Pakistan Cellular Industry – Strengths, Weaknesses, Opportunities, and Threats

pakistan-telecomStrengths

In the past, Pakistan has been termed as fastest growing telecom industry in the world. This was the reason that World’s strongest and most successful telecom players (China Mobile, Etisialat, Singtel, Orascom and Telenor) invested their money in Pakistani market.

This shows the strength that Pakistani market offers to the investors. Even after the boom era, Pakistani telecom industry has got very healthy competition with all these successful players already well settled in the market.

Another good thing about Pakistani telecom industry is that idea of Significant Market Player is diluting with each passing day. Even the newcomers are betting hard and competing well with same enthusiasm and force.

Expected 3G license will take Pakistani Telecom industry to next level, with latest technology coming into the country. This will not only bring additional foreign direct investment, but the telecom standards of common person will shoot up significantly.

During all this process, Pakistan Telecommunication Authority has played its positive role, throughout. They not only encouraged foreign direct investment by allowing 100 percent foreign ownership, but also kept the race very smooth, fair and transparent. Regulator, not only cautioned the operators when they were wrong, but also facilitated them by taking initiatives, such as Mobile Number Portability, an un-ending potential for them.

Weaknesses

Pakistan Telecom industry has primarily 2 issues,

1 – High Taxes: Tax is something that is in government’s hands. Despite the fact that in latest budget, taxes on Telecom industry were lowered, but still the move was not enough to bring down the taxes at a considerable level.

2 – Low ARPU: Competitive tariffs, low spending capabilities of Pakistani subscriber, and higher amount of taxes when compared to tariffs are major factors of lower ARPU. Because of lower ARPU, cellular companies were forced to impose service charges, such as 5 percent service charges, call center call charges and so on.

Lower prices on SMS are another factor for lower ARPU, when masses are allowed (incentivized) to communicate at Rs. 3 for a whole day, don’t expect higher ARPU in such a market.

Opportunities

More number of heads means more business. With almost 45 percent heads still not in telecom loop, the opportunities lies naked for telecom operators to bread their profits.

Value added services, such as Mobile Banking, Mobile Internet etc are some of the fronts that are yet to be fully explored by cellular companies. This way, they can not only fetch new subscribers, but can also make their existing subscriber use these services to increase ARPU level.

Threats

Network quality and capacity issues should be top priority for telecom operators. With increasing base (though not at high rate now), can create troubles for the operators if they not cope with the capacity and quality of their network.

Price war is hitting its lower limits; regulator must step in at this point of time to guide and confines cellular companies at a certain level.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK


  • Yasir arif

    Price war may efect ARPU but new services such as 3 G mobile banking etc can help in gaining some revenue

  • Trouble is, people run after the price, and not necessarily on the network quality. If companies can distinguish (and maintain) their standards, they’ll automatically get more customers (and hence, a higher ARPU can be obtained with more ease).

    But right now, it would make sense for the telcos to derail Mobilink’s customer base.

  • Adnan

    Salam Amir bahi…First of all thanx for all your useful information…

    Amir bahi…i am a telecom engineer in PTCL also doing Masters in Engineering Management from Nust…Now its the time for thesis……..and i am very much confused ….time is running out…..and i donot know which topic to choose….and how to get information……….

    Amir bahi please help me in this regard…..i want to choose the topic from PTCL…but which topic and how to collect information i dont know…..
    Please help me…..Other wise my 2 years will be ruined…ALLAH na karay…….

    • contact me using contact us form – and tell me your areas of interest, so we may further discuss on it

  • Zaffar

    I think low sms terrif is not a major reason for low ARPU. A survey was conducted by Propakistani on number of SIMS/User. We have to consider this also. I may use Rs1000/month but in many sims using low ARPU. Similar is the case with majority of people especially youth.
    2) Also by increasing taxes and service charges companies can bring down the usage of a service but can’t generate more revenues. You can compare it with the usage of call center and other services. Same will definately happen with balance check charges. SMS can be counted easily using SMS COUNTER & balance check will be minimum
    3) Telcos should focus on reducing number of sims or decreasing the validity period, mean a compulsion to recharge and use. They have to do this if want more revenues

  • The Inside Story

    Dear Amir

    This is over All good Post.
    I like it. Any how Capacity is not a very big threat to the Operators since, now Subscriber growth is steady therefore, Operators have much time for analysis and doing operations accordingly.
    Unfortuantly in Pakistan so for we are just working on basic services that’s whay ARPU is low. once we get inside VAS and grab corporate sector the ARPU will be increased automatically.
    Yes I agreed higher taxes is another big issue. But we cannot ignore the fact. Since last 7 to 8 years Telecom is the most revenue getting sector for Govt.

