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Submitted to

:
Sir Nabeel-Ul-Haq
Submitted by group:
Shehmeen Ashraf
Class: BS (BA) 6th B
Date 13th July 2008

Report On
Telecommunication Industry,
Growth, Competition and its impact
on the economy of Pakistan

Payphone Services I. Mobile Sector I. Fixed Line Sector I. Internet Services I.Topic Executive Summary What is Telecommunication? Telecommunication industry in Pakistan Pakistan Telecommunication Authority (PTA) Sectors in telecommunication industry 1. Impact of Deregulation on Economy . Foreign Direct Investment (FDI) 3. Comparison 3. Cellular Penetration 2. Company-wise cell sites VI. Wireless Local Loop Sector I. Broadband Subscribers 6. Growth in March 08 Quarter III. Cities & Villages covered V. Total Teledensity 4. Fixed Line subscribers (PTCL) II. Voice over IP Impact on Economy 1. Impact of Deregulation on Economy 2. Cellular subscriber Growth IV. WLL Market Share II. Mobile Sector (Competitors) II. PCO Mobile share 5.

500.24 million across Pakistan. almost 77 percent are covered with mobile networks.7 million subscribers to mobile networks but PTCL dropped in Dec 2007 bringing to a mere 4. Payphone services had 471. As per March 2008 quarter report all companies in total added about 5. romail Kenneth. Industry analysts said that there is still a great margin of growth in this industry. 2. Mobile Sector. In 2004 there were less than 2000 cell sites installed by all mobile operators for provision of mobile services.068 direct and indirect employments and now in 2006-07 it is more than double at 1.410 subscribers in Dec 2007. Internet Services.235.8 million by 5. During 2006-07. which was about 35% of total FDI in the country. Wireless Local Loop Sector.5 million internet subscribers all across in Pakistan. Fixed Line Sector. out of 376 tehsils across Pakistan.1 million subscribers of WLL services. According to the Pakistan Telecommunication Authority (PTA) Industry Analysis Report 2007. 613 million revenue was generated by telecom industry in 2007.366. currently there are about 3. Voice over IP.4. which is helping the subscribers as they are getting advanced and new packages at low prices. A total of Rs.698 employment opportunities. Foreign Direct Investment (FDI) Challenges for MPO’s Conclusion Bibliography Executive summary Pakistan telecom industry consist 6 sectors. telecom sector has received above US$ 1. bringing the figure to 290.The sector is currently contributing 2% GDP out of 7% to the Government of Pakistan . Telecom industry is booming throughout the country as two million mobile subscribers were added every month throughout the last year. Today total cell sites of all mobile operators are more than 17. Payphone Services.824 million FDI. in 2003-04 the sector was offering 466. Previous year the sector grew by 80 percent while average growth rate in last four years has been more than 100 percent. An intense competition is seen in the telecom sector and all the companies are trying to take edge on each other. Network coverage of almost 90 percent of the total population of Pakistan has made the industry even more attractive for foreign investment.

it is common for multiple transmitting and receiving stations to exchange data among themselves. However. Telecommunication industry in Pakistan: Pakistan Telecommunication Authority (PTA): Pakistan Telecommunication Authority (PTA) was created to regulate and promote telecom services in the country as per provisions under the Pakistan Telecommunication (Re-organization) Act 1996. optical fiber or electromagnetic fields. The medium of signal transmission can be electrical wire or cable (also known as "copper").Telecommunication Industry. Internet was in its infancy. When PTA started regulating the telecommunication services. Competition and its impact on the economy of Pakistan What is Telecommunication? Telecommunication is the exchange of information over significant distances by electronic means. Instaphone & Mobilink were providing cellular mobile service. The simplest form of telecommunications takes place between two stations. PTCL was providing basic telephony services whereas Paktel. Growth. . A complete. Such an arrangement is called a telecommunications network. The Internet is the largest example. single telecommunications circuit consists of two stations. The free-space transmission and reception of data by means of electromagnetic fields is called wireless. The transmitter and receiver at any station may be combined into a single device called a transceiver. each equipped with a transmitter and a receiver.

