INVESTMENTS IN TELECOMS CHANGING THE LANDSCAPE

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Apr 12 - 18, 2010

Beginning 2000 Pakistan has witnessed a complete transformation of telecommunication sector. Not only huge investment has been made but quality of services has improved considerably. Market is fast moving towards saturation but players are creating niche market by offering value added products. The ultimate beneficiaries are the subscribers due to tariffs decline. At times, service providers compromise quality and Pakistan Telecommunication Authority also moves slow.

One of the latest moves has been made by China Mobile announcing to invest US$300 million in Pakistan during 2010. This is one of the largest investments by any telecom operator in the current year. This was revealed by Wang Jianzhou, Chairman of China Mobile Communications Corporation during his visit to Pakistan.

The company known in Pakistan by its brand name Zong has so far invested US $1.66 billion in Pakistan and has generated more than 1700 direct and over 40,000 indirect jobs in the country. This investment has been made in less than two years since its launch in Pakistan. China Mobile intends to invest more in the country as it has chalked out an elaborate investment plan.

China Mobile, which has made the largest investment among all Chinese investments in Pakistan, also has the distinction of being the only offshore company operating in Pakistan which has invested more than US$721 million foreign direct investment so far in the current year.

Zong now stands third in terms of number of base stations and the company has established more than 5000 cell sites in Pakistan showing rapid growth. Zong, China Mobile's first venture outside China has attracted attention not only in the global cellular market but also with the international finance experts and investment houses.

The company continues to invest heavily in the construction of GSM networks, support systems and transmission facilities, and for the development of new technologies and new businesses. China Mobile pursues continuous innovation in the provision of services, business, technology and management and has sustained a leadership position in the telecom industry.

MERGERS AND ACQUISITIONS

Mergers and acquisitions are likely to change the shape of the telecom sector by the end of this year. According to informed sources at least two major companies would be merged into one by the end of this year, which would intensify the competition in the telecom sector. It is learnt that China Mobile Pakistan is in serious talks with other cellular operator of Pakistan in a bid to expand its network. In this regard, some initial talks had taken place earlier. Now a second round of talks has started which is likely to close the deal. Reportedly Orascom Telecom, parent organization of Mobilink, intends to acquire a microfinance bank in Pakistan to enter the financial business and strengthen its presence in the country.

According to a news report a delegation of Orascom was in Pakistan to look this deal. In this regard the first round of talk between the Orascom management and State Bank of Pakistan has been held.

Telenor Pakistan acquired Tameer Microfinance Bank to promote its mobile based banking services and currently is providing various financial services through mobile services. Telenor Pakistan has acquired 51 per cent shares in Tameer Microfinance Bank bringing foreign direct investment of US$12.5 million equivalent to around one billion rupees.

Tameer is a microfinance bank licensed by State Bank of Pakistan in August 2005. Currently it has a network of 27 online branches and 23 sales & service centers across Sindh and Punjab.

"The acquisition of 51 per cent of the shares in Tameer Microfinance Bank is part of our strategy to offer financial services in Pakistan," said Jon Eddy Abdullah, CEO of Telenor Pakistan.

"We are pleased with the deal we have entered. Telenor is a solid partner for further growth, and we have a common view about how financial and telecommunication sectors together can improve customer offerings by combining services," said Nadeem Hussain, President and Chief Executive Officer Tameer Bank.

TECHNOLOGY HIGHWAY

Money Transfer offers a secure, easy and convenient way of sending and receiving domestic remittances through easypaisa retail outlets. Users will have the convenience to access the service from more than 4,000 easypaisa merchants, a figure expected to reach 20,000 by the end of year 2010. Nadeem considers domestic remittances a key point in providing financial access to the rural population. "Remittance flow plays a valuable role in supporting the economy. It also offers significant potential to support income of poor and vulnerable groups. Remittances are often the first and sometimes the only financial service used in low income households. Hence the potential for an accessible banking agent in remote areas of the country is immense." he said.

At the launch of Money Transfer, CEO Telenor Pakistan Jon Eddy Abdullah said, "Providing Money Transfer service is the next step in the development of easypaisa as a unique branchless banking solution. World Bank estimates the domestic transfer volume in Pakistan at $6.95 billion per year. Through this service we not only aim to target all current users of domestic remittance services but also to help bring some portion of $2 to $4 billion transacted through informal channel into mainstream."

