Telecom sector needs to shift gear!

The Vision 2020 report, recently released by the Pakistan Telecommun-ication Authority, envisages the countrys telecom sector to be highly competitive and quality-centric - one that would offer both information and communication technology (ICT) services from the same platform going into the year 2020.
The report offers both cautious and ambitious estimates of various telecom indicators in the country leading upto the year 2020. Projections of mobile teledensity (161 million users) and broadband subscription (19.5 million) are not out of step with current industry dynamics.
However, the ability of telecom sector to gross Rs620 billion per annum by 2020 sounds ambitious, given the fierce competition among mobile network operators (MNOs) and declining average revenue per user (ARPU).
Also, the projected investment of $2.4 billion in the sector appears hard to come by, in the face of a burdensome taxation regime and less-than-optimal cash flows that have compelled the operators to reduce their investments in the sector.
The report, however, rightly identifies the next frontiers of growth for the telecom sector, which include introduction of new telecommunication technologies, mobile financial services, and all-IP next generation networks.
The telecom industry seems to have zoned out to new growth avenues.
Pakistani telecom operators are still employing second-generation technology, when over 85 percent of operators worldwide have already switched to third-generation (3G) or even fourth-generation (4G) technologies. The government of Pakistan is six years too late into introducing the 3G technology spectrum, and every year plans for its rollout are reduced to mere budgetary estimates.
Then again, one can blame the government entirely when perhaps the market itself is not ready for it. Telecom industrys consensus on introduction of next-generation technology has also been missing. MNOs are still caught up in an apparent fight for share of voice and there seems to be little appetite on their part, not least because of feasibility concerns related to a small, nascent market of smart-phone users.
However, 2020 is still a long way to go and analysts are certain that introduction and adoption of 3G-enabled services can benefit the MNOs as international experience shows that they will likely get to benefit in terms of increasing ARPUs derived from high speed data and value-added services.
The other growth area, mobile financial services (MFS) (and branchless banking) offer not just another growing revenue stream to the MNOs; they can also be instrumental in reducing the financial exclusion of the unbanked and under-banked Pakistani population.
According to a recent study conducted by the Boston Consulting Group (BCG) for Telenor group, wide-scale adoption of MFS by Pakistanis would decrease financial exclusion by 20 percent in 2020 (from 84 percent in 2011), thereby improving the financial inclusion to 41 percent by the year 2020, compared to 16 percent in 2011.
The BCG report also highlighted that by 2020, 27 million Pakistani adults will hold saving accounts, 17 million additional customers will pay the utility bills through their mobiles, MNOs will be able to offer lines of credit to 10 million Pakistanis, and four million more people could be insured against crop destruction, natural disasters and disease. International remittances will also rise by 21 percent due to MFS.
As things stand, wide-scale MFS roll-out doesn seem to be in the offing. Telenors Easypaisa and UBLs Omni are the only two players who have undertaken significant exposure in the branchless banking sector and have taken it from conception to scalable business operations. A broad-based thrust from other operators and financial institutions is missing.
Uptake of new technology and adoption of MFS is very much possible in the Pakistani market. Readers need to be reminded that the 2004 telecom deregulation policy could not foresee extraordinary uptake of mobile telephony in Pakistan as it had predicted that "there is a potential demand of approximately 25 million cellular subscriptions by 2018."
The market could surprise once again; all it needs from the telecom industry is a leap of faith.