Telecom Sector Remains One of the Top Investors in Pakistan: Economic Survey 2018-19

Telecom operators have invested a significant amount of US$ 200.1 million from July 2018 to March 2019. The main driver behind this investment is the cellular mobile sector, which has invested US $158.3 million during the first two quarters of the fiscal year 2018-19, revealed the Economic Survey 2018-19.

Telecom Sector Analysis

Telecom sector is playing a pivotal role in Pakistan’s economy where it is contributing directly and indirectly in employment generation, financial inclusion, attracting investment, providing innovation opportunities besides contribution of huge resources to national kitty in terms of taxes, duties and other levies.

Telecom sector has emerged among the major foreign investment attracting sectors in the country. During the last 5 years, the sector has attracted over US$ 2.6 billion in FDI whereas a total of about US$ 4.5 billion have been invested by telecom players in Pakistan. In terms of overall investment in the telecom sector, the momentum that was started in FY 2012-13 for the upgradation of telecom networks for 3G and 4G services has continued.

Telecom operators have invested a significant amount of US$ 200.1 million during this period. The commercial launch of 3G and 4G LTE services has opened new opportunities for revenue generation for the mobile operators.

With a relatively difficult 2018 in terms of Pakistan’s economy, telecom sector stands tall overall and showed improvement in revenues during FY2018 whereby total telecom revenues stood at Rs. 488.8 billion during the year 2017-18. Revenues from the telecom sector reached an estimated Rs. 268.8 billion during the first two quarters of FY 2018-19. The progressive approach followed by PTA for providing ICT access to the citizens of Pakistan through international fibre optic cables, backhaul networks and wireless solution including 3G, 4G, LTE have resulted in access to cellular mobile services to over 89 percent of the total population, of which 73 percent have access to 3G services and 69 percent have access to 4G services.

Total teledensity reached 77.2 percent at the end of March 2019 compared to 74.1 percent at the end of the last fiscal year 2017-18. The prime driver of teledensity rise is the growth in cellular mobile subscribers.

Cellular Subscribers

By the end of March 2019, the total number of mobile subscriptions in Pakistan reached 159 million with a net addition of 8.8 million subscribers from July 2018 to March 2019. Biometric re-verification of SIMs in 2014-15 had an adverse impact on the cellular subscriber base.

Broadband Subscribers

Mobile and Fixed Broadband subscriber base showed strong growth from July 2018 to March 2019. At the end of March 2019, broadband subscribers stood at 68.24 million as compared to 58.33 million at the end of the last fiscal year 2017-18. The number of net subscriber additions during the first nine months of 2018-19 stood at 10 million.

Local Loop Subscribers

The subscriber base of local loop segment has reached 2.70 million at the end of December 2018 as compared to 2.76 million as of June 2018. FLL subscriber base has been steady at 2.56 million subscribers as of June and Dec 2018) as reported by the operators. The closure of PTCL’s WLL connections and the mobile substitution effect has resulted into a gradual decline of the local loop subscriptions.

7th Highest Tax Paying Government Organization in Pakistan

PTA has been ranked as the 7th largest tax-paying government organization in 2018 to the Federal Board of Revenue. In addition, Telecom Regulator has generated over Rs. 209 billion during June 2013 to March 2019 through its levies, fee and other charges.

Local Manufacturing & Assembly of Mobile Handsets

In order to encourage the development of local manufacturing of mobile handsets, PTA took an initiative by introducing a regime enabling PTA type approval holder companies to set up plants in Pakistan for manufacturing/assembly of mobile handsets. This initiative was the first strategic step towards encouraging local manufacturing of mobile handsets in Pakistan. After the introduction of this regime, over 16 companies have obtained permissions for local assembly of mobile handsets and have installed assembling plants that are fully operational.

On average, a total of 3.3 million handsets are being assembled each month in Pakistan. This step of PTA has created over 3,200 jobs in the market and enabled young professionals to have skill development in this specialized field.

Reducing Retail Tariff for Mobile Services

Mobile Termination Rates (MTR) plays a critical role in driving the retail tariffs, especially for off-net calls. In view of the changing market structure of the cellular mobile segment and considering that the last change in MTR was made in 2010, a review of the existing MTR @ Rs. 0.90/min was required in Pakistan. Based on the comments, hearing and meetings, the authority has reduced the MTR for all types of calls i.e. local, long distance and international incoming calls) terminated on mobile networks from other mobile networks or fixed networks from Rs. 0.90 to Rs. 0.80 from 1st January 2019 which will be further reduced to Rs. 0.70 by 2020. Subsequently, the MTR will be reviewed in the coming years in line with international best practices.