• Telenor Pakistan • Pakistan Mobile Communication Limited (PMCL/Mobilink) • PTML (Ufone) • Warid Telecom • China Mobile Pakistan (CM Pak / Paktel) Are providing services using GSM technology whereas the sixth operator i. • Instaphone is providing services using AMPS (Advanced Mobile phone system) technology Here’s a brief description of the top mobile companies in Pakistan. Ltd (PTCL).e. Internet Services 6. For those in Pakistan it is the one company where they can easily invest locally. a wholly owned subsidiary of Pakistan Telecommunication Co. is now under the control of Etisalat group of UAE. Ufone. It has been operating in Pakistan since 1994. Voice over IP 1. At the top is Mobilink. based on its recent . Mobile Sector 2. currently we have five cellular mobile operators i. Norway’s Telenor. Fixed Line Sector 3.e. It has been operating in Pakistan since 2001. owned by the Abu Dhabi group of the United Arab mirates and sister of Wateen group is number 3.Sectors in telecommunication industry: 1. Mobile Sector (Competitors): In Pakistan. a recent entrant with about a billion US dollar investment in Pakistan has been doing well. the Pakistani unit of Egypt-based telecom company Orascom. Warid. Payphone Services 5. Wireless Local Loop Sector 4. It has been operating in Pakistan since 2006.

It has been operating in Pakistan since 2005. is the latest target of foreign acquisition. Growth in March 08 Quarter: • As per March 2008 quarter report all companies in total added about 5.3 million subscribers.earning report.2 million subscribers -Ufone added 1 million subscribers on their network.7 million subscribers to their networks • Total subscribers reached at 82. During the month of April it has reported one million additions in Zong's numbers which is quiet impressive. It has been operating in Pakistan since 1991. a cellular business of Luxembourg’s Millicom. It has 0. Telenor stock is listed in the Oslo stock market (TEL) and in US(TELNY. Instaphone. .5 million during this period • During Jan-Mar 08 Quarter -Telenor added 2 million subscribers . CMPak. After it got acquired by China Mobile it is in the process of rebranding. formerly Paktel.PK). in the first ever sale of a mobile business in Pakistan by a foreign company.878 subscribers however.Mobilink and Warid added 1.It has been operating in Pakistan since 1991. -Zong added only 161.

The rate of growth of Telenor subscribers (or SIMs) has been faster than Ufone.-Insta's performance remained unstable Cellular subscriber Growth Pakistan is on 4th number in cellular subscriber growth in industry. which is due to its large population. number 1 is china. Cities & Villages covered These are areas in Pakistan cities. towns and villages .

252. In 2008 Instaphone has covered 95 locations. and market leader Mobilink has covered 7. Ufone has 2. Paktel has 362.986.covered by mobile services providers. Warid has 183. where either they have their infrastructure or providing services. Company-wise cell sites Cell sites are towers which transfers signals. This graph is comparing data of March 2007 with March 2008. Cellular Penetration Cellular penetration is areas covered by mobile services providers Industry wise in Pakistan. This graph is comparing cellular penetration of 2007 with 2008 provincial wise by the whole mobile sector.011 location all over the Pakistan. Telenor has 1. . Last year ufone was operating just 7 cities as compare to now they are operating in 41 cities which is highest among competition in Balochistan. that means ufone is market leader in Balochistan.

the Government in 1991. in middle of 2005 Government of Pakistan had decided to sell at least 26 percent of this company to some private agency. lately. PTCL has been a major player in telecommunication in Pakistan. . paging and. Ufone had increased its market share in the cellular sector. These vouchers were converted into PTCL shares in mid-1996. 10 per share. None of the brands made it to the top slots in the respective competitions. encouraging private sector participation and resulting in award of licenses for cellular. Lately. There were three participants in the bet for privatization of PTCL. HISTORY:. however. This coincided with the Government's competitive policy.2. a Dubai based company was able to get the shares with a large margin in the bet. PTCL launched its mobile and data services subsideries in 2001 by the name of Ufone and PakNet respectively. Pakistan Telecommunication Corporation (PTC) took over operations and functions from Pakistan Telephone and Telegraph Department under Pakistan Telecommunication Corporation Act 1991. announced its plans to privatize PTC.From the humble beginnings of Posts & Telegraph Department in 1947 and establishment of Pakistan Telephone & Telegraph Department in 1962. The PakNet brand has effectively dissolved over the period of time. Etisalat. Last Year. Recent DSL services launched by PTCL reflect this by the introduction of a new brand name and operations of the service being directly supervised by PTCL instead of Paknet. and in 1994 issued six million vouchers exchangeable into 600 million shares of the would-be PTCL in two separate placements. Each had a par value of Rs. data communication services Pursuing a progressive policy. card-operated pay-phones. Fixed Line subscribers (PTCL) PTCL fixed line telephones holders called fixed line subscribers.

