TELECOM SECTOR INVESTED $495.8M IN FY 2011

AUCTION OF 3G LICENSES TO BRING MORE FDI INTO THE COUNTRY

KANWAL SALEEM
(feedback@pgeconomist.com)

July 23 - 29, 20
12

Pakistan telecom sector is considered as an exemplary growth model around the globe. Today, we have total teledensity of over 72 per cent with 119.9 million mobile subscribers.

The telecom industry has done wonders in Pakistan during the last decade. The number of mobile phone subscribers has jumped from less than 300,000 in 2001-2002 to over 110 million in 2011-12. There are more than two million broadband subscribers and five million smart phone users. These are very good numbers and broadband is making rapid progress in the country.

But there are also some worrying signs for the operators as depreciation in Pak Rupee is accelerating against the US Dollar. It has increased 33 per cent during the last four years as one dollar which was worth Rs 60 in 2008 has gone up to Rs 94 in 2012. This is a big problem as the local operators buy their bandwidth in dollars but have to sell it in rupee.

The power and fuel crisis is another headache for the corporate sector, as their performance gets affected due to frequent power break downs. There also needs to be a joint effort between the government and industry for investing in the development of the content in Urdu and for promoting e and m-government and commerce.

During the last decade the IT infrastructure has been deployed all over the country and now a government push is need to turn it into an economic engine of growth. Investors should look at the various opportunities. The capital expenditure may look high initially but the numbers speak for themselves - once their business picks up there will be no looking back. There is still no face book like product in Urdu. The next crop of Pakistani billionaires can be produced right here Experts told PAGE that introduction of 3G no doubt will increase the data usage in Pakistan particularly in the case of cellular operators. There are a few problems also which will impede growth. For example, the majority of our population understands only Urdu but there is very little content available in that language on the net. Because of this and low affordability capacity of the majority of the cellular population, there may not be as much of a rush on most of the globally hosted popular 3G applications other than free video. In order for 3G to catch on a big scale, we need more Urdu content and free or extremely cheap applications relevant to our population, they said.

According to them, 3G is a category of next generation mobile networks that operates at a higher frequency bandwidth and a larger channel bandwidth. 3G is likely to be the next big thing for the telecom sector, will meet their requirement with intelligence in the network therefore performance will be quick and better and information dissemination will be made easier. 3G technologies will enhance data speed and all convergence services while broadcasting facilities would also be available at one platform

On the other hand, after success in e-commerce and Branchless Banking initiatives, Pakistan Telecommunication Authority (PTA) is now encouraging the development of local content based mobile/ICT applications and willing to extend all sort of support to help the farmers through the provision of reliable and timely information, local content based applications, automation of agriculture production processes.

As per statistics, telecom sector exhibited stability in the FY 2011 and invested $495.8 million with cellular mobile sector being the leading contributor. In addition, Universal Services Fund (USF) also invested Rs 3.5 billion in unserved areas. Despite challenges on the domestic scene, Foreign Direct Investment (FDI) showed an encouraging trend, as FDI by the telecom companies was more than 30 percent of the total FDI landed in the country during last six years. Telecom companies reduced FDI as they had already established their infrastructure. In FY 2011, telecom sector attracted over $79 million FDI in the country, which is about 5 percent of the total FDI which came to Pakistan. Besides this, telecom and Information Technology sector in the country is also looking for potential opportunities with the possible emergence of Third Generation (3G) technology in Pakistan.

Pakistan Telecommunication Authority (PTA) was putting every endeavor to bring home latest cellular mobile technologies including the 3rd Generation. Telecom companies are also facing the issues of outstanding Universal Service Funds (USF) contributions including APC for USF and Spectrum charges, grey trafficking in telecom sector, cancellation of licenses of telecom operators and late fee charges on outstanding payable amount.

On the other hand, revenues of telecom sector have reached all time high last year with Rs. 363 billion, showing 5.4 per cent increase as compared to previous year.

As per data, in line with tele-density, the cellular sector also has the highest share in telecom revenues as during 2011, cellular revenues increased by 11 %. The rise in total telecom revenues is mainly attributed to increase in revenue of mobile services only since the rest of services except Wireless Local Loop (WLL) have reported decrease in their total revenue.

During first two quarters of this year Rs. 197,686 million worth of revenue has been generated by telecom sector.

The sector has also contributed Rs. 58.1 billion to national kitty during the period. It is an important contributor, depositing over Rs. 100 billion on average each year to national exchequer. The telecom sector made its highest ever contribution in 2011, as almost Rs 117 billion were deposited by companies, showing 7 % growth during 2011.

Analysis of investment and FDI clearly reveals that the telecom sector of Pakistan needs an influx of new investment in the near future to boost the figures. The auction of 3G licenses is expected to bring more FDI into the country. An improved economic condition of the country will further encourage investors to bring capital into Pakistan. Telecom sector has achieved much progress and now is the time for them to deliver for its subscribers.