Encouraging Financial Inclusion

NFIS council’s approved Assan Mobile Account (AMA) scheme that requires the establishment of a unified Unstructured Supplementary Services Data (USSD) platform through a Third Party Service Provider (TPSP).

PTA has issued 2 licenses of TPSP that will be instrumental for interoperability and launch of AMA scheme aimed to bring huge unbanked population in banking channels. PTA held a series of meetings with industry and SBP for the integration of CMOs and TPSP. Currently, MoUs have been signed between TPSP licensee and all CMOs, and TPSP has completed Proof of Concept (POC) activities with PMCL (Jazz), Telenor and Ufone. End-to-end testing has been completed. A successful live demo of AMA system was presented to Finance Minister on 17th October 2018.

PTA expects that AMA scheme will be operational shortly in collaboration with State Bank of Pakistan. In the mobile banking market, mobile wallet accounts and agents are playing instrumental role. The biometrically verified SIMs have facilitated the growth of m-wallet accounts during last few years and significant growth has been seen i.e. m-wallet accounts in Pakistan were only 20 million in 2016 which have grown to 39 million in 2018.

Quality of Service Surveys

PTA continuously strives to ensure that the consumers of telecom services get the best quality telecom services. PTA already issued QoS Regulations, therefore in order to monitor the compliance status, during the Jul-Dec 2018, PTA has conducted Quality of Service (QoS) survey jointly with Cellular Mobile Operators (CMOs) using NEMO automated QoS tools. During the period, a total of fifteen (15) cities of Pakistan (Bahrain, Madyan, Kalam, Naran, NathiaGali, Malam Jabba, Peshawar, Quetta, Ziarat, Lodhran, Multan, Mirpurkhas and Badin) have been surveyed.

The performance of the data services of CMOs has been checked by measuring user data throughput and signal strength Key Performance Indicators(KPIs). The quality of data and voice exchange on the cellular mobile networks has been measured for all the CMOs under several indicators. It can be observed that all operators are meeting the standard for Signal Strength (RSCP) of 3G, network accessibility, service accessibility, call completion ratio, inter-system handover of circuit switched voice, SMS success rate and end-to-end SMS delivery time. Results of the survey are available for the general public on the PTA website.

Standardization of BVS Devices to Ensure Security Features of SIM Issuance Process

Pakistan Telecom Authority introduced Biometric Verification System (BVS) for mobile users back in the year 2014 and currently, all users have been properly verified. However, PTA received a few complaints regarding the misuse of BVS devices.

The analysis revealed that some BVS devices, being used for issuance of SIMs are substandard and lack security features. PTA took an initiative to conduct an on-ground check of BVS devices in the market for which, services of a 3rd Party vendor were sought.

After a thorough study, hardware and software specifications, Live Fingerprint Detection (LFD) functionality and device communication & physical security parameters were checked during the exercise. On the basis of activity observations/recommendations, the SOP for SIM sale and verification has been revised by PTA and the same is currently being finalized in consultation with stakeholders.

Public Wifi

PTA has recently laid down the regulations on “Data Retention of Internet extended to WiFiHotspots” aimed to expand wifi access on public places. These regulations are for the access providers and class licensing registration licensees with the mandate to register, maintain and retain information of person(s) using data services through Wi-Fi Hotspot at public places. The owners of public Wi-Fi Hotspot are required under these regulations to maintain a log of information of the users for ‘minimum six months’. We expect that service provider will be able to provide wifi services all across the country on public places that would be helpful for the consumer to remain connected all the time.

Policy Interventions

i. Revision of Policies for Device Identification, Registration and Blocking System (DIRBS) 2018-19:

With the aim to curtail the counterfeit mobile phone market, deter mobile phones theft and to protect consumer interest in line with the duly approved Telecom Policy 2015 issued by Ministry of Information Technology & Telecommunication, PTA developed/established a “Device Identification Registration & Blocking System (DIRBS)”in collaboration with all Cellular Mobile Operators.

