TELECOM REVOLUTION IN PAKISTAN

Much has yet to come

From SHAMIM AHMED RIZVI,
 Islamabad

May 09 - 15, 2005

Telecom sector in Pakistan has witnessed a robust growth which mainly attributable to the participation of the private sector during last few years.

According to Chairman Pakistan Telecommunication Authority (PTA), the cell phone population was multiplying by five hundred thousand every month and it is estimated to pass over 40 million mark in next five years.

The Minister for Information Technology, Awais Ahmad Khan Leghari while speaking over phenomenal growth of telecom sector at a seminar last week expressed his confidence that the vibrant telecom sector would attract 4 to 5 billion dollars fresh investment besides creating additional 15,000-20,000 jobs during next 4-5 years.

The cellular market at present dominated by six companies which include Egypt-based Orascoms Mobilink, Instaphone and Paktel that have partnership between a Pakistani group and Millicom International Cellular of Sweden, and state-owned Ufone is already operating here and a new entry of Norway based, Telenor. The Mobilink, owing to its attractive customer packages, has succeeded to grab a major share of the market with more than 3 million subscribers to its credit. 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 Fredbrik 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.

PTA chairman maintained that the annual increase in the number of mobile phones is expected to be around 6 million in the backdrop of an expected tough competition between the cell phone operators. To a question about potential of investment in cell phones sector, the chief regulator of telecom sector said that the companies can make about $400 million to $500 million investment per year. He said that the Telenor has pledged to make $1 billion investment in Pakistan for three to five years. Warid, Ufone, Mobilink, Instaphone and Paktel are also making investment for expansion.

"All the players in mobile phones in Pakistan are expected to expand in future to capture untapped clientele, to expand their operations and meet the growing demand of new cell phones' connection in future".

He further said that the foreign direct investment is considered an important source of economic growth in this global village. He said that the authority has created a friendly environment for investors and also provided a number of incentives in all the sectors of telecommunications. "We are sure that 5 to 6 billion dollars foreign direct investment (FDI) is expected in the cellular phones and fixed phony in next three to five years," said the PTA chairman.

When asked as to what could be the scenario after the privatization of PTCL, he said that a tough competition is expected to emerge between the telecom operators in the country. Upcoming competition among the telecom players would ensure the survival of the fittest, encourage quality in service, expansion in the network, and facilitation of the subscribers. Regarding increasing regulatory responsibility of the authority amid fast-growing telecom sector, the PTA Chairman said: "We are increasing our capacity by hiring professionals to meet the challenge of regulating the fast-growing overall telecom sector. He said that the PTA will not tolerate any inconvenience to the telecom customers and come hard on the companies, giving poor service and below the prescribed standards."

The mobile sector has enhanced the profits of the Pakistan Telecommunication Company Ltd. (PTCL) during the nine months ended March 31, 2005, analysts said. "The mobile sector has witnessed tremendous growth during 9M-FY05 where the number of mobile subscribers doubled from June 2004 figures," one analyst of Capital One Research said.

Keeping in view the ongoing expansion in mobile sector, we expect the revenue from this segment would augment the bottom line in ensuring fiscals, said an analyst and added: "However, the price competition among the mobile phone operators would impact the revenue of the company in the long run.

There is no doubt that as a result of the aggressive strategy of the government, the IT and telecom sector has made rapid progress during the last few years. Use of computer/Internet has grown with phenomenal speed due to reduction in bandwidth rates and spread of the facility in different regions of the country. Similarly, the demand for both fixed and mobile phones has grown rapidly. However, it is a fact that we had almost become users of consumers of modern technologies because of lack of necessary research and development activities. Despite repeated claims of the government, Pakistan could not achieve any significant progress in software development whereas there are no plans in sight for local manufacturing or development of computers and their accessories. Same is the case with the communication technology as we import all sorts of phones and accessories. Thanks to the increased budgetary allocations for the sector, the country today has a few quality institutions producing IT and telecom graduates but we are unable to absorb them. It shows that there is something seriously wrong with the approach and it needs to be rectified at the soonest to reap the benefits of modern technologies.

Currently, the issue of intellectual property right is a major hurdle in the way of software business in the country. It should, therefore, be resolved soon to encourage software developers.

Concrete steps are needed to give a practical shape to the concept of E-government which has the potential to give a kick-start to IT business to the grass root level. The implementation, however, calls for transparency in government policies and actions.