Pakistan Telecommunication Report

REPORT ON

PAKISTAN TELECOMMUNICATION BY

SHAHID ALI MBA (BANKING & FINNACE)

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1. Introduction 1.1 The Islamic Republic of Pakistan was founded on the 14 th August 1947. It is a land of snow-covered peaks and burning deserts, of fertile mountain valleys and irrigated plains. It is peopled by some 149.03 million inhabitants representing an array of ethnic groups but united by the Islamic faith. Pakistan is strategically placed at the crossroads of Asia, where the road from China to the Mediterranean meets the route from India to Central Asia. For thousands of years, this junction has been a melting pot of diverse cultures, attracting traders and adventures, pilgrims and holy men. 1.2 Located in South Asia, Pakistan is bordered by India on the east, China on the north east, Afghanistan on the north west while Iran shares its border in the south west and Arabian Sea in the south. The borders of Pakistan encompass a total area of 796,096 square kilometers. 1.3 Climatically, Pakistan enjoys a considerable measure of variety. North and northwestern high mountain ranges are extremely cold in winter while the summer months from April to September are very pleasant. The vast plains of the Indus Valley are extremely hot in summer and have cold weather in winter. The coastal strip in the south has a temperate climate. There is general deficiency in the rainfall. Average rainfall is 762 millimeters per annum. 1.4 Pakistan’s 4000-years history is richly illustrated by archaeological sites and imposing monuments scattered the length and breadth of the country. Brick cities from the Indus Civilization, which flourished around 2000 BC, stand beside Buddhist ruins contemporaneous with the birth of Christianity. Magnificent Muslim tombs from the 12th century vie with the palaces, mosques and forts of the Moghul Emperors of the 16th and 17th centuries.

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2.

Pakistan Telecommunication Authority (PTA)

The Pakistan Telecommunication Authority was established in January 1996 under the Pakistan Telecommunication (Re-organization) Act, 1996. It consists of a chairman and two members, Member (Technical) and Member (Finance). The overall working force of PTA exceeds 200. PTA regulates the establishment, operation and maintenance of telecommunication services in Pakistan.

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AN OVERVIEW OF PAKISTAN ECONOMY

Since late 2000, the world economy has been witnessing harmonized downturn and for the first time the world’s potent economies faced deceleration in tandem. The 11th September event and their aftermath further worsen the already difficult situation on the global economic scene. This year several countries experienced a fall in output on per capita basis. This reversal compounds problems for the developing countries to emerge from poverty in 2003. Instead million of people added to the list of poor living below the poverty line. 3.1

3.2 Notwithstanding with the downturn in many countries, Pakistan’s economy has demonstrated greater resilience and improvement in overall macro economic fundamentals of the economy. However, the events of September 11, and continuation of the catastrophic drought conditions adversely affected the pace of economic recovery. Despite these external shocks, performance of Pakistan’s economic was quite encouraging in fiscal year 2001-2002. Particularly, the most impressive gain during the year appeared to be the tremendous improvement in Pakistan’s external sector. Main factors strengthening the external sector were improvement in trade balance, sharp increase in the inflow of workers remittances and substantial increase in the official transfer. 3.3 Present government has placed special emphasis to information technology and communication sector, as it has been identified as the one of the major drivers of the growth. Vision of the government is to harness the 3

potentials of IT & Telecom as a key contributor towards Pakistan sustainable development. In this regard Rs. 3.5 billion has been allocated to IT & Telecom Sector in fiscal year 2002-2003. 4

AN OVERVIEW OF THE TELECOM SECTOR

The current global telecom industry, is going through a phase of turbulence after years of stability, the situation is changing radically. The industry is facing number of challenges; the most pressing one is opening of the telecommunication sector. It has led to evolve genuine competition in many markets; the introduction of mobile, Internet together with other value added services is rapidly creating new segments of market with very few similarities with the traditional marketplace. Moreover, with the convergence of services and technologies in the developed economics is resulting in a totally different set of issues to be addressed. 4.1

4.2 In line with these global trends the telecom sector of Pakistan is also being completely deregulated and necessary preparations by all stakeholders are underway. In this regard PTA has been working exclusively to address all anticipated issues for evolving a comprehensive deregulation framework. Consultations with internationally renowned telecom consultants have been carried out to chalk out a strategy for implementing deregulation. 4.3 Pakistan telecommunication and IT sector despite going through a major structural shift, has grown and developed in the last few years. To highlight a few, • PTCL earned a record profit of Rs. 19 billion while preparing for a deregulated scenario. • Internet access expanded to 850 cities. • PAKSAT-I Pakistan’s own satellite has been launched and positioned at 38* e orbital slot. • Cellular penetration is now 1.3 million and is expected to grow to 3 million by next year. • Cost of making domestic and international calls dropped between 40 and 60 percent. • Internet bandwidth rates slashed down from US$ 90,000 to US$3,800 per month. • Internet bandwidth capacity availability has increased to 400 Mb/s and 250 cities are connected through optic fiber. 4

5. TELEPHONE ACCESSIBILITY 5.1 Communication and information technologies are the foundation of the new global information-based economy Advanced telecommunications networks and related systems, increasingly permeate every economic sector and help business of all kinds. It enhances their organizational efficiency and competitiveness while providing customers better goods and services at lower prices. However, at a time when communications technology is rapidly transforming, many countries remain unprivileged where millions of their citizens still do not have access to the most basic tool of the information age: a telephone. According to European Commission Report (June 2002), one third of the world population has never made a call. This fact amounts to evidence of what has become known as the digital divide—the gap between people with access to technology, and those without. 5.2 Pakistan Telecommunication network is expanding each year, thus providing telephone access to rural and urban communities in record time. Total lines installed by May 2003 are 4.446 million, out of which 3.747 million are in service as against 3.655 million last year. This resulted in corresponding increase in teledensity from 2.27 to 2.50 during this year. However, the teledensity equal to is still lower than many other developing countries. In Table 1 teledensity for the last five years is given:Table –1 Growth Trend of Teledensity in Pakistan Years ALIS Population Teledensity 1998 2.660 133.61 1.99 1999 2.874 136.69 2.10 2000 3.053 139.76 2.18 2001 3.252 142.86 2.27 2002 3.655 145.96 2.50

