with experienced carriers to share the knowledge to facilitate the transfer of technology. This in turn has helped them in updating their infrastructure to offer quality services to their customers to fuel the growth of ICTs. PTCL should also benefit from these global experiences.
The sharp growth in the number of mobile phone users during last two years, including 100 per cent increase alone last year, highlights the potential that this particular sector of the telecom offers. What makes telecommunication system all the more important is that it is not only essential for promoting economic, trade, commercial and information exchanges but is also imperative to foster national integration as well as increasing regional and global trade.
In the wired world of today the importance of mobile phone can hardly be over-emphasised. The convenience of getting connected to the world- close and far- offer immense benefits; social, business or otherwise, has turned the world into a real global village where distance no more matters. The rising demand of mobile phones in the country and the deregulation of the telecom sector should be expected to fuel economic growth offering many intangible benefits for the country.
The easy access to communicate and send and receive data through the mobile phones will require a modern telecom infrastructure to facilitate the growing traffic. The planned deregulation of the PTCL and the emerging public-private partnerships would help induct latest technology to offer more value-added services to the communication hungry people of Pakistan. We will have to wait for the heating up of competition in the mobile phones to further lower the prices to better reflect the Purchasing Power Parity in Pakistan.