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Cellular Industry of Pakistan

Abstract
The report studies the cellular industry of Pakistan and identifies the reasons of the surge
and its future potential. The research looks at factors such as the increase in network
coverage, increase in number of subscribers, reduction in call charges, improvement in
quality of service etc. to determine the growth in the cellular industry. Interviews with
personnel of cellular companies have been done to find out the future trends of the
cellular companies.

Consumer insight has also been taken through primary survey of 300 consumers. The
survey was conducted to understand the consumer preferences with respect to cellular
services. The research establishes which factors are the most important to consumers
amongst price, quality, value added services etc.

Introduction
Pakistan Telecommunications Sector is going through a phase of transition i.e. from a
purely monopolistic model to a more competitive model. The de-regulation of the
Telecom Act of 1996 has opened the ground for competition and has made the country
attractive for foreign investments and economic development.

The current move towards liberalization would not only cover WTO commitments but
will also protect consumer issues, attract private investments, promote development and
improvement of telecom infrastructure so that it can meet the demands for future of
information technology sector. It will also encourage developments in international trade
in telecommunications services, growth in Internet, mobile and other wireless services.

If the regulatory process is carried out as planned, and the alignment of deregulation of
telecom sector with multilateral trade negotiations is done well, then this can reap
immense economic benefits for Pakistan.

The telecommunication sector can be divided into the Fixed Land Line (FLL), Wireless
Local Loop (WLL), Mobile Communications and Internet Service Providers (ISP).

Cellular Mobile Telephony

To make Pakistan an investor-friendly country, especially for telecom services, a number


of initiatives have been taken by the Authority. The first step towards making Pakistani
telecom sector an investor’s heaven is, providing an environment, which has little
government intervention. In this regard, the government of Pakistan has recently issued
two licenses to the foreign companies namely Warid and Telenor and is planning to give
licenses to more. It can be said for sure that the future prospects of the growth in the
mobile service providers are very bright and the current scenario is very welcoming for
new advances.

Electronic copy available at: http://ssrn.com/abstract=996259


Cellular Industry of Pakistan

The up coming companies have not greatly effect the current service providers as the
Pakistani market is not fully saturated yet, however, it has increased the competition in
the market resulting in the introduction of many value-added-services for the users. There
are currently 22 million mobile users in the country and the total population is 140
million and it is expected that by 2007-2008 there will be at least 30 million subscribers.
There is a possibility that beside these two companies more companies might enter into
the market after few years.

Research to date has largely demonstrated that privatization under the right institutional
environment can lead to substantial performance improvements. According to the
research most of the mobile companies are earning revenues from providing services to
the villages but the problem they face is that the Government of Pakistan is not giving
them any incentives like tax holidays to the mobile companies to ease the pain. The
companies have to spend out of their pocket in order to move in to villages and that’s
why there is a lot of competition going in the market.
Another problem is mobile companies by law are dependant on the lease circuits to be
used of PTCL and they cannot have them of our own. This is in turn increasing their cost
of operations and is dependant on their giving them a good quality of service. Mobilink
has recently been allowed to lay its own fiber-optic cable which would help the service of
Mobilink.

The market share for each of the mobile companies is shown in the graph below:

Market Share

3% 2%
3% 1%
Mobilink
Ufone
30%
Paktel
Instaphone
61% Warid
Telenor

Electronic copy available at: http://ssrn.com/abstract=996259


Cellular Industry of Pakistan

Objective
The objective of the study is to analyze the growing cellular industry of Pakistan.
Recently Pakistan has been awarded the award for the fastest growing economy in the
cellular sector. The no. of subscribers has more than doubled in the past 5 years with the
current customer base exceeding 22 Million. Through this research we aim to find out the
reasons behind this growth and whether this growth will continue or not in the future.

The research also aims to understand the consumer preferences and the reasons behind
the constant switching of connections by the users.

Methodology
The research looks at two aspects of the cellular industry. It first tries to establish the
consumer psyche and the factors that effect the decisions of the consumers. Factors such
as price, quality of service, network coverage etc. is looked upon. The methodology used
to test these relationships is using surveys and performing statistical tests to find
empirical evidence.

Given that our results are of an eminently empirical nature, we start by presenting the
data sources used. These were samples obtained from a large data set of around 300
questionnaires that includes information about consumers and their preferences. The data
set was gathered through primary research conducted in various companies, colleges, and
houses in Karachi. The data set is representative of mobile consumers in Pakistan.

The second part of the research focuses on the cellular companies themselves. In-depth
interviews of key personnel at the cellular companies were conducted to gather
information such as the future trends in call charges, introduction of new value added
services etc. The results of these interviews were subjective and were achieved through
qualitative judgmental methods such as expert opinion and past experience.

The procedure followed in this regard is as follows.

After formulating our research objectives and hypothesis, we moved on to secondary data
collection.

Sampling and Survey Instrument

Once we had Secondary data we had enough information to choose our sample and data
collection method. We thought questionnaire would be the best idea to collect data
because that will be convenient for the respondent. We also conducted interviews. The
questionnaire formation was done keeping problem definition, research objectives and
hypothesis in mind.

