A decade-long step by the authority

Feb 14 - 20, 2005

To get telephone connection from the state-run telecommunication company in the past recording hectic fever, who used to monopolize in fixed telephony in Pakistan but lagged in bridging the wide digital divide among its 145 million people.

Until two years back the teledensity was 2.5 per 100 persons, one of the lowest in even the developing countries.

But now a swift revolution is in the offing making all available kinds of modern telecommunications accessible to a larger number of population as new entrants are about to launch their telephone exchanges parallel to Pakistan Telecommunication Company Limited (PTCL).

"We have granted 98 licenses to 31 private companies for local loop (LL) and 12 licenses to the companies for long distance international (LDI) in our latest auction," said Pakistan Telecommunication Authority (PTA) Zonal Director, Rizwan Ahmed Hydri.

The deregulation process took about a decade for PTA after coming into being through an Act to open Pakistani telecommunication sector to open competition.

The authorities started carrying structural shift about a decade ago when they created PTA to undertake freeing the telecom sector by providing level playing fields to all the local and international stakeholders.

"PTA was created to regulate the telecom sector and our major responsibilities are to ensure easy access (of telecom) to every body, quality of service and the choice so that subscribers could chose a company of their liking," said Hydri.

The first phase has come to an end with granting wireless local loop (WLL) in September, which would significantly facilitate the infrastructure deficient rural areas of Pakistan, that accounts for about 70 percent of the country.

"We expect the WLL subscriber base to reach 1.8 million and would contribute about Rs12 billion (US$201 million) for the telecom industry during the current fiscal," said Capital One Securities research analyst Faisal Shaji.

However, in order to meet the challenges, the state-owned PTCL has also geared up its functional and financial resources and on the back of its huge infrastructure and network is ready to embrace the new players.

"We don't think it (deregulation) as a threat to our company as it would significantly help grow the overall sector in the coming years," said PTCL, member Mashkoor Hussain. "We are an infrastructure-rich company with a large network from Karachi (south) to Peshawar (across north) and our backbone is fiber optic links."

Until 2003, the PTCL has increased its fixed phone connections to 4.46 million that increased the teledensity to about 3 per 100 persons. For the year 2004-05 an aggressive investment plans are expected to rise the existing teledensity to double.

"We have prepared for the upcoming competitions and allocated about Rs29 billion (US$487 million) for development work, which would add about four million new connections to our network this year," Hussain added.

Licensing fees for LL, WLL and LDI alone have earned Pakistan a sum of Rs14.5 billion (US$242 million). But a greater value come up with auctioning of two cell phone licenses to foreign companies in April last that cumulatively gave $582 million to Pakistan.

As an emerging cell phone market, Pakistan has witnessed an exponential growth of 106 percent to over five million subscribers as compared to 2.4 million in 2002-03.

Al-Warid Telecom of United Arab Emirates and Telenor ASA of Norway, the recipients of the new licensees will be soon joining the bandwagon.

"These (new) companies are expected to invest $150 million each in the infrastructure in the coming years that would generate a lot of economic activities," said the PTA official.

"The foreign investors' eagerness to enter the Pakistani telecom markets and operates in a deregulated environment had been evident in the cellular phone auction," commented Shaji.

The present four cell phone companies Paktel, Instaphone, Ufone and Mobilink are brining up new facilitative packages for their customers to maintain their market share which is largely dominated by Mobilink with 3.81 million customers.

Rationalization of the cell phone connection prices may result in overwhelming the fixed phone usage in the country. "We very much forecast that cell phones are likely to outnumber the fixed phone connections in the coming year because of increasing competition among the market players and the resultant cost effectiveness," Hydri added.