Many big change events are happening in PTCL at the moment after its privatization. Historical Background  1947 Posts & Telegraph Dept established  1961 Pakistan Telegraph & Telephone Deptt. composing data of 2002 to Dec 2007. in . Comparison with other telecoms in developing countries shows that it is not due to the efficiency of PTCL that it is showing good financial results and paying dividends. these include the VSS (Voluntary Separation Scheme for its employees).  1998 Mobile(Ufone)& Internet(PakNet)subsidiaries established. Another seemingly minor change was change of brand identity (logo) that will present PTCL's new face after privatization.  1990-91 Pakistan Telecom Corporation  1995 About 5% of PTC assets transferred to PTA.  1996 PTCL Formed listed on all Stock Exchanges of Pakistan.  2000 Telecom Policy Finalized  2003 Telecom Deregulation Policy Announced  2006 Etisalat Takes Over PTCL Facts and figures since 2002-Dec2007: PTCL enjoys high profits because it earns monopoly rents as a single provider of fixed telephony in the country.There was increasing trend in fixed line connection from 2001 to 2006. B& CC (Billing and Customer Care Software) etc. This graph is in millions in numbers. ERP (SAP based). with greater focus on customer satisfaction and bringing about of new advancements in telecom for Pakistani consumers. FAB & NTC. restructuring.

fixed Teledensity dropped from 3. Wireless local loop services are based on CDMA and are considered an alternative to copper lines.8 million across Pakistan. 3. Comparison Mobile sector continues to be major share holder in terms of Teledensity. PTCL staff reduced because of offering Golden hand shakes. Great Bear.99%. but dropped in Dec 2007 bringing to a mere 4. Now 17 WLL licenses were issued out of which PTCL. which is adding more than 2. but it is expected to rise in light of the newly launched WLL services. PTCL has 48 lacks subscriber nation wide and sharing number of employees with ufone 40 thousand.3 million subscribers per month However. Where as ufone has 16million 1 Koror 60 lacks subscriber and have 1500 employees. Wireless Local Loop Sector (WLL) Wireless Local Loop services were introduced in Pakistan after deregulation of local loop sector in 2004. World call. Telecard. Mytel and Wateen are operational. As of the . Burraq.04% to 2. Recently re-branded Vfone service by PTCL is the market leader and recently there have been many interesting marketing and pricing moves.2007 it remain same. WLL customer base has shown rapid growth since 2003.

The entire industry in growing that can be judge from increasing number of subscribers.7% share of the whole WLL market and having 1. Another more efficient operator in the private sector would have generated twice the current level of PTCL profits through better cost controls and higher penetration rates.only three percent compared to seven per cent in India. so out of the sample of 100 people. than come worldcarll with 18% market share and having 423. WLL Market Share Maximum market share is covered by PTCL with 58.009 subscribers. .writing there are 2.384. the number of subscriber of any operator is called Teledensity of that operator. Total Teledensity: Teledensity: when we compare the number of subscribers. Tele density under PTCL monopoly is quite low .738 subscribers all over the Pakistan.1 million subscribers of WLL services.