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Cellular Industry of Pakistan

Fieldwork

Then we conducted a fieldwork. We spread the questionnaires out to the students and
also went to school and colleges and universities, offices and households to collect
information.

Data Analysis and conclusion

After that we did a data analysis by merging some of the questions so as to conform the
data to our hypothesis. We conducted various types of statistical tests in order to
interrogate our problem definition and to find solutions. Once all this was done a final
conclusion comment was added to the written document (we have documented our work
during our entire research process)

Hypothesis
The research objectives have been divided in to hypothesis to further the research
process. The hypotheses are as follows:

Research Objective # 1: Quality of Service

Hơ: The cellular companies are providing adequate level of service.

Hı: The cellular companies are not providing adequate level of service.

This hypothesis relates to the consumer perception of the service provided by any cellular
company. The questionnaire will try to probe into the various services used by the
consumer and the degree of consumer satisfaction with these services.

Research Objective # 2: Improvement in Quality of Service

Hơ: The cellular companies have made significant improvements in the cellular
networks to improve service quality.

Hı: The cellular companies have not made significant improvements in the cellular
networks to improve service quality.

This hypothesis will try to investigate the technical details of cellular networks. We will
try to analyze if the changes made to the cellular networks were proactive or reactive to
consumer complaints and increasing competition.

Research Objective # 3: Increase in number of Subscribers

Hơ: There will be a significant growth in the number of subscribers over the next few
years.

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Cellular Industry of Pakistan

Hı: There will be not be any significant growth in the number of subscribers over the
next few years.

This hypothesis will probe in to various statistics such as population growth, purchasing
power of people, number of people without cell phones and other statistical as well as
psychological measures that seem to have an impact on number of connections.
Research Objective # 4: Reduction in Call Charges

Hơ: There has been significant reduction in the call charges over the past years.

Hı: The call charges have not reduced significantly over the past years.

This hypothesis will try to compare the international call rates with the local market rates
and view the trends in accordance with the competition and quality of service. This will
provide a basis to analyze if the reduction in rates was real or just a cut in the margin.

Research Objective # 5: Trend Call Charges

Hơ: The trend of reduction in the call charges will continue.

Hı: The trend of reduction in the call charges will not continue.

This hypothesis attempts to predict the trend in the call charges being charged by the
cellular companies. This will provide us with a direction in which the future call rates
will move and whether they have reached their lowest or will they move further down.

Research Objective # 6: Impact of new companies on the cellular market

Ho: The new companies has increased the market size significantly

H1: The new companies has not increased the market size significantly

The above hypothesis will determine the impact by the entrance of new companies in the
cellular market. This will explain the development in the market size of the cellular
industry as well as provide an idea of where the cellular industry growth is going. It will
also try to explain what would happen if some new entrants come in to the market in the
future.

Research Objective # 7: New value added services introduced

Ho: There has been a lot of new value added services introduced

H1: There has not been a lot of new value added services introduced

This hypothesis attempts to find out whether new value added services (VAS) have been
introduced by the cellular companies. This aspect of the survey looks at the incentives the
cellular companies are providing to keep customers in a highly competitive industry

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Cellular Industry of Pakistan

Research Objective # 8: New value added services will be introduced

Ho: New value added services will be introduced in the future

H1: New value added services will not be introduced in the future

The hypothesis tries to establish whether new value added services will be introduced in
the future. This will provide us information about what new services if any will be
introduced for the customers.

Research Objective # 9: Increase in network coverage

Ho: The network coverage of the cellular companies has increased

H1: The network coverage of the cellular companies has not increased

The hypothesis tries to explain if the network coverage of the cellular companies has
increased. This will give information about the recent expansions in the network
coverage made by the cellular companies.

Research Objective # 10: Trend of increase in network coverage

Ho: The network coverage of the cellular companies will increase

H1: The network coverage of the cellular companies will not increase

The hypothesis tries to explain if the network coverage of the cellular companies will
increase or whether it has reached its peak. This will give information about the
expansions and future expansion plans of the network coverage of the cellular companies.

Research Objective # 11: Consumers are price sensitive

Ho: Call charges have a positive influence on the consumer decisions

H1: Call charges do not have a positive influence on the consumer decisions

The hypothesis attempts to explain the consumer preferences in selecting a cellular


service. It tries to explain whether prices i.e. call charges are the significant factor in the
customers’ decision of selecting a cellular service.

Research Objective # 12: Consumers prefer better quality

Ho: Quality of service has a positive influence on the consumer decisions

H1: Quality of service does not have a positive influence on the consumer decisions

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Cellular Industry of Pakistan

The hypothesis attempts to explain the consumer preferences in selecting a cellular


service. It tries to explain whether better quality of service is the significant factor in the
customers’ decision of selecting a cellular service.

Research Objective # 13: Consumers prefer VAS

Ho: VAS has a positive influence on the consumer decisions

H1: VAS does not have a positive influence on the consumer decisions

The hypothesis attempts to explain the consumer preferences in selecting a cellular


service. It tries to explain whether value added services are the significant factor in the
customers’ decision of selecting a cellular service.

Research Objective # 14: Consumers want wider network coverage

Ho: Network coverage has a positive influence on the consumer decisions

H1: Network coverage does not have a positive influence on the consumer decisions

The hypothesis attempts to explain the consumer preferences in selecting a cellular


service. It tries to explain whether network coverage is the significant factor in the
customers’ decision of selecting a cellular service.

