The same telecom humdrum

Once upon a time, not so long ago the telecommunication landscape in Pakistan was akin to an oasis in the desert. After all, the sector has attracted around one-third of the FDI coming to Pakistan since the telecom deregulation in 2004; however, these inflows have sharply waned in recent years, not least because of the stagnation and downslide in various telephony segments.
Latest figures released by the Pakistan Telecommunication Authority (PTA) present a mixed picture of the industry. Total teledensity in Pakistan - the sum of cellular, fixed local loop (FLL) and wireless local loop (WLL) teledensities - reached 68.4 percent by the end of April 2011, an improvement of 430bps since June 2010.
The thrust behind rising teledensities is provided by a gradually increasing cellular subscriber base which crossed the milestone of 100 million in July last year. With 107.8 million subscribers, the cellular teledensity reached 64.8 percent in April 2011.
The teledensities of the FLL and WLL segments remained flat during the month of April at 1.9 percent and 1.7 percent respectively. The WLL segment shed 1.2 percent of its subscribers during the month, mainly due to a loss of around 37,000 PTCL customers.
The MNOs collectively acquired 8.7 million new (or additional) subscribers during the ten months ended April 2011, primarily in rural areas. It is interesting to note that the trend in acquisition of additional subscribers is in sharp contrast with the ranking (based on market share) of the mobile network operators (MNOs).
For instance, Mobilink has a market share of 31 percent, yet it acquired only 9 percent of the additional subscribers during the ten months ended April 2011. On the contrary, Zong - which had a market share of only 7 percent in June 2010 - acquired a whopping 42 percent of new subscribers to its network during the same period, increasing its market share to 10 percent in April 2011.
The overall telecommunication scene is getting increasingly drab. While higher taxes are weighing on all telecom segments, several segment-specific issues are also retarding the industrys growth. The FLL segment fell prey to preference for wireless communication in line with regional trends. The pace of decline in the WLL segment has become faster only in recent months.
Owing to stiff price competition, cheap tariff rates, declining ARPUs and a decelerating pace of subscriber growth, MNOs margins are more squeezed than ever. There also seems to be little appetite for new technologies like 3G or 4G - not least because of lackluster financial performance of most of the MNOs and little evidence of market feasibility, readiness and acceptance.
The market had to saturate at one point or the other, and the discriminatory taxation regime for the sector is likely to continue unabated. Time is, however, ripe for diversification. PTCL can arrest the persistent loss of fixed line subscribers and increase its revenues if it focuses more on corporate services and solutions, LDI traffic, VoIP telephony and videoconferencing.
Provision of value added services (VAS) - those that go beyond cheap SMS bundles and inadequate internet buckets - is the way to go. MNOs are in a unique position to benefit from the introduction of mobile financial services to unbanked Pakistanis and its adoption on a large scale.

===================================================

Cellular sector comparison (till April 2011)

===================================================

                    Market        Total Subscribers

                      share  subscribers     added*

                          %          mn          mn

===================================================

1       Mobilink       30.5       32.96        0.76

2       Telenor        24.2       26.06        2.26

3       Ufone          18.9       20.43        0.89

4       Warid          16.8       18.09        1.16

5       Zong            9.6       10.34        3.63

        Total                     107.9        8.70

===================================================