Growth of fixed line PCO’s remained impressive till 2004-05 where it was going at an outstanding pace.89 26.84 48.43 58.88 52.26 44. In 2003 there were 127.06 45.41 55.70 57.The corporate income tax. After 2004-05 growth trend of fixed line PCO declined but wireless PCO services flourished in Pakistan.94 53. . With the induction of new licencees. sales tax and other taxes collected from the new licensees would exceed the total taxes paid by the PTCL at present as the aggregate profits of the industry would rise due to higher teledensity and higher penetration rates.910 subscribers but it grows and reaches at 471. Public Sector monopoly could reach only four million in 57 years.91 46.25 11. PTA allowed mobile companies to establish their PCO’s.410 subscribers in Dec 2007.2 Payphone Services Payphone services are companies provided license by PTA.80 3. Years Total Teledensity (%) 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 July-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07* Jan-08 Feb-08 Mar-08 Apr-08 May-08 2.66 4. the teledensity of Pakistan is estimated to double in the next two years to eight million subscribers.91 47.75 50.31 6. Teledensity (Fixed + WLL + Mobile) 4. to provide PCO sets to the retailers.26 56.

PCO Mobile share Fixed provided by PTCL has 32% share. currently there are about 3. than mobile PCOs like Mobilink and Warid has 12%. than we have WLL has 56%. Internet Subscribers According to estimates of ISPAK (Association of Pakistani ISPs). 5.5 million internet subscribers all across in Pakistan .

6. Pakistan’s Broadband market has been slow despite the fact that services have been available since almost five years. Broadband Subscribers It is very costly service that’s why having fewer subscribers than any other services. Cable Modem. . Cost of service is the major reason behind this slow growth. In other words: International calls.whereas total users crossed 17 million marks.not specific to Pakistan  FreeCallPlanet . local rates. Fiber to the Home (FTTH).not specific to Pakistan. Broadband services can be offered with the help of various technologies such as DSL. Wimax (worldwide interoperability for microwave access). Voice over IP: Companies providing VOIP and call forwarding services.002 cities are connected to internet. Currently around 3. The following list of companies are those that providing voice over IP:  Vonics (more about Vonic’s Pakistan Plan)  BRAIN TEL (Lahore only)  CallPakistanDirect  Rebetel .

it would be extremely difficult for PTCL to show such performance in the future despite its dominant market power.1 13.5 207.5 1052.  During 2005-06.4 1.60 37. Since the market structure has been deregulated. telecom sector received over US$ 1.44 54.11 35. the PTCL monopoly broken and new private sector operators given licenses to compete. China Mobile acquired Paktel which has contracted out US$ 500 million worth of project to renowned companies like Ericsson. Impact of Deregulation on Economy The impact of telecom deregulation on overall economy is quite obvious.26 1. Years Total FDI FDI in Telecom Sector Contribution in Total FDI (%) 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 July-Sep 07 Oct-Dec 07 484. 6.9 1524 3521.6 15.1 6.6 Jan-Mar 08 982.3 363.4 1905.613 million revenue was generated by telecom industry in 2007.824 million FDI. A total of Rs.5 156.8 billion FDI out of US$3 billion FDI and emerged as the only sector of the economy to attract such huge investment where its share in total FDI crossed 54%.9 290. ZTE and Alcatel to roll out their .9 It is expected that the trend of investment may continue in the next 5 years because large potential market still exists in Pakistan and all operators intend to grab their share.1 1824. which was about 35% of total FDI in the country.9 962.1 494. The sector is currently contributing 2% GDP out of 7% to the Government of Pakistan. 235.71 27.69 21.7 798 979. Foreign Direct Investment (FDI) In the last 2-3 years the telecom sector has attracted record inflows of FDI.  During 2006-07. This contribution has major impact on economy of Pakistan.0 5124. telecom sector has received above US$ 1.13 32.Impact on Economy 5.

Investment by Operators .networks. Similarly Mobilink also plan to invest US$ 500 million in 2007-08 for improving and expanding its quality of service.