Data
The data has been gathered through primary survey of around 300 consumers across
Karachi. Sampling has been done to ensure that the sample is a representative of the
consumers of Pakistan.

The data has then been analyzed on the basis of the research objectives. There are two
kinds of research objectives. The first caters to the consumer perception and their psyche
and looks at factors such as price sensitivity etc. Statistical tests and hypothesis testing
has been done in this regard.

The second kind of research objectives are those that relate to the corporate side i.e. it
focuses on the developments and the future targets of the cellular companies. Data for
these hypotheses have been collected through in-depth interviews of key personnel at the
cellular companies.

S. No Description Type
1 Quality of service Consumer
2 Improvement in quality of service Corporate
3 Increase in number of subscribers Corporate
4 Reduction in call charges Consumer
5 Trend of call charges Corporate

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Cellular Industry of Pakistan

6 Impact of new companies on the industry Corporate


7 New value added services introduced Corporate
8 New value added services will be introduced Corporate
9 Increase in network coverage Corporate
10 Trend of increase in network coverage Corporate
11 Consumers are price sensitive Consumer
12 Consumers prefer better quality Consumer
13 Consumers prefer value added services Consumer
14 Consumers want wide network coverage Consumer

Results
Research Objective # 1: Quality of Service

Hơ: The cellular companies are providing adequate level of service.

Hı: The cellular companies are providing adequate level of service.

Consumer Perception of Quality is a function of a lot of variables. We tried to check a


few of these variables to check the level of satisfaction. Qs 16, 17, 18 & 19 were used for
this purpose.

Qs 16) How many times at an average do you have to dial a number before your call
connects?

 None 1 2 3 4  5 or more

The satisfaction level will be highest for the first two options. Hence, an average of 2.0
will give a satisfactory quality of service measure for the variable.

p-value for the test was 0.148 which is greater than ά= 0.05, there is no significant
evidence to reject null hypothesis. Therefore, the result for this question yields a
satisfactory level of service perceived by the consumers.

Q 17) Does the call ever get disconnected in the middle of conversation?
 Never Rarely Sometimes
Quiet often Most of the time  Always.

The first three options (rating 5 and 4) specify average and above average level of
service. Therefore, a population mean of 3.5 will give adequate satisfaction level of
consumers with cellular services.

At 95% confidence level, the p value (0.829) > α = 0.05, we do not have sufficient evidence
to reject null hypothesis. Therefore, cellular companies do provide adequate service level
to their consumers by providing uninterrupted conversation to the consumers.

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Cellular Industry of Pakistan

Q 18) What is the level of disturbance in the call?


 No disturbance  Minimal disturbance
 Conversation understandable  Conversation not understandable

The first two options (rating 4 and 3) specify average and above average level of service.
Therefore, a population mean of 2.5 will give adequate satisfaction level of consumers
with cellular services.

At 95% confidence level, the p value(0.992) > α = 0.05, we do not have sufficient evidence to
reject null hypothesis. Therefore, cellular companies do provide adequate service level to
their consumers by providing minimal disturbance in the conversation to the consumers.

Qs 19 ) Do the sms and mms you send or receive reach on time?


 Never  Rarely  Sometimes
 Quiet often  Most of the time  Always.

The first two options (rating 5 and 4) specify average and above average level of service.
Therefore, a population mean of 3.5 will give adequate satisfaction level of consumers
with cellular services.

At 95% confidence level, the p value (0) < α = 0.05, we have sufficient evidence to reject
null hypothesis. Therefore, consumers face the issue of not receiving their sms and mms
on time.

Out of four variables that were used to measure consumer perception of quality, three
hypotheses were accepted. Hence, we are able to conclude that the cellular companies
provide adequate service level to the customers in exchange of price.

Research Objective # 2: Improvement in Quality of Service

Hơ: The cellular companies have made significant improvements in the cellular
networks to improve service quality.

Hı: The cellular companies have not made significant improvements in the cellular
networks to improve service quality.

Though our questionnaire and conversations with the Marketing team in the 6 major
Mobile Phone companies we have identified that business in the mobile communications
industry is growing and consumers are more powerful than ever before. They are better
informed, more demanding, have individual needs and now that they have a variety to
choose from they wont settle for less. Therefore to satisfy and retain consumer is a
challenge faced by these companies and they do it by regular updates in their quality of
service.

Also, since the industry is highly dynamic, technological advancements have to be made
and kept up to date with the global standards. These standards have to meet with the

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Cellular Industry of Pakistan

competition as well. Among the information found was that Mobilink has extended its
network with the increase in consumers. 0300, 0301, 0302 are the three networks
currently in service. Similarly, companies like Warid and Telenor have had to reconcile
their differences with PTCL as it is the monopoly in land-line. If customers don’t get
connected from the PTCL lines in one go, they get agitated and consider with a mobile
company problem.

