SLOWDOWN IN TELECOM GROWTH
FOZIA AROOJ (email@example.com)
Oct 05 - 11, 2009
Telecom sector of Pakistan created a distinct position for itself as a fast growing and progressive communication system. The system came into advent in 1947 with the establishment of Posts and Telegraph Department having only 14,000 operational telephone lines across the country. Then it steadily zoomed to provide from a telephonic and telegraphic system to radio systems and cell phones and bringing Pakistan more aligned with the wireless platforms.
During previous years this sector has been among the fastest growing sectors of the economy. This is evident from the fact that the country has 67 million phones including cellular and fixed lines and the teledensity has increased from 4% in 2003 to 59% in 2008. However the sterling performance of the sector has suddenly been rusted by the slow growth in economy, rising inflation and revenue enhancing measures i.e. excessive taxation coupled with a slowdown in the manufacturing and services sectors, a sharp increase in interest rates and widening current account deficit during the first half of the fiscal year 2008-09.
Almost all the development indicators of the sector i.e. subscribers, teledensity, and revenue continued to show declining trend during Jul-Dec 2008. Total teledensity was increasing more than the rate of 7% per quarter since July 2007. However, its rate of growth declined to 2.2% during Oct-Dec 2008. Total teledensity of the country registered a marked decline as it was 59.6% at the end of December 2008 as compared to 59.89% at the end of Sept 2008. Along with cellular phones fixed line teledensity has also continued to decline. However this decline in fixed line teledensity is likely to be compensated through Wireless Local Loop (WLL) segment. However, the WLL growth pace is slow as well.
Despite the melt down in the economy and recessionary trend major indicators of telecom have been posing resistance to the recession. The subscriber base of broadband internet has been increasing rapidly with the total base crossing 170,000 in the country. In the year 2008 a global research centre "Point Topic Global Broadband Analysis" has ranked Pakistan 4th in terms of broadband internet growth in the world. In the year 2009, broadband speed has increased from 512 kilobytes to 12 megabytes. This year, the largest broadband providers are Cyber net, PTCL, LINK dot NET, and Wateen whereas, the small DSL providers recognized as the 'good performers' are MicroNet, MaxCom, Multinet, World Call, BrainNet, and Comsats. Most of these conventional players expanded into niche offerings such as BrainNet and Multinet and moved out of the traditional DSL space.
Many international investors have invested in Pakistan's telecom sector pouring an investment of about $9 billion in the last three years. Long distance and international operators have made huge investment in optical fiber, system up-gradation and installation of other communications equipment. Mobilink has the largest stake in the local industry with its GSM, WiMAX and convergence vision, the most users and the most diversified portfolio. The companies, like Multi-net, Wateen and Link Direct, have installed almost 15,000 km long optical fiber between Karachi and Peshawar. If the optical fiber of PTCL is included, the total length of optical fiber will reach 30,000 to 40,000 kms. Despite a slow down in economy as well as of telecom sector, Foreign Direct Investment in telecom sector of Pakistan continued in last few years which indicates the confidence of foreign investors in their policies, as during Jul- Dec 2008 telecom sector received over $ 716m FDI which become 31% of total FDI landed in Pakistan during this period. Now there is a likelihood of more investment and capital restructuring of telecom companies as a delegation of China Mobile Communication Corporation (CMCC) is visiting Pakistan to talk with other mobile operators for probable merger of two companies. Expected mergers in telecom are likely to change the shape of the industry by the end of this year. This step will intensify the competition between players encouraging them to expand network and introduce more innovation and faster speed.
Telecom sector in Pakistan is thriving on a consistent note though a slight dip is being felt but the real challenge now will not be to further penetrate in the market because many urban areas will quickly achieve a saturation point.
Next milestone is to generate a converging platform of communications whereby data and voice can co-exist to be the enabling forces for every other industry and transaction. The telecom sector has also become a major employer of skilled jobs as its exponential growth has resulted in creation of thousands of jobs. The public now has the choice of multiple telephone service providers at competitive rates.
The systematic and sustained innovation efforts by the operators and investment prone environment can further transform and modernize the telecom sector. Access to telecom services gives a sense of pride and confidence to the people as it provides instant connectivity across the world. However, some untapped avenues are to be explored such as local manufacturing of mobile phones. Attracting foreign companies to invest in this area of telecom equipment in the country would decrease the burden on foreign exchange, encourage technology and knowledge transfer and create further employment. Furthermore it is imperative to begin manufacturing the latest generation Wi-Fi and WiMAX equipment under joint ventures with Original Equipment Manufacturers (OEMs). Broadband or telecom operator should be encouraged to establish equipment manufacturing or latest next generation equipment facility in Pakistan.
The stable economy, consistency in policies, stable financial environment and strong economic fundamentals such as low inflation and low fiscal deficit and freedom to investors to repatriate their profits are considered prerequisite to attract foreign investment in any country of the world.