TELECOM REGISTERS 50 PERCENT GROWTH IN 2006-07
SHAMIM AHMED RIZVI,
Bureau Chief, Islamabad
July 16 - 22, 2007
Prudent telecom policies and a helpful regulatory environment has enabled the telecom sector to grow at an astounding pace in Pakistan. The growth momentum during the outgoing financial year has been phenomenal establishing IT industry as the fastest growing industry of Pakistan.
The federal Minister for Information technology and telecommunication Awais Ahmed Khan Leghari, while speaking at a seminar in Islamabad said that IT was undergoing a revolution in Pakistan. He said that the astounding success made by the IT industry in Pakistan during the last few years has been acknowledged internationally attracting foreign companies towards Pakistan. The Minister appreciated the role played by foreign companies in the rapid expansion of IT industry who came to Pakistan with substantial investment. The environment would further help the companies to expand their network to rural areas as well in the coming years. In this perspective, the performance of the telecom regulator and the sector is exemplary. The success story of Pakistan's telecom sector is quoted as a role model for other emerging markets, Mr. Leghari added.
While talking to Page, the Director General Pakistan Telecommunication Authority said that the industry has registered a growth of 50 percent in the financial year 2006-07 as more and more western firms are turning towards Pakistan for IT enabled services to cut costs and raise profits. Officials and industry players believe the rising export figures indicate Pakistan is fast catching up with rapidly developing software industry and at such rate, the country's global IT revenue may touch $ 9 billion by the end of 2009-10. "If you count such numbers independently, which are not documented, these will be far ahead and may be more than double the exports registered every year", he said adding that the latest data complied by the State Bank of Pakistan suggested software exports and service outsourcing reached $ 72 million during 2005-06 and could hit $ 80 million or above by the close of fiscal year on June 30. "It shows software export growth at 50 percent", "We managed to surpass growth rate of 2004-05 as in that year exports of software and IT enabled services reached $ 48.5 million against $ 32.88 million during 2003-04î, he added.
FASTEST GROWING SECTOR
The IT industry has emerged as the fastest growing sector this fiscal year, mainly supported by the phenomenal rise in call centers' operations during the last two years. More than 140 centers are currently operating mainly in Lahore, Karachi, and Islamabad offering employment to around 5,000 people. Defined as a unit, the call centers have adequate telecom facilities, trained manpower and access to database providing information to customers. The advancement in telecom technology has made it possible that the person handling a call could be anywhere provided that communication and interaction is properly handled. Growth in business from western companies has inspired local investors to explore new opportunities. Though Pakistan remains far behind India, operators believe they are on the right path now, the DG added.
It is widely believed that the regulatory environment providing a deregulated and free market with government intervention kept at the absolute minimum has been instrumental the far the rapid growth of this industry in Pakistan. Recently an international name in the IT field LIRNEASIA a study for the regulatory assessment of the Telecom Authorities in the six selected countries of Asia (Pakistan, Indonesia, Sri Lanka, India, Philippines and Thailand).
This study has rated the Telecom Regulatory Environment (TRE) of Pakistan as the best in the group of these six countries. Pakistan Telecommunication Authority (PTA), the regulator, has also been rated the best over its effective regulation in terms of market entry, interconnection, universal service and utilization of scarce resources.
Pakistan's telecom sector attracted US $ 1.9 billion during 2005-06 and was 54% of the total FDI in the country during the year. On the other hand, India's telecom sector attracted US$ 4.85 billion during the same period which was just 7.8% of the total FDI in India. Per capita (less privatisation proceeds) in telecom sector of Pakistan (US$4.4) is also much higher than India's US$ 0.02. Most of the investment in telecom sector of Pakistan being in the form of FDI is itself a confidence of investors on the regulatory environment in the country by virtue of well-resourced and empowered PTA with a strong leadership. The study has also appreciated PTA's strong role in telecom policy in the country. PTA's decisions have not been subject to litigation, appeal and reversal by the government unlike other countries in the group. The concerned and coherent regulatory actions of PTA have not only created such a Telecom Regulatory Environment in the country that has been rated best in region but also resulted in outstanding performance in terms of sector growth.
Currently, there are more than 60 million mobile and fixed subscribers which are almost 38% of the total population. And we have a population of over 156 million, if we exclude approximately 20% relatively extreme poor population and 25% children (population below the age of 8 years), we get a potential target market of about 90 million people. It is, however, widely argued that the poor are more inclined to avail telecom facility which in turn increased their income while reduces their business input costs, and in that a case potential target market increases to more than 94 million people. So far cellular mobile companies have grabbed almost 36 million active subscribers/people (adjusted for multiple SIM usage) which are only 40% of this potential target market. Similarly, the fixed line operators including WLL have covered only 7.5% of the potential population. This potential market is projected to cross 115 million by 2010 keeping in view the current pace of economic growth and expected increase in the purchasing power and population. The economy is expected to grow above 7% in the current fiscal year. Per capita income of Pakistan was US $ 847 in 2005-06 and it is expected that during 2006-07 it will reach US $ 920 which will increase the disposable income of people for more spending on telecom services amongst various others. Specially, a higher per capita income enables the consumers to buy a variety of products such as cellular phones thus indicating much economic potential in the economy of Pakistan. As about 66% of the population in Pakistan is living in rural areas, the scenario provides a huge market potential to WLL and Cellular operators due to their deployment.
Thus, higher economic growth, increased disposable income coupled with substantial investment in the Telecom sector would result in increasing the use of telecom network in the country. The telecom market in Pakistan has immense potential and there is a growing number of international telecom companies working in Pakistan to tap this potential and contribute to the current growth. It is expected that telecom companies would earn revenues of over RS./ 240 billion during 2006-07 and value addition in telecom sector would be over US$ 3 billion. Hence, there exists a promising scenario for the existing and new telecom entrants that get more reinforced with further expansion in the national economy.
In recent years, the tremendous growth was seen in the telecom subscribers especially in cellular mobile sector. Easy deployment of WLL and Cellular mobile, and their affordability have even captured the potential market of traditional fixed line. The recent growth in its cellular segment has also made it one of the most lucrative markets in the region. International companies have their stake in the telecom sector of Pakistan and are continuously investing to tap rest of the market potential. The telecom sector of Pakistan has great growth prospects keeping in view the demographic, social, economic technological and market dynamics.
CELL PHONES THRIVING SEGMENT
Cellular Mobile is the most thriving segment of Telecom. Four out of the five GSM operators have performed very well and the market has exhibited unprecedented growth over the last two years. By the end of February 07 the cellular subscribers were 52.9 million showing a growth of 112%. During 2005-06, on average monthly 1.8 million subscribers were added in the subscribers base and in the first 8 months of 20067-07, the average monthly addition was 2.3 million which is exemplary with respect to size of market. Cellular network is now available to more than 2.233 cities/towns/villages, which was just less than 1000 in 2005-06. This expansion has enabled the analysts to expect a considerable growth in the cellular subscribers in the nest two three years. With this expanded coverage, cellular operators can reach to potential market which was earlier untapped. Moreover, the operators have also realized the potential of rural areas and are making strategies for this segment of the population.
Considering the above factors, it is expected that the cellular subscribers would cross 61.5 million by the end of 2007 making above 2.2 million monthly average additions during the year. By the next two years, cellular operators would reach most of the population (currently cellular coverage is around c75% of population). Therefore, by the year 2009-10, the cellular subscribers would reach around 100 million making the cellular penetration 59 percent.