Our conclusion from the data collected is that a number of mobile communication
companies with the increase in competition have brought about changes in their cellular
networks. The reason for these changes has been mostly customer complaints due to lack
of good service and also the disloyalty of customers that exists in this industry. The
changes have been in the network lines and services being offered. These changes have
instilled a sense of confidence in the consumers that their complaints are being heard.
Therefore, a certain amount of loyalty is now seen. Quality complaints however have not
been completely eradicated. This is because of umpteenth factors like lack of
coordination between technical team and marketing teams.
‫۔‬
The future looks bright as a sense of stability will soon be achieved. No more licenses
will be awarded to any new company and so consumers will soon settle for one company
of their choice.

Research Objective # 3: Increase in number of Subscribers

Hơ: There will be a significant growth in the number of subscribers over the next few
years.

Hı: There will be not be any significant growth in the number of subscribers over the
next few years.

The population of Pakistan as of 2006 is 160 million which is the 6th largest in the world.
It has grown from 150 million in 2005. The size and the population growth help the
mobile communication industries determine the approximate number of subscribers.
Apart from the increase in the population size, the per capita income of the customers has
increased as well. This again correlates positively with the number of mobile connections
bought in a year. When asked all network connections said that they have observed an
increase in the number of subscribers. Another interesting trend seen in Pakistan that the
population is prone to technology. They learn how to use technology without much
effort. This trend is also observed in the bottom of the pyramid.

Another factor that has played a role is the increase in the number of subscribers for the
different companies has been the origin of the company. All companies except for Warid
and Telenor are local. This gives them an edge as no hostile acts are committed against
them.

An approximate number of subscribers for the major companies are:

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Cellular Industry of Pakistan

0.6

0.5
Mobilink
0.4
Warid
0.3 Ufone
Paktel
0.2
Telenor
0.1

0
2002 2003 2004 2005 2006

From the data above we conclude that the number of subscribers have increased
tremendously in cases of Warid and Mobilink. Paktel and Ufone have not seen as much
increase. Telenor however is facing difficulties to make a mark in the minds of the
consumers here. A major reason has been the cartoon controversy that has been a major
disadvantage. They launched djuice as a separate brand but this marketing gimmick is yet
to pay off.

A trend very much on the rise in Pakistan is that one consumer holds a great many
network connections at a time. This is because of the cheap line rents. The companies
feel that as long as consumer holds their number half their battle is won. With similar
offerings, comparable rates and promotions, it is advertising that makes one service
provider stand apart from the other. With an enormous budget, advertising is given the
greatest importance in creating customer base. Recent television commercials of service
providers have given a new dimension to the category altogether. For example the Paktel
ad sung by Ali Azmat and the latest Ufone commercial by Dino. Although in direct
competition with each other, the two companies were promoting themselves with
opposing propositions, (Paktel talking about unity and patriotism and Ufone about
individuality and youth)

Research Objective # 4: Reduction in Call Charges

Hơ: There has been significant reduction in the call charges over the past years.

Hı: The call charges have not reduced significantly over the past years.

Three questions will be used to test the overall hypothesis.

1) Have the cell phone call rates gone down over the past few years?

 Significantly  Halved  Not much of a difference

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Cellular Industry of Pakistan

The first two options had a rating 1 while the third was rated 0. The purpose was to
capture the consumer perception of any price reduction. Therefore, the hypothesized
mean of 1 would be used for the test.

Since p = 0.333 which is less than ά= 0.05, there is no significant evidence to reject null
hypothesis. Thus, we can essentially conclude that the consumers perceive that prices for
various cellular services have gone down over time.

2) Is it still expensive to use a cell phone over the land line?

Yes  It’s the same  No (cellular rates are higher)

The first option has a rating 1 while the other two have 0 rating. The purpose was to get
an idea if the cellular service has replaced the land line call service. Therefore, the
hypothesized mean of 1 would be used for the test assuming consumers still find it
expensive to use cell phone over land line.

Since p-value(0.00)< 0.05, there is sufficient evidence at 95% confidence level to reject
null hypothesis. Therefore, we can conclude that consumers find the cellular services to
be equally or even less priced than the land line service.

3) Should the call rates further go down at the cost of quality?

Yes  No

The first option is rated 1 while the second is 0. This question is trying to measure the consumer
perception of price vs. quality.

Since p-value (0.965)> 0.05, there is no sufficient evidence at 95% confidence level to
reject null hypothesis. Therefore, we can conclude that consumers are indifferent between
the price and quality at this point. It reflects the fact that the consumers are satisfied with
current level of quality of service and would not want to pay any extra charges to receive
better quality.

Research Objective # 5: Trend Call Charges

Hơ: The trend of reduction in the call charges will continue.

Hı: The trend of reduction in the call charges will not continue.

According to the questionnaires and other sources the prices have seen a great fall. This
has largely been possible due to the government’s efforts and its regularization of this
industry. Apart from call rates, the line rents and also the pre paid line costs have
reduced.

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Cellular Industry of Pakistan

You can call it 'cellular war' as the intensity of competition is so high. In Pakistan’s
telecom industry, millions of confused and satisfied subscribers look up to the service
providers for them to sustain at 'one' fixed tariff policy. The variation in tariff plans
almost every other month is outcome of severe competition between cellular companies
especially after entrance of two new cellular companies in 2005. Nearly all cellular
companies in Pakistan modified their tariffs during last 12 months.