    Over all good post.

    • thanks for your insight..! it added value to the actual post : – )

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  • Bilal

    The last sentence read “Price war is hitting its lower limits; regulator must step in at this point of time to guide and confines cellular companies at a certain level”…….now why would you want that….a price war is the first sign in any industry that the companies are fighting for the customer, why should the government come in and regulate this….what exactly does the government know about the telco biz or the technology or what it means for Pakistanis and their future….there the entire world is engaged in lowering prices for its customers and here you guys are actually helping the companies raise the prices on the customers w/out any new innovation…which is completely ridiculous ….price wars lead to new innovation and as a result leads to the entire industry moving up to another level…You guys seem to be completely ignorant of this…infact you guys are not even thinking as to how this creates space for a Pakistani company coming into the industry with some new technology….AND NO new value added services DO NOT qualify as new technology….

    here are some numbers…..there are roughly 94 million cellphone users in Pakistan…if on avg a users spends 500 rupees a month that is 47 billion rupees per month…..now if with that the carriers cannot improve technology and make themselves more efficient then they deserve to be out of business….and the government is just a bunch of idiots…

    • Bilal, this is not us, but the industry’s demand. In fact there are plenty of meeting held at operator level, under the umbrella of PTA for the issue. Margins, for industry are hitting zero level, so in such a scenario, there is dire need to price control at PTA level.

      I do agree that consumer will be the only hit of such regulation, but to save industry such things are required.

  • Bilal

    Also the article was very badly written!! at least proof read it before you post it…

    • Okay, i will look into it.

      Thanks for your feedback!

  • Bilal

    Aamir, do you really think that a multi-billion rupee / month industry, whose participants had the capacity to spend hundreds of millions of USD, is really going to go out of business. What usually happens, in Pakistan, and countries such as Pakistan, is that these companies become complacent and would rather pressure the government into providing for them than run a more efficient organization and come up with new ways to cut cost and increase margins.

    Lets say that the government does step in and establishes a min price level, then what…in six months, inflation (or whatever other macro economic factor) takes its tool, and that min price level is no longer sufficient…this leads to another round of telco’s throwing a fit and making the government raise that previous min price level….do you really think that is the way to go…We Pakistanis have always looked for the easy way out…same happened/is happening to the textile industry, same with the power co, same with the government…

    Price competition is the basis for all new innovation and incentive for the companies to run more efficiently…why has the government banned…e.g. VOIP…that is what they have done with that whole Grey voice calls…if someone could do that, and had a way to implement that, make money, for themselves and the government, why shouldn’t it be allowed…just to protect the foreign investors and lock the industry…with all due respect Amir I really don’t think that is the way to progress…there is no culture of creativity in Pakistan and that is the reason why we are where we are….good business is being able to break a compromise for the customer…that leads to innovation and profit, not what is happening right now.

    • Ted

      Bilal you got it right! We need people who can innovate as economy depends on creativity. Good to know we understand this after 60 yrs, the real reasonw hy we are doomed. Add to creativity the common sense and ability to think. And all Pakistanis should start eating iodine salt, this is very crucial.

  • Usman

    To me the real opportunity with telecom companies is to invest and innovate value added services.so far the focus has been on introducing b2c services but the real strength lies in b2b services as this domain has never been explorer.beside this the next biggest opportunity for telecom industry is to transform into a communication hub rather than just a telecom provider i.e. it provides mobile service,internet service,office solutions, IT etc etc.

    i think it all requires a paradigm shift.

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  • Javed

    SYMPATHIES ALWAYS FOR CRIMINALS

    After the departure of Ayub Khan I have never seen any scheme introduced or any law enacted with real honesty and intent for the benefit of the common man and for the nation as a whole. Since 1971-72 whatever has been done I saw it being done in the name of and for the sake of “common man” raising the slogans “Awam kay muffad main” but actually all this was done ensuring that a hidden invisible door forthe vested interests remains open. For example during Miraj Khalid tenure when the people started raising eye brows that while their phones get disconnected even in many cases despite having paid timely, the phones of lucky ones remain alive despite lakhs of Rupees dues years over years. On this the PTCL changed the rule that in future the landlord would pay such dues of the tenant. A tenant as per Lease leaves the flat on 31st August while his August bill comes in the second half of October so how the Landlord could know pre handed on 31st August that tenant was leaving any dues behind. This new law was in fact introduced to keep the door of corruption and vested personal interests of the staff open. Had there been any real honest intent for the Department or the country, the law would had been drafted that a phone which remained alive despite two months consecutive non payment, the concerned PTCL Revenue Officer will pay from his salary. But we are always fooling the nation by always keeping interest of mafias foremost.

