CELL PHONE INDUSTRY IN PAKISTAN
The industry has reached to the level of take-off where investors are keen to invest
By MUSTAFA KAMAL PASHA
May 09 - 15, 2005
Beginning of new mobile phone service by Al-Warid of UAE would mark the completion of the deregulation of cellular mobile phone sector process in Pakistan. With that, new phase of development would start in the cell phone industry in Pakistan..
It goes beyond saying that the beginning of cell phone service by the fifth company (Telenor) has already revolutionized the outlook and functioning of cell phone industry in Pakistan. There are 9.732 million cell phone subscribers in Pakistan
The idea of award of two more licenses to (Al-Warid & Telenor) was personal initiative of Chairman PTA, Maj. General (Retd) Shahzada Alam Malik.
The idea of additional licensing was not appreciated on the pretext of commercial viability of granting new licenses. It was generally believed that mobile phone subscribers' level had reached stagnancy and there is no further growth expected in this sector. It was projected that the companies already operating (Mobilink, Ufone, Instafone & Paktel) in mobile sector were sufficient to cater the requirement of the country. The Chairman PTA was opposed to that argument and pleaded that mobile subscribers' which stood at 3.2m in 1999 can conveniently be increased to three to four times if the tariff structure of the companies was put to acid test of perfect competition. The experts at all decision-making levels thought that Chairman PTA assessment was over optimistic. It took considerable time for Chairman PTA to convince the decision makers, and let his idea be a reality. His idea has become a reality with a subscriber base of 9.732 million.
Presently four old companies including Mobilink, Ufone, Paktel and Instaphone and one new i.e. Telenor are providing cellular services in Pakistan. Mobilink is enjoying the status of Significant Market Power (SMP), with 6.019 million subscribers and Ufone with 2.147 million of subscribers is number two in the row. Paktel has recently switched over from AMS to GSM system and is striving hard to take/capture his market share. Insta has 0.453 million, Paktel (AMS) 0.337 million and Paktel GSM 0.448 million subscribers. With a total of 9.732 million cellular mobile phone subscribers market is growing at a miraculous rate. General's idea was not over optimistic rather conservative. It has prevailed, and geared up the growth process.
CELLULAR SUBSCRIBERS TILL 31 MARCH 2005
In January 2004, first-ever Mobile Phone Policy was announced to lay grounds for granting additional licensing and enhancing competition in the mobile phone industry in Pakistan. The PTA under the dynamism of Chairman Gen Shahzada Alam Malik had already done their homework and made necessary arrangements to award two cellular mobile phone licenses through open bidding and outcry method.
Expression of Interests (EoI's) were invited till January 21, 2004. On February, 11th 2004, a conference of all interested parties was called to interact and educate them about the relevant issues. Their queries were taken up by the Authority and answered well. Out of 33 parties who had submitted their EOIs, 16 were multinational and 17 from Pakistan. Eleven companies were declared eligible to participate in the bidding process. On April 15, 2004 two licenses worth $291 million each were awarded through open bidding auction in Islamabad. One of the winner (Space Telecom) could not deposit the required amount of auction money well in time so the third highest bidder was asked to match and get the license. Al-Warid from UAE and Telenor from Norway were awarded licenses to enter into the market and start the cell services in Pakistan.
EXPECTED INVESTMENT BY MAJOR COMPANIES (2004-05)
(US $ MILLION)
These licenses are technology neutral and for 15 years. Policy review period is five years. Rollout obligations include, coverage of 70pc tehsil headquarters in four years (at least 10 percent in each province), performance bond worth $30 million to ensure compliance with rollout obligations.
DRIVERS BOOSTING TELECOM GROWTH
•Telecom Deregulation & Issuance of Cellular Mobile Licenses
•Reduction in Taxes & Duties
•One window regular facility (Placing FAB under PTA)
•Simple Liberalizing Regime
•CPP regime for Cellular Mobile Subscribers
•Level Playing Field Royalties
•Level Playing Field for All Operators
•Out of Court Settlement of cases with Operators
The way auction was conducted, it was really unprecedented in the history of Pakistan. The terms and conditions offered to the new entrants have also been made mandatory for all the players in the cell phone market. It means old mobile phone operators would have to follow the terms and conditions, applicable for new operators, after the renewal of their licenses. The existing license holders are being given the option to immediately adopt to the new policy conditions even for the remaining term of their existing licenses, so that all mobile licensees operate under the same policy parameters with immediate effect. Certain benefits are being made available if existing licensees immediately opt to the new policy.
The vision of Gen Shahzada Alam Malik, coupled with the progressive way of implementing the policy by PTA, has starting bearing results in form of accelerated activities in the sector. Induction of two new operators had ignited the price war among the operators, who were already in the market. Launch of service by Telenor and announcements of commencements of service date by Al-Warid, have fuelled this fire in the market. Price war seems to be concluded and after the launch of completion of launch off the service by the Telenor and Al-Warid a new war for the provisioning of best quality service to the subscribers, would reign the market. Creation of perfectly competitive regime for the ultimate benefits of the end users and establishment of level playing field for the benefits of investors, by the PTA has revolutionized the cell phone industry. The vision of Gen Shahzada Alam Malik has prevailed and his dream of making Pakistan a hub of telecom activities has become a ground reality.
Beginning of the next phase and ushering a new era in the cell phone industry, is marked with stabilization of tariff structure and improved quality of service with availability of high quality value-added services to the common man at affordable prices. Cell phone industry has already poised to absorb a big chunk of investment in local currency and foreign exchange. A sizeable foreign exchange investment has already been made and investment worth billion of rupees is taking place. Competition in the telecom job market is gearing up day by day. Right from lineman, wire technician to a level of engineer, demand for HR is increasing rapidly. Vendors' industry is no exception to it. According to the various market surveys, an investment worth $5 billion is expected to be made within five years. It would generate more than 2 million job opportunities in the telecom industry. Government earnings in the form of various taxes are over than the said calculation.
The cell phone industry has reached to the level of take-off and entered into a new phase where investors are keen to invest and subscribers are happy to avail the quality services at reasonably competitive prices. Credit goes to the regulator who has created conductive and investor and user friendly regime in Pakistan.