And over the past year, Mobilink has cut rates twice, though new entrants have proposed
prices that are even lower. "Mobilink is fully alive to the challenge," says M. Mashkoor
Hussain, who oversees marketing at the carrier.

There are three things that has caused the lowering of the rates of Paktel, these are:

• The license was given to Paktel on the condition that the rate charged to the public will
be 20% lower than the existing rate going in the market. This was the requirement of the
government and because of which it had to do it.

• Another reason was to follow the penetration strategy and to again the market share. If
you go in the market with the same offer than no one will buy your product it has to offer
something extra.

• Thirdly to create value for the customer as the customer is price sensitive.

The prices paid by Pakistani people especially after the imposition of the incoming call
free is far less than paid by people in India. The charges are around 40 paisa for one
minute call which is cheap and the point of bringing the rates down depends on the
number of users that are subscribed to the company. This year the number of mobile
users outstripped fixed-line subscribers for the first time, and cellular is sure to make
further gains as two new operators join the existing four. If this trend continues and the
cost is justified than they may bring the prices down. This however is not a possibility in
the near future.

Another conclusion is that these mobile companies are dependant on the price levels of
PTCL and they cannot set them independently because PTCL is a monopoly . This is in
turn increasing their cost of operations and they are dependant on PTCL’s quality of
service. So, they cannot set rates without keeping their direct competition and PTCL in
mind.

Research Objective # 6: Impact of new companies on the cellular market

Ho: The new companies has increased the market size significantly

H1: The new companies has not increased the market size significantly

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Cellular Industry of Pakistan

Last year, the number of mobile users outstripped fixed-line subscribers for the first time,
and cellular is sure to make further gains as two new operators join the existing four.

The impact of each company in the sector is given below

Mobilink

Mobilink the market leader in Pakistan's cellular communication remains at the top.
Entrance of new companies into the cellular scene did not hurt the growth of Mobilink's
subscribers and even could not force them to slash their tariff to such a low level which
other cellular companies had to.

Warid Telecom

Warid Telecom is liked by many as their simple airtime attracts new users and keeps the
old ones happy and satisfied. 'I don't have to calculate Warid's tariff as I get what they
say, no difference on any network' comments a Warid subscriber in Islamabad. Although
Paktel now offers 'per second billing', Warid Telecom's 30 second billing is also very
much magnetic to its subscribers. Paktel and Warid Telecom are only companies offering
billing in seconds, the other networks charge you for a minute even if you talk for 5
seconds.

Telenor

Telenor which came with a big bang to Pakistan in 2005, widely advertised the company
as a European one and assured of introduction of European standards to Pakistan. They
had an edge over Warid Telecom as Telenor launched before Warid. With over 200
destinations now, Telenor has become a mature cellular company in Pakistan. Telenor's
MMS deal with all GSM companies except Paktel is also a great plus to Telenor's
subscribers. With these deals, Telenor's subscribers can send MMS to any of these
networks without any interconnect charges. Telenor's packages are not that much
appreciated but their 'value added services' have a worth. “I love Telenor's GPRS for its
speed and reliability”, claims a young Telenor subscriber with a cool GPRS enabled
phone.

UFONE

Ufone had a post paid package that was 'the lowest'. Though the package can still be
purchased, Ufone is no more advertising this package in their current campaigns. With
the name of 'Unique' package, this one is not even mentioned on Ufone's website now. 50
Paisa per minute in peak time and 25 Paisa per minute at off-peak time are very attractive
for those who have large call volumes. The problem starts when the rate differs while
calling on other networks. Ufone's customer service has improved a lot as now users do
not have to wait for such a long time when they dial 333 from their cell phones which is
Ufone's customer service number. “I didn't believe when my call got entertained within

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10 seconds at Ufone customer service number, they have improved their customer
support a lot” applause by a Ufone post paid subscriber.

Paktel

Paktel remains famous for its colorful, interesting and widely talked packages, offers and
advertising campaigns. Recent offer of 'per second billing' tempted lots of cell phone
users and many turned to Paktel for benefiting from this exciting offer. Paktel charges the
same rate for International and local calls (valid for land-lined numbers of listed
countries). This in itself is a great feature according to some Paktel fans.

Telecom Industry in Pakistan as seem by the data above is experiencing a fast pace in
context of new launchings and introduction of exciting technologies. "It's an absolute
revolution," said Awais Ahmed Khan Leghari, the telecommunications minister.

Pakistan's telecom sector has plodded along, seemingly stuck in the mid-20th century.
From 2.1 phones per 100 Pakistanis in 1999, the number of fixed lines has crept up to just
2.9 per 100 today. And while cellular has been more dynamic, only about 5% of
Pakistanis have cell phones. scores of new private entrants are gearing up to provide
service, and since June cellular subscriptions have shot up by 56% -- making Pakistan
one of the fastest-growing cellular markets. Within the next 18 months the number of
phone lines -- both fixed and mobile -- in Pakistan is expected to double.

Research Objective # 7: New value added services introduced

Ho: There has been a lot of new value added services introduced

H1: There has not been a lot of new value added services introduced

The list to value added services provided by each company has increased tremendously.
this is because of the increased competition and the brand loyalty that doesn’t exist.
Paktel has recently introduced a ring tone facility that it is heavily advertising to its
customers. Mobilink and Warid keep on introducing new services and send messages
informing their consumers of the same to keep them hooked on to their connections.