36.21 0.8 36.9 8. 2. In 2006-07 Government collected Rs.7 7.9 11. 1.2 8.7 7.5 26. 26 billion in 2005-06.Mar Sep 07 07 08 2. GST/CED is Rs.7. GST/CED Collection from Telecom Sector (Rs.85 . 100 billion (about 30% higher than the last year). GST/CED collected by Govt was Rs.59 1. from July 07 to March 08).82 1.6 10.Dec Jan .8 28. 8.89 8. The increase in these government revenues are attributed to increased Teledensity and increase in the usage of telephony for voice & data.2 0.3 10.9 9.5 12.9 1.14 0.Oct . in billion) 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Mobile Basic Telephony* Others** Total July . 3.e.69 10.3 billion GST from the telecom sector and its share in total telecom taxes has increased to 36%.25 8.2 9.9 0. Revenue collected by Govt. 4.89 6.1 20.0 3.3 5.9 18. Financial $2 Billion revenue generated during the first 9 months of the fiscal year 2007-08 (i.3 0.7 - - - 0.500 per sim that is paid to government by the mobile services providers.2 6. During 2006-07 total revenue collected by the Government Rs.64 8.

Telecom Imports The exponential growth in the telecom sector is burdening the overall imports of Pakistan where sector requires spending of about US$ 1 billion just on the import of Cellular mobile handsets annually.o USO 1. clearances.5%+3% (Tax) Incl in license fees 17%~26% + GST 5. which puts burden on our foreign reserves and . Pakistan % age of revenue Sri Lanka %age Regulatory charges Service tax.5% + 0..5% Nil (only on ISD calls) Total Regulatory 2.o.5% R & 0.) + 1% D of capital invested (inv) Spectrum Charge Cost recovery ~1.3% t.1% to t. and lengthy approval processes do not permit the managers to make timely decisions to respond to the business opportunities.5%* (China Mobile) Nil 2 ~ 6%** 0.+1% inv+VAT charges recovery China % age of revenue 3% Nil India % age of revenue 10% + GST 5 – 10% ~0. Government would still receive all the taxes from PTCL and 65 percent of all the dividends that hopefully will be higher under private management. GST GST VAT License Fee 0.3% turnover (t.o.Reduction in Revenue Share License Fee Cellular phones have already jumped almost threefold to seven million subscribers during the last one year due to competition among the four players and have contributed to increased tax collection.5% +GST+ cost 1. State enterprises have an inherent disadvantage that their procedures.

The substitution of unskilled jobs in the PTCL by the skilled jobs in the telecom industry as a whole will raise the productivity of the sector as well as that of the user companies and institutions. The losses of redundant jobs in PTCL. after deregulation. Telecom sector has generated. mobile phone companies. will be more than offset by new productive jobs in the Local Loop. Those among the unskilled who can be retained or re deployed could be retained minimizing the overall loss within the PTCL itself.000 new jobs will be added during next 3-5 years. hundreds of thousands of new jobs through public call offices. calling cards and pre-paid card companies. 6. Wireless Loop and LDI companies being set up in the private sector and new infrastructure facilities. broad band services. if any. .increases the trade gap. and other value added services under the private sector. Employment in Telecom sector The alarm of employment losses after privatization is also largely misplaced and rhetorical. Industry estimates that 100. Internet Service providers.

7 1. Taxes Years %age share of GDP 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 1.6 1. Broadband & WLL services 8.7 1. Rising operational & maintenance cost 2. Increase in Govt. Internet telephony and VOIP 7.9 2.0 Conclusion . Strict policies adopted by PTA regarding the sale of new connections 6. Technological advancements 9.Challenges for MPO’s 1.6 1. Increasing marketing costs 4. Cut throat competition 5. Increasing tariff costs 3.

It is expected that fixed as well as wireless sectors will grow considerably in next future years.1. Value added products and content development are rather barely explored markets and offer a great deal to an aggressive investor 3. Telecom sector is contributing about 2% in GDP directly and if we include its indirect contribution in other sectors this share comes to about 5% 2. Broadband in the last mile. It might have minor impact on the growth of Cell phone industry but this remains to be seen . Increase in GST from 15% to 21% will result in more revenue for the Govt.

org/wiki/communication_in_pakistan .gov.wikipedia.pk 2. http://www. Mobile phone tariffs available at this PTA page.pk/index.Bibliography All the facts and figures quoted in this presentation have been taken from 1. Information of providers from PTA site www. Wikipedia http://en.pta.pta.php? option=com_content&task=view&id=542&Itemd=566 3.gov.