Telcos grow steadily

The latest statistics released by the Pakistan Telecommu-nications Authority reveal that the telecom sector continues to grow, albeit at a retarded pace. The data shows that the total teledensity - the sum of cellular, fixed local loop (FLL) and wireless local loop (WLL) teledensities - had reached 69.9 percent by the end of January 2012, primarily due to the sustained growth in cellular subscribers.

The FLL teledensity is steady at 1.8 percent, and there are nearly 3 million active subscriptions. Experts opine that after the tough loss of over two million landline connections since FY06, the operators, mainly the PTCL, would be able to hold on to the majority of the remaining subscriptions that are believed to be among those household, commercial and corporate users for whom the landlines are a necessity.

Though the volume of minutes has grown over the years, the voice-dependent top line of PTCL has been battered by cheap voice tariffs over mobile networks and the burgeoning texting (SMS) trend. That is why PTCL wouldn want to sell a landline connection in isolation anymore, and rather bundle it with other emerging services like broadband, and Smart TV. Triple-play (voice, video and data) is the way to go! In the cellular segment, the driver of local telecom scene, the mobile network operators expanded the subscription pie by 5.7 million and swelled it to 114.6 million, thereby increasing the cellular teledensity to 66.5 percent by the end of January 2012. Zong (CMPak) has been leading the pack with a net addition of 3.5 million subscribers, much to Warids loss of roughly 2.4 million subscribers during 7MFY12. It is important not to read too much into this grand subscriber base. For one, due to phenomena like multiple-sim and mobile number portability, the active customers are believed to be somewhere between 70-80 percent of the total subscribers. Besides, the addressable market has also been increasing as MNOs report extensive uptake and usage from age groups above 60 and below 18. MNOs rankings remain unchanged; however, Mobilink saw its market share erode by 37bps even as it acquired another 1.32 million subscribers during 7MFY12. Telenor and Ufone improved their market shares by 35bps each. Zong is sniffing for the fourth spot as it increased its share by 255bps during the period as Warids dropped by 289bps. The telecom sectors drabness may turn out to be short-lived as the interesting timeline for the rest of 2HFY12 suggests. First, with the planned license auction of now-defunct Instaphone, a sixth active MNO would jump into fray. Then, there is the belated, much-awaited and game-changing auction of mobile spectrum auction (for 3G technology). Telecom experts agree that MNOs need to protect their high-end customers as well as grow, and 3G is the answer to that. It would perhaps be too early or naïve to equate the 3G auction as a trigger for M&A activities in the sector. However, the sponsors of the remaining 2G operators would be in for serious strategic rethinking in the post-3G milieu. Not just the MNOs, but other ICT segments would also be impacted, albeit indirectly, by the rollout of the 3G technology. Therefore, the concerned authorities need to combine the urgency with meticulousness and conduct the pre- and post-auction process in a transparent manner, so that legitimate interests of customers, private sector and also the government, are ensured.

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Cellular sector comparison*
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                 Market         Total
Rank  MNOs        shares  Subscribers
                     (%)         (mn)
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1     Mobilink     30.28        34.70
2     Telenor      24.84        28.47
3     Ufone        19.21        22.02
4     Warid        13.08        14.99
5     Zong         12.59        14.42
                   Total        114.6
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*as of Jan. 2012 Source: PTA, BR Research