Services offered by Telenor

GPRS/WAP
Ringbones, pictures
MMS
Easy recharge through easy load

Services offered by Ufone

GPRS

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Cellular Industry of Pakistan

MMS
WAP
Voice Mai
a wide range of SMS services.

Since the service that all companies provide is more or less the same, in order to create a
differentiation in the eyes of the customer, special branding strategies have to be
implemented. This is a major challenge for the companies and they are continuously
putting in efforts to solve the issue. This is evident from the fact that most of the
companies have undergone major branding shifts. Ufone has tried to position itself as a
service for the new generation with its new PrePay, while Paktel has come up with the
lowest rates for international calls to position itself differently. However still, branding
the service in the right way has become a major challenge for the marketers in the mobile
telecommunication industry.

Research Objective # 8: New value added services will be introduced

Ho: New value added services will be introduced in the future

H1: New value added services will not be introduced in the future

The hypothesis tries to establish whether new value added services will be introduced in
the future. This will provide us information about what new services if any will be
introduced for the customers.

The list the services that are provided by the each mobile company have increased.

Mobilink

Some of the major services that it provides to its users are:

 GPRS Roaming (nationwide and international)


 Ring tones
 Wallpapers
 Greeting cards
 SMS Trivia
 Chat services
 Mobile Banking through Citibank SMS service
 Payment solutions
 International Roaming

Warid

Warid offers its customers the most advanced and most practical of products to amass
onto its packages

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Cellular Industry of Pakistan

 Data Services
 Voice and Basic Services
 Voice Mail
 Warid Entertainment
 Warid Zone
 Friends & Family
 International Roaming

Instaphone

 InstaShare
 SMS Info Services
 Web*SMS Chat
 Ring Tones
 Free Voice Mail Gold
 Call Waiting
 Conference Call
 Free CLI

As can be seen from the data given above, the VAS provided by the companies is very
competitive. As competition is growing and consumer preferences growing with it, the
need for better services is felt by all mobile communication companies. This helps them
in getting loyal customers. Business is growing and consumers are more powerful than
ever before. They are better informed, more demanding, have individual needs and now
that they have a variety to choose from they wont settle for less. Therefore to satisfy and
retain consumer is a challenge faced by marketers and they do it by regular promotions
and value added service.

Another aspect is that since the service that all companies provide are more or less the
same, in order to create a differentiation in the eyes of the customer, special branding
strategies have to be implemented. This is a major challenge for the comapnies and they
are continuously putting in efforts to solve the issue. This is evident from the fact that
most of the companies have undergone major branding shifts. Ufone has tried to position
itself as a service for the new generation with its new PrePay, while Paktel has come up
with the lowest rates for international calls to position itself differently. However still,
branding the service in the right way has become a major challenge for the marketers in
the mobile telecommunication industry

Research Objective # 9: Increase in network coverage

Ho: The network coverage of the cellular companies has increased

H1: The network coverage of the cellular companies has not increased

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Cellular Industry of Pakistan

The hypothesis tries to explain if the network coverage of the cellular companies has
increased. This will give information about the recent expansions in the network
coverage made by the cellular companies.

Pakistan's Telecoms Authority is understood to be preparing to permit mobile phones to


be used in the country's Northern Areas, where phones are currently forbidden. The
regulator is considering permitting the existing mobile networks to extend the remit of
their operating licenses to include the Northern Area for a fee of US$10 million. The
need for improved wireless communications was heightened following the 2005
earthquake in the area. Aid efforts were severely affected by the lack of even rudimentary
communications services

Mobilink’s coverage Map

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Cellular Industry of Pakistan

Ufone’s coverage area

The comparative study of the two giants in the mobile sector identifies that the network
coverage of Mobilink and Ufone have increased and cover significant areas of the
country. Currently the number of LAN line users in Pakistan is 5.5 million and the
mobile users are around 6 million. It has already exceeded the LAN line connections due
to its availability in rural areas.

Research Objective # 10: Trend of increase in network coverage

Ho: The network coverage of the cellular companies will increase

H1: The network coverage of the cellular companies will not increase

The coverage of the mobile companies has increased tremendously in the past few years.
Currently the number of LAN line users in Pakistan is 5.5 million and the mobile users
are around 6 million. It has already exceeded the LAN line connections due to its
availability in rural areas. It is a misconception with the people that the mobile companies
are not operating in the villages but the fact is that the mobile service providers are not
only operating in many villages but also getting the major source of revenue from them.
It is in the contract that the government signs with every service provider that it will
expand it base in the villages where the fixed PTCL lines are not present. Mobile service
providers also benefits from the village services: this is because:

• These people are fair in their dealings and they don’t cheat.

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Cellular Industry of Pakistan

• Secondly they pay all the bills on time, as they are simple people.

• Thirdly they use mobile very frequently than the city people because no
alternate is available so they have to stick with the option. They keep mobile to
be used for even small tasks and as they don’t have other expenses they have a
lot of money to spend on these calls.

