July 16 - 22, 2007

Two Arabian telecom firms- Qatar Telecom (Qtel) and Oman Telecommunications Co. (Omantel) are eyeing investment opportunities in Pakistan's telecoms market that has already the footmarks of strategic investors such as Orascom, Etisalat, Telenor, Abu Dhabi Group's Warid Telecom and Nortel Networks, the Canadian telecommunications equipment manufacturer. While Omantel is currently planning to enter into competition to purchase a share in a Pakistani telecom company, the Qtel has completed the purchase of a majority stake in Pakistan's Burraq Telecom. Another Arabian telecom firm Emirates has already bought a 26pc stake in Pakistan Telecommunications Co. Ltd. for $2.6 billion in 2005.

Gulf Arab telecom operators have been hunting for foreign assets in other Asian countries, as competition at home has witressed an increase in recent times. Today, Pakistan is a high-growth telecom market. According to a recent report of Business Monitor International (BMI), Pakistan is the second fastest mobile growth market across South and Southeast Asia after India. For the first time since BMI has started to produce Business Environment Rankings, comparing 14 Asia Pacific markets in terms of competitiveness and investor friendliness, Pakistan has fought its way out of the bottom two. It now lies in equal ninth position (with Indonesia), still ahead of Vietnam, but also above Thailand, China and the Philippines. If the Pakistan Telecommunication Authority (PTA) launches its 3G licensing programme this year, the country is expected to move further up the table. Last year, mobile operators invested US$2 billion, which is 54% of the total foreign direct investment in the country.

Omantel, the smallest telecom operator in the Gulf Arab region by market value, is expected to conclude the purchase of a majority stake in a Pakistan-based telecom operator this month. It is also in negotiations to buy a minority stake in a Gulf Arab telecom operator. Presently, the company is considering buying a Pakistani telecom company to expand outside its home market, where it had lost its mobile phone monopoly in 2005. According to industrial sources, the Omantel is negotiating with Worldcall, which runs long distance and international (LDI) as well as wireless local loop (WLL) services. The deal is likely to give Omantel access to Asia's fourth most-populous country as competition grows at home.

The Qatar Telecom has entered into a US$30 million deal with Burraq Telecom, a local company with nationwide and intentional telephony networks, to acquire its 70 per cent stake with management control. The deal is the Qtel's first foray into Pakistan. Having an international presence particularly in the Middle East, Qtel is the exclusive telecom provider in Qatar. Its principal activities include local and international fixed telephone, mobile, Internet, data and cable television services. In 2004, Qtel led a consortium and won the public tender for the second mobile license in Oman, and launched its Nawras subsidiary services in March 2005, capturing more than 500,000 new customers in just over 20 months of operations.

In the year 2006, the Qtel achieved revenues of Qatari Ryal 4.42 billion, showing an increase of 48.2 per cent over the corresponding period of 2005. The company also grew its combined mobile customer base in Qatar and Oman to 1.49 million, which is an increase of 55.3 per cent over the customer base of 2005. In March 2007, it acquired 51 per cent of the share capital of Kuwait-based National Mobile Telecommunications Company from Kuwait Projects Company for a total cash consideration of $3.8 billion. The deal is described as the biggest-ever telecom deal in the Arab world.

Qtel and Burraq have reportedly been engaged in talks for long. Burraq Telecom has already the licenses of nationwide and international telephony service operation it acquired from the Pakistan Telecommunication Authority (PTA). The company was looking for potential local and international investors to roll out its services across the country but this failed to come to fruition. The company management later decided to offload their shares to foreign investors and finally struck a deal with the Qtel. Burraq Telecom Limited is a public limited company sponsored by three telecom firms, namely Concept Private Limited, TeleCall Payphones Private Limited and Stancom Private Limited. It acquired LDI (long distance and international) and WLL (wireless local loop) licenses in 2004.

Burraq-Qtel deal is seen as a major shift of world reputed companies' interest towards Pakistan. Telecom deregulation in 2004 brought an end to more than five-decade-old monopoly of the Pakistan Telecommunication Company Limited (PTCL). PTA the telecom regulator awarded over 84 licenses to more than some 35 companies for fixed line local loop (FLL) and licensed fifteen others for WLL operations in different regions while 12 licenses were issued for LDI service.

Pakistan telecom sector attracted US$ 1.4 billion foreign direct investment (FDI) during the first three quarters of 2006-07. The total teledensity reached 43.44 per cent in May, which was just 12 per cent in June 2005. On average approximately 2.3 million subscribers are being added on cellular mobile networks each month in Pakistan, which is an exemplary growth in relation to the population of any country in the Asian region. The mobile penetration reached 37.6 per cent at the end of April 2007. Total mobile subscribers at the end of May 2007 crossed the 60.8 million mark.

According to the first Telecom Regulatory Environment (TRE) survey conducted by Sri Lanka-based independent telecom research organisation LIRNEasia, Pakistan has a better regulatory environment for mobile telecommunications than India, Indonesia, Sri Lanka and the Philippines. The results of the 2006 TRE survey, carried out in five Asian countries- India, Indonesia, Pakistan, the Philippines and Sri Lanka, provide a useful diagnostic tool for assessing regulatory efficacy. Overall, Pakistan scored particularly well on market entry and on the management of scarce resources (spectrum) in mobile sector.

In the last three years, Pakistan's telecom sector has attracted $9 billion investment and is expecting another $4 billion during the next four years. Pakistan has become a hub of activity for international and local telecom companies and unprecedented amount of foreign investment flowed into the sector due to the well thought out telecom policy, which was prepared after intensive discussions and debates involving all stakeholders. The market has witnessed remarkable year-on-year growth in subscribers' number of over 145 percent. Tremendous consumer demand, high levels of competition and a government that is ready to welcome inward investment are the driving force behind this growth. BMI is confident that Pakistan will join the small band of countries with over 100mn mobile subscribers during the second half of 2008 and that by the end of 2010, there should be just over 120mn cellular customers in Pakistan.

Since Pakistan has deregulated the telecom sector, scores of new private entrants are gearing up to provide service making the south Asian country one of the fastest-growing cellular markets. The government plans to increase fixed-line teledensity to 7% (around 10 million fixed lines) by 2010. The target can be achieved by installing up to 1 million additional lines annually. The number of subscribers of fixed and mobile telephony has increased from 8 million in 2003 to over 50 million in 2006 and the market has the potential to reach 80 million mobile in 2 to 3 years. It has also the presence of leading China's telecom giants, ZTE Corporation and China Mobile. It is the success of these investors that has caused the avalanche of growth.

Pakistan telecom has currently become a highly competitive market which is already dominated by six cellular operators with over 40 million subscribers. Presently, there is competition in every telecom service segment in Pakistan, including fixed telephony, mobile cellular, payphones, internet and other value-added services. The telecom sector is growing at a faster pace with new exciting opportunities coming up for big players like China Mobile. Pakistan's cell phone sector, with more than 46 million cellphone users, still has a lot of untapped potential.