DIRBS acts as a central system and database for all network operators to share and synchronize information about blacklisted mobile devices to deny operations to such unauthorized devices on any network. The system besides above-mentioned benefits also enables a unique opportunity to eliminate smuggling of new and used mobile phones as only whitelisted devices i.e. those with valid IMEIs formally cleared by the PTA/Customs, will be allowed to operate on the networks, henceforth.

ii. Determination of underserved areas for the launch of Next Generation Broadband in under-served areas of Pakistan.

The Universal Services Fund Company (USF Co.) launched projects to provide telecommunication coverage to approximately 12,000 unserved Mauzas with a population of around 15 million, across all provinces of Pakistan. In these areas, provision of telecom services was not commercially viable for Telecom Operators and without intervention from USF Co., the general population would have remained deprived of telecom connectivity. The new flagship program of USF Co. is the Next Generation Broadband for Sustainable Development (NG-BSD). This program provides enhanced Broadband data rates (5122kbps) to Unserved and Underserved population of the country facing limited or no data coverage.

The Federal Cabinet approved the declaration of the following areas as Underserved for inclusion in USF’s Program, aimed at the provision of Next Generation Broadband to a population of 30,435,725 in 11,915 Under-Served Mauzas of Pakistan: Pishin, Nasirabad, Mastung, Turbat, Sukkur, Dadu, Mirpurkhas, Larkana, Chitral, DG Khan, Bahawalpur, Bahawalnagar and Rahimyar Khan.

iii. Spectrum Plan

A comprehensive draft Spectrum Plan and Strategy is prepared by the close collaboration of stakeholder including MoITT, FAB, PTA and spectrum veterans. The draft has been improved during the year 2018 and the approval process for the same is being initiated during the current fiscal year.

iv. Cyber Governance

The formulation of Cyber Governance Policy is in process and all stakeholders are being taken on board.

B. Infrastructure Development in Unserved and Underserved Areas of the Country

Through the Universal Service Fund, this Ministry is committed to minimize the Information and communication gap between rural and urban communities. To connect the unconnected in the unserved and underserved areas of the country, projects are being designed under different categories each bridging the gap of necessary services and associated systems.

i. Broadband for Sustainable Development (BSD) Program

A flagship program to establish telecommunication infrastructure that provides coverage of Voice and Broadband Internet Services to unserved mauzas across the country. More than 7,000 unserved mauzas across the country have been provided with coverage through USF. In current Fiscal Year, 925 mauzas have been served by USF under previously running projects. Whereas, Rs. 3 billion have been disbursed upon completion of different project milestones. Furthermore, USF has launched a new project to provide services in 401 unserved mauzas of North Waziristan Agency, FR Bannu and FR LakkiMarwat. Necessary codal formalities are being completed for the signing of a contract worth Rs.135 million.

ii. Next Generation – Broadband for Sustainable Development (BSD) Program

The program offers enhanced broadband services along with voice services and has recently been ratified by Cabinet. The target areas are unserved and underserved mauzas. Approximately 30 million un/underserved population in 46 districts will benefit from this program in the next 4 years. 5 Lots to be auctioned this year have been designed targeting 4,000 mauzas in 12 districts namely Dadu, Jamshoro, Thatta, Matiari, Hyderabad, Tando Allahyar, Tando Muhammad Khan, Badin, Sujawal, Bahawalpur, Rahimyar Khan and Bahawalnagar.

iii. Next Generation BSD Program for National Highways and Motorways

It is a new program which is evolved from BSD program and has been launched in the current financial year. The program targets unserved areas along the national highways and motorways across the country. It is estimated that around 7,700 kms of routes are un-served. A salient feature of this program is national roaming that facilitates commuters to get seamless coverage irrespective of their originally subscribed networks. These will be first of their kind projects to offer this facility in Pakistan. In the current fiscal year, USF has successfully launched a project to provide coverage along with the unserved segments, spanning 669 kms, on National Highway 10 and national highway 25 (partially).

iv. Optic Fiber Cable Program(OFC) USF

Optic Fiber Cable program is concentrating on connecting the unserved Tehsil Headquarters (THQs) and major town enroute 6,951 kms of OFC has been laid and 84 THQs and Towns have been provided with the connectivity. In current fiscal year, 59 THQs and major towns will be connected under OFC Khyber Pakhtunkhwa and OFC FATA Packages by laying more than 1,200 kms of Optic Fiber Cable.

v. Broadband Program

The program was initiated in 2007 whereby urban areas of 2nd and 3rd tier cities were provided with the broadband infrastructure. Additionally, broadband centers were to be established in educational institutions, called Educational Broadband Centers (EBCs) and in public places, called Community Broadband Centers (CBCs).