    2. Recently with much fan fare the Pakistan Telecommunication Authority woke up claiming that no one will be able to get a bogus SIM. In the name of security all unregistered SIMs were blocked. People found many many SIMs registered in their names which they never purchased. In order to hide the truth, the paid commentators and writers attributed this that the photo coping shops used or helped others use the copies for buying a SIM. PTA just to show how serious it was towards the public and the countryy issued a guideline for purchase of SIMs including that when a person buys a SIM on strength of a copy of his CNIC, he must write the bought mobile SIM number on the copy so this copy is not re-used for issuance of another illegal SIM. As our policy makers lack the real honesty the PTA policy makers did not do anything to investigate and punish those inside the mobile companies who issued such illegal SIMs. No doubt the photo copy shops or say for example a genuinely deposited CNIC copy with the PTCL might have been re-used, nevertheless the real fact is that it was the mobile company which actively helped and blessed this illegal issuance of the SIMs by not comparing the copy with original and checking the signature of purchaser with that on the CNIC.

    3. However though the new SIM registration system has been devised, as is claimed by PTA, to ensure proper data so that these SIMs do not go in the hands of criminals nevertheless it appears to has been drafted by someone who definitely had real sympathy for the criminals. NADRA claimed that no one can get a fictitious CNIC. In the biggest bank robbery this month in Karachi the main accused was reported to be in possession of an illegal CNIC. I purchased a SIM the other day. Under the new system from my mobile with the new SIM, I dialed the company control who got from me my name, father mother names and CNIN number for verification. NADRA system definitely confirmed the information provided by me as it was genuine and my SIM started working within a few minute. Now I can not take it as guaranteed that the same information will not be re-used for issuance of another SIM of the same or some other mobile company reason being that in the old system these were the same very mobile companies staff who issued illegal SIMs on the strength of photocopies. The same staff can today for same “old considerations” can well activate the new SIMs feeding in the computer my personal information or can provide my personal information to criminals. After all this is the same very mobile companies staff which provide our mobile numbers to credit card sellers or commercial advertisers bombarding us daily through calls/SMSs. A recently published survey tells that the female subscribers immediately on activation start receiving calls from “men” even before they could inform their own family members their new SIM number. These are not just delusions. Just read the column from the learned and senior writer Irfan Siddiqui entitled “Mr. Justice Chief Justice, is this a jungle?” appearing today 23 December 2009 in Daily Jang Karachi. He narrates how a 60 years old widow Homeopath and teacher of Holy Quran and a 70 year retired Professor from Islamabad were whisked away from their homes by the Police 10 days back and are today “missing persons”. They have been taken into custody as per the column because a SIM bought on the strength of a CNIC photocopy of the office driver was found used by some criminal. For majority of us such things are just news for discussion unless one day luck makes us such a news. No one you and me are safe that on the strength of a copy of our CNICs due to active collaboration of the concerned staff a bank or a house building loan is not outstanding against us or a SIM or a phone connection at a PCO is not being used illegally some 1500 miles away in Wazirastan. Under the new procedure the authorities have in fact created a more easy door for the criminals. The only nearest possible solution is that no SIM is issued without filling up an Application Form, scrutiny of the original CNIC and the Form is signed invariably both by the applicant and the sales official with a compulsory column for two thumb impressions of the applicant. The mobile companies under the grab of different techniques pick pocket the subscribers. For this Form and thumb impression it can charge a little extra. But I am sure the concerned policy makers will not agree to such a sensible proposal as it would affect the income of the businessmen, let go to the hell interest of the country and that of the common man. A decade back a fully non sense rule was enacted by the SECP. I am more than confident that no one in today’s civilized world could even think of that such a rule does exist in any part of the world. When I took up the matter with the Federal Ombudsman the SECP immediately agreed to amend it. It sent me a draft version of amendment which again was deliberately but not surprisingly “defective”. I corrected it and sent back to the SECP. For 5 continuous years SECP kept me fooling that the amendment was under process. Seeing this foolish senior citizen was ruthlessly shameless and not tired of, after 5 years the SECP came back to me with the reply that “the businessmen do not agree to the amendment”. Was the interest of a few dozen dishonest businessmen more important or that of millions of shareholders? PTA will have I am sure no room for a word of sense on this account. Our foreign investors can not be annoyed. Let 60 year widow or a 70 year professor go to the hell as missing persons.

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