The mobile companies are hence, pursuing aggressively in that sector of the market and
will expand their bases even further. The new upcoming companies may also go for them
and they will do that, as many people in cities are less likely to change their connections.
The villagers seems unaware but that is not the case in most cases as they know a great
about the services provided by each company

Research Objective # 11: Consumers are price sensitive

Ho: Call charges have a positive influence on the consumer decisions

H1: Call charges do not have a positive influence on the consumer decisions

Questions 6 and 7 attempt to test this factor in our survey. Given below are our findings
of the z-test that we applied to the results of the 2 questions.

Q 6) I am satisfied with the tariff that my cellular service 5 4 3 2 1


charges     

The first three options (rating 5,4 and 3) specify average and above average level of
satisfaction with tariff charges. Therefore, a population mean of 3.0 will give adequate
level of importance placed on network coverage.

At 95% confidence level, since the p value (0.583) > α = 0.05, we do not have sufficient
evidence to reject null hypothesis. Therefore, we conclude that consumers in general are
satisfied with the tariff that their cellular service charges.

Q7 ) I will switch to other services if they have lower 5 4 3 2 1


charges     

The first three options (rating 5,4 and 3) specify average and above average level of price
sensitivity in consumers when selecting a cellular service. Therefore, a population mean
of 3.0 will give adequate level of price sensitivity.

At 95% confidence level, since the p value (0.906) > α = 0.05, we do not have sufficient
evidence to reject null hypothesis. Therefore, we conclude that consumers in general are
price sensitive while selecting or using a cellular service.

20
Cellular Industry of Pakistan

By performing hypothesis tests on the two questions concerning price sensitivity, we


have determined that consumers will easily switch to other services if they provide lower
charges and they consider price as one of the most important factor when selecting a
service.

Research Objective # 12: Consumers prefer better quality

Ho: Quality of service has a positive influence on the consumer decisions

H1: Quality of service does not have a positive influence on the consumer decisions

Questions 8 and 9 attempt to test this factor in our survey. Given below are our findings
of the z-test that we applied to the results of the 2 questions.

Q8) I am satisfied with the quality of service of my 5 4 3 2 1


cellular service     

The first three options (rating 5,4 and 3) specify average and above average level of
satisfaction with quality of service being provided by cellular companies. Therefore, a
population mean of 3.0 will give adequate level of service quality.

At 95% confidence level, since the p value (1.00) > α = 0.05, we do not have sufficient
evidence to reject null hypothesis. Therefore, we conclude that consumers in general are
satisfied with quality of service being provided by cellular companies.

Q9 ) I am concerned with the problems of signal 5 4 3 2 1


dropping & busy network     

The first three options (rating 5,4 and 3) specify average and above average level
importance placed on quality of services , i.e. : problems of signal dropping & busy
network.. Therefore, a population mean of 3.0 will give adequate level of service quality.

At 95% confidence level, since the p value (0.982) > α = 0.05, we do not have sufficient
evidence to reject null hypothesis. Therefore, we conclude that consumers in general are
concerned about problems of signal dropping & busy network.

Research Objective # 13: Consumers prefer VAS

Ho: VAS has a positive influence on the consumer decisions

H1: VAS does not have a positive influence on the consumer decisions

Qs 10)VAS such as GPRS, MMS etc. is very important to me


5 4 3 2 1
    

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Cellular Industry of Pakistan

This question aims at testing the value provided to the value added services by the consumer. We
are trying to test that the consumer gives an average weight to the value added services.

Since p-value (0.785)> 0.05, there is no sufficient evidence at 95% confidence level to
reject null hypothesis. Therefore, we can conclude that consumers pay a significant deal
of attention to the value added services that are provided to the consumers.

Qs 11)I am satisfied with the VAS that my cellular service provides


5 4 3 2 1
    

This question aims at testing the level of satisfaction for the consumers with the value
added services provided by the cellular companies. Its rated from 1 to 5 with 5 being the
highest degree of satisfaction. The hypothesis aims at testing an average level of
satisfaction with these services.

Since p-value (0.996)> 0.05, there is no sufficient evidence at 95% confidence level to
reject null hypothesis. Therefore, we can conclude that consumers have an average level
of satisfaction with the value added services of the consumers.

Research Objective # 14: Consumers want wider network coverage

Ho: Network coverage has a positive influence on the consumer decisions

H1: Network coverage does not have a positive influence on the consumer decisions

Questions 14 and 15 attempt to test this factor in our survey. Given below are our
findings of the z-test that we applied to the results of the 2 questions :

Qs 14) I am satisfied with the network coverage that my 5 4 3 2 1


cellular service provides     

The first three options (rating 5,4 and 3) specify average and above average level of
network coverage. Therefore, a population mean of 3.0 will give adequate satisfaction
level of consumers with their cellular services.

At 95% confidence level, the p value (0.732) > α = 0.05, we do not have sufficient evidence
to reject null hypothesis. Therefore, we conclude that consumers in general are satisfied
with the network coverage that their cellular services provide.

Qs 15) Network coverage is an important factor for me in 5 4 3 2 1


selecting a service     

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Cellular Industry of Pakistan

The first three options (rating 5,4 and 3) specify average and above average level of
importance placed on network coverage by consumers. Therefore, a population mean of
3.0 will give adequate level of importance placed on network coverage.