These centers provide shared access points to the intended sections of society. By March 31, 2019 USF has covered 479 cities and towns and established a customer base of more than 780,000 subscribers. Additionally, more than 1300 EBC and 360 CBCs have been established. In the current financial year around 700 subscribers have been established along with 19 EBCs and 4 CBCs.

Information Technology Sector Government’s Incentives for IT industry

Zero income tax on IT exports till June 20254 100 percent equity ownership allowed to foreign investors4 100 percent repatriation of capital and dividends allowed4 Three-year tax holiday for PSEB registered IT startups Tax holiday for venture capital funds till4 2024. IT Exports and Remittances There has been a consistent growth in IT &ITeS-BPO remittances over the last 5 years, with 151 percent growth in IT &ITeS-BPO remittances at a compound annual growth rate (CAGR) of 20 percent, the highest growth rate in comparison with all other industries and the highest in the region.

Pakistan’s IT &ITeS-BPO exports are estimated to have crossed US $ 3.3 billion a year at present. In addition, export remittances earned by MSMEs and freelancers are estimated to be $500 million, whereas annual domestic revenue exceeds $1 billion. Pakistan’s IT sector has a promising future, brimming with talent, and with potential to become the largest export industry of the country. Already, IT industry is among the top 5 net exporters of the country with the highest net exports in the services industries.

Pakistan is the 3rd most financially attractive location in the world for offshore services, according to A.T. Kearney’s Global Services Location Index. More than 300 international companies including Global enterprises like Bentley (R), Ciklum (R), IBM (R), Mentor Graphics (R), S&P Global (R), Symantec (R), Teradata (R), and VMware (R) have established global consulting services centers, research & development facilities, and BPO support services centers in Pakistan. Foreign Direct Investment (FDI) inflow in the ICT Sector (IT & Telecom) The reported FDI inflow in the ICT sector (IT & Telecom) for the period July 2018- January 2019 is USD 114.4 million.

E-Commerce

MoIT in-consultation with relevant stakeholders has formulated the e-commerce regulatory framework for the proliferation of e-commerce eco-system to safeguard the users and merchants’ trust and will resolve longstanding barrier to the growth of Pakistani e-commerce. Now, this Ministry is providing technical assistance to the Ministry of Commerce for consolidation of all working groups’ including the working group on e-commerce regulatory framework’s feedback into a National E-commerce Policy document.

E-Governance

MoIT through NITB, is in process of rolling-out the e-Office suite in the federal government to ensure efficiency, accuracy, effectiveness, good governance, transparency and accountability in decision making and delivery of efficient and cost-effective public services to citizens of Pakistan. In this regard, the access of e-office suite software has been provided to more than twenty-four (24) Ministries/Divisions and twenty-four (24) attached departments, whereby, more than 8000 staff have been trained on the said e-governance system.

E-Office services are being provisioned to these departments through the federal government’s secure and dedicated optical fiber network. Currently, the MoITT, in consultation with relevant stakeholders, is in the process of rolling-out the e-office suite in the provinces through a Public Private Partnership model in collaboration with the local IT industry.

The projects in this regard are as follows: Centralized Procurement Plan for Federal Government: A special procurement committee has been constituted, a Special Procurement Committee for centralized procurement of the ICT infrastructure to ensure e-Readiness of Federal Government Program. The committee shall be responsible for the procurement of items subject to quantity and quality. NITB will assess the need of each Division objectively and the allocation of funds for the same shall be taken up with Finance Division. Replication of e-office suite: Under this project, the currently under progress e-office system is to be replicated to remaining ministries and attached departments. NITB is in process of completing this project in the year 2018-19.

Infrastructure Development for IT Facilitation Establishment of Information Technology Parks

The Software Technology Parks (STPs) are a major factor in facilitating the IT companies and play a major role in the development of the IT industry. STPs house IT companies and professionals and act as software factories generating software and IT exports for the country every year.

