Cellular mobile operators: Internal competition termed hurdle to revenue growth

ISLAMABAD: Internal competition among cellular mobile operators (CMOs) is restricting them from increasing Average Revenue Per User (ARPU), which is hurting their business plans, official sources have revealed to Business Recorder.

Telecom sector was deregulated in 2003 and hence there is no restriction from the regulator, the Pakistan Telecommunication Authority (PTA), on CMOs to increase ARPU, except for Jazz, which is a significant market player (SMP) and requires prior approval for changes in tariff to avoid disturbance in market.

CMOs during the National Assembly Standing Committee on Information Technology and Telecommunication demanded 250 percent increase in ARPU, i.e., from 80 cents to 2 dollars to meet growing expenses.

They further pleaded that Pakistan is 237th cheapest among the 239 countries, and with the current ARPU, they cannot compete with EU or US where it is around 40 dollars. CMOs representative also stated that they do not need other relief, but just increase the ARPU from current 80 cents to two dollars.

However, when Business Recorder contacted senior officials at the Ministry of IT and Telecom, PTA AMD sector experts to further analyze the hurdles in increasing ARPU, it was revealed that CMOs are requesting for increase in ARPU from themselves, as there is no restriction on three operators including Ufone, Zong and Telenor to increase prices at any time.

Pakistan telecom market is de-regulated and government cannot intervene except for SMP, i.e., Jazz to seek prior approval. Jazz had 4.816 million 3G and 41.891 million 4G users by end January 2023.

As per the rules, SMP cannot be given free hand which can result in disturbance in the market even by lowering tariff massively. However, fearing subscribers’ loss, CMOs are reluctant to increase rates by themselves.

“If one operator will increase package price it may result in losing subscribers and that is why all are looking at each and competing to attract more subscribes even at lower rates”, and apparently presenting the case at various forum being a low friendly market for telecom industry, which actually is not, official sources added.

PTA annual report noted that in terms of ARPU, the mobile sector registered modest improvement as indicated by an increase from Rs215 in fiscal year 2020-21 to Rs220 per month in fiscal year 2021-22. This increase can be attributed to expansion of mobile services, addition of new subscribers, increased usage of data services, and increase in tariffs.

Given the rising number of Internet subscribers, a major chunk of mobile operators’ revenue comes from provision of data services. The share of data revenue in the gross revenue generated by mobile operators increased from 38 percent in fiscal year 2017-18 to 61 percent in 2021-22.

The data ARPU of the mobile industry stood at Rs237 per month during 2021-22 as against Rs234.7 in the previous year, reflecting a minor increase of 0.37 percent, compared to an 11 percent increase in data usage per subscriber; this shows that the average price for data has further declined in Pakistan.

This is also evident from the effective price per GB calculation, which shows that price (in terms of Revenue/GB) further declined to Rs34.23 in 2021-22, compared to Rs37.86 in the previous year.

According to the PTA report, Jazz ARPU was Rs253, Ufone Rs205, Zong Rs216, Telenor Rs178, and total was Rs220 per month during 2021-22.

Copyright Business Recorder, 2023