Pakistan telecoms market
Pakistan is located at the crossroads of south Asia, central Asia, China and the Middle East. Bordering Afghanistan, China, India and Iran, as well as the Arabian Sea to the south, it represents the fulcrum of a regional market with a vast population, large and diverse resources, and untapped potential for trade.
It also faces significant challenges. These include political upheaval, security issues and conflict in border areas. In addition, it is prone to the elements. Floods in 2010 caused damage estimated at more than $10 billion.
“It has been really difficult times politically in Pakistan since 9/11,” says Rashid Shafi, senior EVP and CSO, Multinet Pakistan. “The ‘ping-pong’ between military regime and democratic civil government has meant we have yet to be in a position to streamline or focus our proper direction.”
Instability has impeded growth in Pakistan’s telecoms sector. The auction of 3G/4G/LTE “technology neutral” licences approved in 2011 has been delayed amid legal challenges and allegations of corruption.
With the government, the Ministry of IT & Telecom (MoIT) and the Pakistan Telecommunication Authority (PTA) still at loggerheads, wrangling over the issues of legal intercept and taxation via the International Clearing House also remain unresolved.
Yet the telecoms sector has continued to perform relatively well. The PTA reports that teledensity passed 70% in 2012, while telecoms revenues reached $3.8 billion during the same period, up 12% year-on-year. Growth has been achieved via new value-added services, subscriber additions, and internet and data services. Cellular operators are focussing on mobile banking and premium-rate SMS.
Basic services include fixed local loop (FLL), wireless in the local loop (WiLL) and long-distance international (LDI). Voice accounted for 84% of total telecom revenues, hitting $3.3 billion in 2012. Growth in broadband, dial-up, internet, SMS and MMS saw data revenues reach $636.6 million.
LDI recorded an all-time high in 2012 of 20.2 billion minutes, an increase of 79% on 2011. However, the use of illegal gateway exchanges to terminate/originate international traffic via VoIP, known as “grey trafficking”, is reportedly costing $20 million per month in lost tax revenue. Nevertheless, Pakistan’s telecom sector contributed a record $1.2 billion to the national exchequer in 2012.
Telecoms market research firm TeleGeography reports that Pakistan’s fixed-line market is gradually becoming competitive. Incumbent Pakistan Telecommunication Company (PTCL) remains the dominant provider, and retains a monopoly on international bandwidth. It is a consortia member in three of the four submarine cables serving the country: SEA-ME-WE 3, SEA-ME-WE 4 and IMEWE. The other, Transworld (TW1), is owned jointly by Global Telecom Holding (formerly Orascom Telecom Holding, Egypt), Orastar (Pakistan) and Omzest (Oman).
PTCL is required to install DSL Access Multiplexers (DSLAMs) in its exchanges to offer wholesale ports to alternative ISPs. Moreover, it was expected to begin offering wholesale bitstream access by the end of 2009, although as of mid-2013, it had yet to do so.
Meanwhile, Multinet continues to aggressively invest in its network expansion, with an optical fibre network now in excess of 11,000 km and connecting 107 cities. Fixed-wireless operators TeleCard and WorldCall are other notable players.
According to Multinet’s Rashid Shafi, with the previous civil government being the first in Pakistan’s history to complete its full tenure and make a democratic transition to the current administration, the country’s new-found political stability will make a serious economic revival tenable. The World Bank forecasts GDP growth close to 4% during 2014-2015, while the IMF has approved a $6.6 billion loan to support Pakistan’s structural reforms.
“With the economic growth that we are expecting, the affordability of ICT and telephony will increase. The government will spend more money on education, so literacy should increase as well. As a result, the wholesale arena will see demand for internet bandwidth and telephony increase.”