Tameer's original branchless banking pilot was developed in partnership with the technology program at Consultative Group to Assist the Poor (CGAP), a microfinance center housed at the World Bank. The program is supported by the Bill & Melinda Gates Foundation. Telenor Pakistan & Tameer Microfinance Bank's easypaisa portfolio, which now includes Bill Payment solution and Money Transfer, is scheduled to come up with services such as, mobile wallet accounts, cash deposits and withdrawal facilities in near future. The services offer innovation, freedom, security and convenience.

NEW VENTURE

Wateen Telecom has announced initial public offering (IPO) worth Rs2 billion in Pakistan. The telecom giant will issue 110 million shares to institutional investors and general pubic at a price of Rs10 per share with a green shoe option of 90 million ordinary shares. This will increase the paid up capital of the company from Rs4.174 billion to Rs5.275 billion.

The money generated will be used for repay the debt acquired from the financial institution on account of Letter of Credits (LCs) worth Rs14 billion and raise capital for acquiring remaining 49 per cent shares in Wateen Solution. Wateen Telecom CEO Tariq Malik said the company has long-term and committed investment plans in the country despite any political economy and law and order situation of the country.

The company is playing an active role in making Pakistan a regional hub for information and communication network with its optic-fiber international gateways. Wateen is laying optic-fibre to connect India at Wagah and Chaman and Tukhum to link Afghanistan, he said and added it will offer services to various telecommunication services inside and in neighboring countries of Pakistan.

Malik said the company is aggressively pursuing its multiple plans in all its services including wireless telephony, broadband and infrastructure services that will enhance its revenues manifold. Its corporate clients include leading financial institutions, cellular phone companies and television channels. The company has acquired a lion's share in international calling traffic and it has been a leading performer in broadband and wireless local loops sectors.

The opportunities are lucrative in Pakistani equity markets for local and international investors as it is recognised by all rating and financial institutions as the best market in delivering handsome returns with the lowest business cost.

With the clouds of crisis and uncertainty scattered and the situation is improving in the country for business and investments.

EXTENDING OUTREACH

Universal Service Fund signed contracts for providing basic telecom services in Nasirabad (Balochistan) with CM Pak and Broadband Services in Multan Telecom Region (Southern Punjab) with World Call. CEO CM Pak, Qian Li and CEO World Call, Babar Ali Syed signed these contracts with CEO Universal Service Fund, Parvez Iftikhar. Secretary IT, Naguibullah Malik witnessed the signing ceremony as the chief guest. In the Rural Telecom project, CMPak will be paid Rs1.57 billion to provide telephony services to 648 unserved Mauzas to serve a population of around half a million in districts of Bolan, Jaffarabad, Jhal Magsi and Nasirabad of Balochistan.

Whereas in the Broadband project, WorldCall will be paid Rs785 Million to provide broadband connections in 11 districts (38 small towns) of Southern Punjab, in addition to establishing 27 Educational Broadband Centres in high schools, colleges and libraries plus 121 Community Broadband Centres. It is noteworthy that this is in addition to broadband services in MTR that PTCL will provide under a contract with Universal Service Fund signed recently.

Giving his remarks on the occasion, Federal Secretary for Information Technology, Naguibullah Malik said that the Ministry of IT was striving to reinvigorate and stimulate the ICT sector by increasing level of telecom penetration in unserved areas of the country. He informed that Ministry of IT, through Universal Service Fund, has been successfully executing rural-telecom, broadband and optic-fiber programmes that are playing a huge role in socioeconomic development in rural and semi-urban Pakistan. He further stated that Broadband Program will give impetus to other e-services like e-education, e-health, e-government, e-commerce etc.

CEO of Universal Service Fund informed that after signing the two contracts, the total amount of subsidies through Universal Service Fund have crossed Rs10 billion, which has generated total investments of Rs16 Billion in unserved areas of the country. Seven major Telecom Service Providers are rolling out these services under contracts with Universal Service Fund. The number of villages where services have already started with the help of Universal Service Fund has exceeded one thousand. Work is in progress for another five thousand villages and another five thousand remaining unserved villages shall be covered by Universal Service Fund through future auctions.