At 95% confidence level, since the p value (0.000) < α = 0.05, we have sufficient evidence to
reject null hypothesis. Therefore, we conclude that consumers in general do not place
network coverage as the most important factor for selecting a service.

By performing hypothesis tests on the two questions concerning network coverage, we


have determined that consumers in general are satisfied with the current level of network
coverage that their cellular companies provide and when selecting a cellular service, they
would not place network coverage as the most important deciding factor as compared to
price or quality of service etc – so on average consumers rate network coverage at 2.5 on
a scale of 1 to 5.

Summary and Conclusion

It can be said for sure that the future prospects of the growth in the mobile service
providers are very bright and the current scenario is very welcoming for new advances.
The people of Pakistan are also taking up the habit of using the mobile in their day to day
affairs and are appreciating the new services being provided by them. The market is full
of innovative and second hand mobile phones with innovative features and youngsters are
buying it in great numbers.

The govt.’s deregulation policy has ended the monopoly of the old cellular companies
who were charging exorbitant rates and not providing adequate level of service.
However, with the advent of the new cellular companies the quality of service has
improved and the customer face fewer problems of signal dropping and disturbance in
calls. The intense competition has brought much needed improvements in this sector with
network coverage of most companies increasing day by day. Most of the telecom
companies have increased their network coverage to more than 200 cities and towns in
Pakistan. The price of the service has gone down significantly due to the competition.
However, the government’s role in this cannot be ignored as the government has reduced
the duties on the connections and has reduced other duties that have helped the cellular
companies to lower the tariff.

The introduction of value added services such as GPRS, MMS, Balance Transfer etc.
have been introduced to attract consumers and there are many more to be introduced in
the future.

The need for mobile phones is increasing and the market is expanding day by day. The
no. of consumers has increased from 3 Million in 2003 to more than 22 Million in 2006.
This shows the exponential increase in the number of consumers over the past few years.

This increase in the number of subscribers has mostly been due to the entrance of 2 new
companies Telenor and Warid. They have greatly impacted the local cellular market. Not

23
Cellular Industry of Pakistan

only have they increased the market size but the competition has forced the existing
players to improve their service. This has been one of the major reasons in the
improvement of quality of service.

An important aspect of the research was to determine which factors are important for
consumers while selecting a cellular service. Consumers are extremely sensitive to price
changes and are willing to switch connections if the other company reduces the tariff.
This has been one of the major reasons for the popularity of Warid as it provides a very
cheap tariff.

Consumers also give importance to the quality of service, however it is not of primary
concern. The same can be said about the value added services as the are interested in
them but it is not the major deciding factor. Since, most of the users reside in urban areas
or in larger towns, network coverage is not such a significant factor for the consumers.
Network coverage is important for companies who have workers working in far-off areas
at their manufacturing sites. Hence, price is the most significant factor in deciding which
network to choose.

The recent trends show a very positive and bright future for the Pakistani cellular
industry. The govt. has supported the privatization and deregulation process. The number
of subscribers will continue to increase as there is a huge market potential. The awarding
of licenses to new companies will further boost the cellular industry as it will bring in
more investment and the increasing competition will help the industry grow further.

Despite all the positives, we have to remember that the process has just begun. 22 Million
subscribers out of a population 140 Million is only 15%. Hence there is a long way to go
and we should continue the upward graph to move ahead.

References

• Article # 1: The Current And Future Scenario of Cellular Network in


Pakistan (MIS Project – IBA)

Author: Mubeen Ahmed, Yousuf Maqbool Hussain, Salahuddin Nasir

Source: IBA Research Portal

• Article # 1: ICFA Report from Pakistan

Author: Arshad Ali, NUST Institute of Information Technology, Pakistan

Source: http://icfa-scic.web.cern.chICFA-SCIC/docs/WorkDocs05/Pakistan-
Networks-Status-Report-2004.doc

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Cellular Industry of Pakistan

• Article # 2: Pakistan wins global award for tremendous telecom sector


achievements

Author: Awais Leghari

Source:www.presidentofpakistan.gov.pk/NewsEventsDetail.aspx?NewsEventID=
2937 - 25k

• Article # 3: PAKISTAN TELECOMMUNICATIONS LIBERALIZATION


(PART I)

Author: Yousaf Haroon Assistant Professor (Management) National Post


Graduate Institute of Telecommunications & Informatics

Source: http://www.pakistaneconomist.com/database2/cover/c2003-24.asp

• Article # 4 : TELENOR PAKISTAN GSM / GPRS / EDGE NETWORKS,


PAKISTAN

Source:http://www.mobilecommstechnology.com/projects/telenor_pakistan/

• Article # 5: Cell Phone Industry in Pakistan

Author: Mustafa Kamaal Pasha ,dated: March 2005

Source:http://www.pta.gov.pk/index.php?cur_t=vtext&option=com_content&task
=view&id=583&Itemid=1&catid=95

• Article # 6: Pakistan - Introduction of a Mobile Cellular Policy

Source: http://www.icc-uk.com/PakMobPol.html

• Article # 7: Hard-hitting competition among cell operators

Author: Azhar Javed

Source:http://www.google.com.pk/search?q=competition+cellular+Pakistan+2205
+scenario&hl=en&lr=&start=10&sa=N

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