Pakistan is a high-growth telecoms market where the number of mobile phone subscribers has grown to 122.1 million. The market has the footmarks of strategic investors such as Orascom, Etisalat, Telenor, Abu Dhabi Group's Warid Telecom and Canada's Nortel Networks. It also has the presence of the Chinese telecoms giants ZTE Corporation and China Mobile.
There was a dramatic improvement in the country's telecoms infrastructure, in which the foreign firms significantly invested into fixed-line and mobile networks over the past decade. The construction of fibre systems to accelerate network growth is still under way across the country.
Pakistan's mobile telecoms has become a highly competitive market, which is dominated by five operators - Mobilink, Ufone, Warid, Telenor and Zong. It is because of the high levels of market penetration and stiff competition that cellular firms are getting lower margins and gradually losing interest in the country's telecoms market. For example, Abu Dhabi Group has reportedly decided to sell Warid fully or partially in the coming days.
It was under the government of the former president Pervez Musharraf that the telecoms sector was deregulated in 2003. Under the policy, the foreign companies were encouraged to invest in the telecoms market. The Pakistan Telecommunications Authority (PTA), the telecoms regulator, awarded more than 84 licences to more than 35 companies for fixed line local loop and licensed 15 others for wireless local loop operations in different regions, while 12 licences were issued for long distance and international service.
Since the deregulation of the telecoms sector, scores of new private entrants geared up to provide service, making the South Asian country one of the fastest-growing cellular markets.
The telecoms market benefited from remarkable year-on-year growth in subscriber numbers of more than 145 per cent. Tremendous consumer demand, high levels of competition and Pakistan's investment-friendly regime have been the driving force behind this growth.
In 2006, Etisalat International Pakistan, a wholly owned subsidiary of Emirates Telecommunications Corporation under a US$2.6 billion deal bought a 26 per cent shareholding in Pakistan Telecommunication Company (PTCL), a state-owned monopoly and assumed management control of the company. Etisalat, however, held back $800 million because of a dispute over property ownership. Telecoms deregulation brought an end to more than five-decade-old monopoly of PTCL. The main challenge for the government was to preserve PTCL in wake of opening the telecoms market.
Liberalisation of the sector made it attractive for many global telecoms giants to invest in Pakistan. The cellular mobile sector has been the major driver of growth in telecoms revenues. The country became the world's third-fastest growing telecoms market in 2008 when the mobile sector in Pakistan was most active, followed by broadband; while the fixed-line sector remained somewhat static.
Orascom Telecom, which operates under the name Mobilink, continues to lead the market with more than 40 million subscribers. Last year, Telenor and Ufone improved their market shares by 35 basis points each, according to the PTA. Zong increased its share by 255 basis points during the period, while Warid dropped by 289 basis points. Zong added 3.5 million subscribers, while Warid lost about 2.4 million subscribers last year.
Pakistan had the highest mobile penetration rate in the South Asian region in March 2012 with 118 million mobile subscribers. The number has now crossed the 122 million figure.
Even now the telecoms sector continues to grow, but its pace of growth has retarded over the past three years. The total teledensity including cellular, fixed local loop and wireless local loop teledensities - had reached 69.9 per cent by the end of January 2012, primarily because of the sustained growth in cellular subscribers, according to the PTA. The mobile network operators expanded the subscription pie by 5.7 million and swelled it to 114.6 million, thereby increasing the cellular teledensity to 66.5 per cent by the end of January 2012. But the foreign investment in the telecoms sector is presently in decline because of a higher ratio of taxes and the reluctance of major players to move with expansion plans in Pakiatan's rural areas.
Warid Telecom, which launched its cellular services in the country in 2005, has reportedly been put up for sale by its Abu Dhabi owners. It has mandated the US investment bank Lazard and the British lender Standard Chartered as advisers of the process. According to the media reports, China Mobile and Etisalat have shown interest in purchasing stakes in the company. Warid has turned out to be the country's smallest operator with 12 million subscribers as it lost about 5 million subscribers over the past three years.
There is competition in every telecoms service segment in Pakistan, including fixed telephony, mobile cellular, pay phones, internet and other value-added services.
The country is likely to have four mobile operators by next year, as high operating costs, higher taxes and import duties on equipment purchase discourage operators in an environment in which profit margins have been narrowing because of stiff competition.
Syed Fazl-e-Haider is a development analyst in Pakistan. He is the author of several books, including The Economic Development of Balochistan, published in 2004.