A new state of the art IT Park in Islamabad is being established under financing from Korea Eximbank through the Economic Development Cooperation Fund (EDCF), spreading over an area of 14.9 acres of land. The construction of IT Park will be undertaken in two phases. Cost estimate for first phase is US$ 88.25 million for which loan agreement has been signed. It is expected that the design and construction of IT Park will be completed by 2022. In addition to the above, the Ministry is in the process of planning for undertaking the feasibility study to establish such state of the art technology parks in Karachi.

National Initiatives for ICTs (It &Telecom)

A. Innovation and Entrepreneurship in ICTs National Incubation Centers

The government has a vision of accelerated digitization and transformation of Pakistan into a knowledge-based economy to spur economic growth through innovation and entrepreneurship. Keeping in mind the critical role played by startups in economic growth, job creation, financial inclusion, reducing the income divide, and building a knowledge economy ignite under the auspices of MoIT, launched a program to build a network of National Incubation Centers (NIC). IGNITE has successfully established 5 NIC in the federal capital and all provincial capitals of the country. Today five NICs (Islamabad, Lahore, Peshawar, Karachi & Quetta) house 179 promising startups, which have been provided mentorship and networking by leading entrepreneurs, corporate chieftains, top professionals, investors and global entrepreneurial organizations through numerous events and meet-ups. Other facilities include rent-free office space, high-speed broadband internet, makers lab, usability labs, fintech lab, design thinking lab etc. These centers also offer a curriculum that teaches pitching and learning by doing. Legal assistance, coaches, vertical mentors, financial experts and trainers are also available to nurture Incubates.

B. Peoples Development Programs

i. Digital Skills Training Program for Freelancing The digital skills training program was inaugurated in August 2018, to train one (1) million people across the country over a period of 2 years. The digi skills Program is aimed at equipping our youth, freelancers, students, professionals, etc. with knowledge, skills, tools & techniques necessary to seize the opportunities available internationally in online jobs market places and also locally to earn a decent living. The program aims at not only developing key specialized skills, but also imparting knowledge about various freelancing and other employment and entrepreneurial opportunities available internationally and locally. Due to limited employment opportunities, it is essential for the upcoming workforce to have the necessary knowledge and abilities to grab such opportunities. This is envisaged to be achieved through a national level program, which will train target audiences in freelancing and other specialized skills.

ii. ICT for Girls Universal Service Fund’s “ICTs for Girls” program is aimed at spurring the socio-economic uplift of girls through digital learning. As part of this program, 120 state of the art digital labs have been established throughout Pakistan at the women empowerment centers and 24 other educational institutions at a cost of PKR 260 million. 150 master trainers have been trained with the help of Microsoft, Facebook and UN-Women.Through this program around 15,000 girls will be trained annually The second wave of this program, at a cost of Rs 810 million, has also been launched to train over 110,000 girls per year at 226 girls’ schools of Islamabad being run by the federal directorate of education. USF is also funding the hiring of 202 teachers for these computer labs. Under these projects, 6,372 computer terminals have been set up throughout the country. Through this mega project, the ultimate objective is to increase the employability potential of this disadvantageous section of society.

iii. Capacity Building of IT Industry PSEB has assisted quality certification of 03 IT companies at ISO 27001:2015 and 02 at ISO20001. Whereas, certification of 06 IT companies is in progress on ISO 27001/20001. Moreover, PSEB has also assisted one IT company on CMMI Level-5.

iv. ICT for Special Persons USF has recently launched a special project to establish 6 state of art specialized Information Communication Technology (ICT) facilities at the national library and select institutions located in Islamabad Capital Territory. All these labs have been equipped with modern ICT equipment and relevant assistive technologies catering to the specific disability\disorder.

v. Digital Platforms for Underserved with the advancement of technologies, the proliferation of digital platforms and enabling apps, user behavior is shifting from voice and data-centric services to app-centric centric services. Realizing this shift, USF is in process of establishing platforms for the un/underserved communities of Pakistan.

C. Funding Technical Innovative Products (ICT) Technology startups

It is considered to be the epicenter of innovation and are fueling the growth of economies worldwide by creating new jobs, contributing to the GDP and raising the standard of living. Some of the success models around the world are South Korea and Singapore etc. The Government of Pakistan has also realized the importance of supporting an innovation and entrepreneurship culture in the country and has taken major strides in the past few years. This includes supporting cutting edge R&D and product development through supporting startups and joint industry-academia collaborations.



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