Pakistan’s telecoms market ripe for the picking

The auction of the 3G spectrum in the world's third-fastest growing mobile market could make billions for mobile companies and the country's government.

A Pakistani man checks messages on his mobile phone at a mobile market in Rawalpindi. Farooq Naeem / AFP Photo
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Pakistan has emerged as a highly competitive telecoms market for foreign mobile operators.
The country's telecoms industry contributed 119 billion rupees (Dh4.14bn) a year in tax revenue to the government over the past five years. The sector witnessed a steady growth, with the addition of 10 million new cellular connections in the last fiscal year ending in June.
The country has the presence of five mobile operators — Mobilink, Ufone, Warid, Telenor and Zong. The competition among the operators is characterised by a drastic reduction in call rates and attractive packages offered.
This has been beneficial to a majority of people, who obtain connections from multiple mobile operators at cost-effective call rates. Though the Pakistan Telecommunication Authority (PTA) has implemented growth-oriented telecoms policy as a regulator, it has so far failed to sell the licences for 3G technology, which offers a higher rate of data transfer and provides reliable access to global roaming between networks.
During the past fiscal year the country's telecoms sector showed a steady growth, with telecoms services covering 92 per cent of the land area and 75 per cent of the population, according to a PTA report. The statistics revealed that the country's tele-density grew to more than 75 per cent at the end of fiscal year from 71.73 per cent in the previous fiscal year.
The total number of cellular subscribers increased by 7 per cent to 128.9m last fiscal year.
The five mobile operators contributed 438bn rupees to the telecoms sector's revenues, which increased to 445.7bn rupees at the end of fiscal year 2013, up 9 per cent.
The country's telecoms market attracted significant foreign investment after the deregulation policy for the telecoms sector introduced by the government of the former president, Pervez Musharraf, in 2003.
In 2008, the country emerged as the world's third-fastest growing telecoms market.
The communications infrastructure in the country continues to improve as foreign and domestic companies continue to pour their investments into fixed-line and mobile networks.
Network growth is aided by fibre systems, which are being constructed across the country.
Despite having immense growth potential, the country has not yet auctioned the 3G mobile licenses, a technology possessed by even war-torn Afghanistan. The 3G auction could raise US$1bn in annual license fees for the cash-strapped country, but it has been beset by delays.
Critics say that the present government is not serious about the 3G auction, while the previous government, led by Asif Ali Zardari, faced resistance by the PTA members because it wanted to bypass the standard tendering practices in the auction process.
What lure foreign companies s to invest in the country's telecoms sector are prospects such as a market of about 200m people without 3G services and very low broadband penetration.
Etisalat International Pakistan, a subsidiary of Emirates Telecommunications, owns a 26 per cent stake in the state-owned Pakistan Telecommunication Company Limited (PTCL).
Etisalat has already shown interest in bidding for a 3G mobile licence, costing at least US$210 million. Etisalat believes that the 3G licence, would allow the company to sell faster mobile-internet services in the high-growth Pakistani market.
Etisalat bought its stake in PTCL for $2.6bn in 2006. The international telecoms player, however withheld $800m of that payment because of complications over the transfer of property units.
There were different views expressed in the local media on interpretation of the sale purchase agreement the country signed with Etisalat. Some media reports claimed that the Pakistani government was bound by a deal with Etisalat under which it could not issue any new telecoms licence until March of last year. The previous government contended that the Etisalat deal only bound the government not to move ahead with licence of LDI (long distance and international) until that date.
The present government, led by the prime minister, Nawaz Sharif, has already issued policy directives on the much-delayed auction for the 3G and 4G spectrum to the PTA. The auction, which is expected to be completed by next month, is estimated to raise $1.13bn revenue for the government.
In its annual report, the PTA set its success benchmarks as creation of a technology-driven, consumer-oriented and business-friendly environment with fair competition, affordable tariffs, high quality of service and extended land coverage.
On the other hand, increased taxes and import duties on equipment purchase and rising operating costs have emerged and are evaporating the interest mobile phone operators in the country.
The PTA's report showed a slight decline in the imports of telecoms equipment that reached $918m last fiscal year, compared to $954m the year before.
Syed Fazl-e-Haider is a development analyst in Pakistan. He is the author of several books, including The Economic Development of Balochistan.