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This growth trend of teledensity is shown in Figure-1. Figure–1 Growth Trend of Teledensity in Pakistan 3 2.5 2.5 2

1.99

2.1

2.18

1999

2000

2.27

1.5 1 0.5 0 1998

6.

2001

2002

Cellular Mobile

6.1 Mobile telephones have become an integral part of the growth, success and efficiency of any business economy. Recent years have witnessed an explosion of new operators and users of cellular mobile communications. The importance of mobile communications in today’s telecommunication industry has therefore become indisputable. 6.2 The Cellular Mobile Industry of Pakistan Cellular industry of Pakistan comprises of four companies namely Instaphone, Paktel, Mobilink and U-fone. The industry has shown tremendous growth in the year 2001-2002 as the subscriber base increased from 0.7 million to 1.2 million (70 percent increase). However, this growth rate is lower than the previous years growth rate. Mobilink and U-phone are using digital technology (GSM) for its cellular service. Lately Instaphone introduced digital version of the analogue technology, D-amps, (Digital Analogue Mobile Phone System). Table2 gives a bird’s eye view of the situation of cellular market in Pakistan from 1999 to 2002.

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Table–2 Cellular Subscribers in Pakistan Year

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Instaphone

Mobilink

Paktel

PTML (U-fone)

Total

Growth rate percent

1995-96

20,950

16,385

30,703

--

68,038

--

1996-97

43,029

52,600

39,398

--

135,027

98.4

1997-98

53,184

82,912

6,000

--

196,096

45.2

1998-99

108,058

87,556

70,000

--

265,612

35.4

1999-2000

112,000

114,272

80,221

--

306,493

15.4

2000-2001

220,000

309,272

96,623

116,711

742,606

142.0

2001-2002

319,926

570,888

206,109

141,679

1238,602

66.79

2002-2003

581404

1014710

340947

511337

2448398

--

Figure–2 Cellular Subscribers in Pakistan 1238602

742606

68038

1995-96

135027

1996-97

196096

1997-98

265612

1998-99

306493

1999-00

2000-01 2001-2002

Fig-3 shows the market shareof cellular operators with respect to the number of subscribers. Figure-3 Subscriber – Wise Market share of Cellular Operators in Pakistan Instaphone 26%

PTML 11%

Paktel 17%

Source: Pakistan Telecommunication Authority

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Mobilink 46%

6.3 PTA played a major role in increasing the growth rate of the industry. A transition from MPP (Mobile Party Pay) to CPP (Calling Party Pay) made incoming calls free. Moreover, PTA gave incentive to the operator by reducing royalty, reduction in interconnection charges and airtime tariff. All these factors made mobile phone affordable for a common man. 6.4 Pakistan mobile industry at the moment is experiencing growth explosion. Though the existing players are trying hard to meet the growing demand still there is a huge amount of unmet demand in the country as against the supply of connection by the operating mobile companies. Recent example of this potential demand can be seen in the prepaid mobile connections by U-Fone, which claims that they have sold 100,000 in just 100 hours. Major reason for the unfulfilled demand is lack of investment on the part existing players to increase their network capacity and use of obsolete technology that is AMPS instead of moving to GMPCS/GPRS. More over, no fresh foreign investment is coming up in the form of new players in local market. It is desirable that the existing operators should upgrade the technology and to meet the demand more licenses should be issued for GSM. 7. E-Commerce & PAKISTAN Over the last two years, considerable work has gone into laying the basis for the E-commerce in Pakistan. The Cabinet has approved the IT law and regulations have been issued. Joint work with the Ministry of Commerce, State Bank of Pakistan and other related entities is underway and there are plans to set up a Trusted Authority, which will issue digital Certificates as well as authenticate the Digital signatures via a Public Key Infrastructure (PKI). The World Bank and UNIDO are involved in putting the process reengineering and form design in place and a ‘Trade Point’ is scheduled to be established. A few studies has been commissioned on different aspects of the introduction of E-commerce and some new ones are in the pipeline. It is also expected that the next Asia Pacific Council for Trade Facilitation and E-business (AFACT) conference will be held in Pakistan. Key policy decisions are underway a series of projects are expected to be launched in this area. The core infrastructure will be used by the E-Government initiative as well.

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8. Card Payphone Industry of Pakistan Across the global, rapid technological changes took place in the field of telecommunications. Pakistan has also been experiencing tremendous technological developments in the recent years. However, telephone coverage in cities and particularly in the rural areas is still highly inadequate. Thus creating a need to set up Card Payphone facilities all over the country for ensuring universal access. The first step in this direction was the installation of card payphone in 1992. The growth was not substantial till 1998 when the PCOs were installed as outdoor booth. Later on card payphone started as franchises as indoor booth. Since then a significant growth was seen in card payphone industry.

Figure-4 Total Number of PCO’s In Pakistan (1999–2001) 98759

100000 90000 80000 57446

70000 60000 50000 40000

27710

30000 20000 10000 0 1999-2000

Source: PTC

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2000-2001

Jul-02