TELECOM SECTOR ATTRACTED ABOUT US$10 BN IN THREE YEARS: CHAIRMAN PTA

SHABBIR H. KAZMI
May 18 - 24, 2009

Over the last few years telecommunication has attracted the largest foreign investment and also added the latest technology. The benefits of entry of private sector are evident from reducing cost and improving quality of service. However, the biggest player Pakistan Telecommunication Company, which also attracted colossal foreign investment, seems to be drifting away from fixed line service to wireless technology. It's fully owned subsidiary Ufone is spending millions of rupee on advertising, but the quality of service of the parent company has gone from bad to worse.

Telecommunication sector has attracted nearly US$10 billion investment over the last three years. This was revealed by Dr. Muhammad Yaseen chairman Pakistan Telecommunication Authority (PTA) while addressing the inaugural session of 4th Connect Conference 2009 at Karachi Expo Centre. Huge investment has been made in optical fiber, systems up gradation and installation of other communication equipment. Companies like Multinet, Wateen and Linkdirect have installed almost 15,000 kilometers of optical fiber between Karachi and Peshawar. If the optical fiber of PTCL is included, the total length of optical fiber now getting close to 40,000 kilometers.

As the sector moves from monopoly to fierce competition the role of regulators becomes more important. The PTA is discharging its responsibility. It has imposed fines of the players in the past but still needs to act more vigilantly. The Authority has installed state-of-the-art equipment. It conducts surveys to assess the quality of Internet service providers on daily basis. On the basis of its findings, the Authority suggests the corrective measures. PTA also ranks them on the basis of their services. These findings are available on PTA's website. The authority will carry out the quality audit of PTCL from June this year.

RISING TELEDENSITY

The largest benefit of privatization and entry of private sector is that the teledensity in the country is on the rise, exceeding 60% at end March this year. Cellular teledensity showed a growth of about half a percent as another 434,000 subscribers were added during the month. The total cellular subscribers number reached 91.44 million at the end of March as compared to 91 million subscribers in February.

During March, Telenor added 142,000 new subscribers followed by addition of 124,000 subscribers each by Warid and Mobilink. Ufone was also able to add 114,000 new subscribers to raise the number of its total subscriber to19.61 million. At the end of March, Mobilink maintained a market share of 31%, followed by Telenor (22%) and Ufone (22%). Zong and Warid increased their market share to 7% and 19% respectively.

INTERNET USE

Availability of computers at affordable price, widening network of internet service providers and offering of wireless services has brought the facility to the rural population. Opening up of cyber cafes even in the small towns has made communication fast and affordable. The growing use of this facility in banking has made life easier, though many of the fees charged by banks remain questionable.

QUALITY OF SERVICE

In an attempt to protect subscribers and ensure quality of service PTA has issued show cause notices to various telecom operators for violation of license conditions during the past six months. However, the licensees have been given eight weeks to complete their roll out obligations and failure of which may lead to cancellation of their licenses.

PTA issued a show cause notice to Telecard in November 2008 after finding it involved in concealment of international incoming telecom traffic and misrepresenting the same as national traffic. The large number of missing minutes manifested a huge loss to the foreign exchequer on account of Access Promotion Contribution (APC) for Universal Service Fund (USF) by the licensee. The authority has asked the licensee to clear its position against the above-mentioned violations else face proceeding.

A show cause notice was also issued to Dancom on contravention of Rule 12 of Access Promotion Rules 2004 regarding the provision of incorrect call detail records (CDRs). Subsequently, PTA suspended its license for not providing correct information to the authority. PTA also passed an order to impose a fine of one million Rupees on Dancom for changing its management without prior intimation to the authority.

Wafai Communication was also issued a show cause notice for changing management without prior approval of the authority. Five WLL operators failed to establish at least one network connection point in each of their respective regions as per the license condition and all of them were issued show cause notices for this failure.

OUTLOOK

In the days to come telecommunication sector growth is likely to remain slower as compared to past due to a number of factors. These include economic slowdown, market becoming saturated and withdrawal of the facilities or increase in their tariff.

With the cancellation of SIMs having unidentified subscribers the overall number is likely to remain stagnant. However, the operators offering value added services are likely to register growth.

The high competition and low profit margin has forced small companies to rethink whether to offer their share to other companies who can invest more and heavily and introduce new innovative products. Orascom of Egypt already has majority share holding in Mobilink. China mobile which is the largest cellular mobile operator has acquired Paktel. Warid Telecom has sold part of its shareholding to Singtel. And more mergers and acquisitions can b expected.

Fixed line subscribers face lot of problems. In 2004 the total subscriber base was 4.5 million which increased to 5.24 million in 2006 but declined to 4.54 million in 2008. The decline is attributable to switching which continued from local loop to wireless local loop and decreasing prices of mobile services. PTCL is loosing market share in fixed line segment but remains the key beneficiary because of customers switching to wire less local loop segment.

At the end of March, Mobilink maintained a market share of 31%, followed by Telenor (22%) and Ufone (22%). Zong and Warid increased their market share to 7% and 19% respectively.