Telecom Cellular Sector

Telecom Cellular Sector

In the name of Allah, Most Beneficent, Most Merciful

RESEARCH REPORT Of

On

Telecom cellular Sector of Pakistan Submitted to

Mrs. Nosheen Sarwat Submitted by M. Zuhair Altaf MBC-08-36 Omer Hanif MBC-08-16 Ramiz ur Rehman MBC-08-31 Usman Arshad MBC-08-32 Usman Aslam MBC-08-46 Aun Ali Khosa MBC-08-54

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Telecom Cellular Sector

Getting practical knowledge is one of the major aims of MBA program. Institute of Management Sciences, Bahauddin Zakariya University, Multan has followed policy of assigning different practical assignments to its students so a touch of real working environment can be given to the students apart from classroom studies at widen their perspective. Economic Environment of Business is one of the core subjects of MBA (1), which gives an insight into the theoretical concepts and their application in practical world. Therefore study of the subject is imperfect without observing in real working environment. In this context, respectable, instructor Mrs. Nosheen Sarwat has assigned us to study the ecomomic and social impacts of Telecom Cellular on Pakistan.

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Telecom Cellular Sector

We have the only pearl of our eyes to admire the blessing of the compassionate and omnipotent because the words are bound, knowledge is limited and time is short to express his dignity. All thanks are due only to Almighty ALLAH, most gracious, the most merciful, who gave us the strength and we did this job. Our special praises are for Holy Prophet Muhammad (SAW) who is, for even humanity as a whole. It is a matter of great honor and pleasure for us to express our ineffable gratitude and profound indebtedness to our venerable supervisor Mrs. Nosheen Sarwat for her kind supervision, valuable suggestions and sympathetic attitude throughout our research. We are much impressed of her intellectual activities, inexhaustible energy to steer forth the student. Her sympathetic and sincerest attitude is highly qualified experience. This research report includes economic and social analysis of telecom cellular sector of Pakistan. Special Thanks to all of our friends and all those who have helped us in collecting the data.

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Telecom Cellular Sector

TABLE OF CONTENTS • History of Telecom cellular sector • Cellular Companies • Economies of telecom cellular sector o Revenue o Subscribers’ growth and penetrations o Regional Comparison o Market share o Coverage o Financials o Average revenue user o Investment o Taxes on cellular sector o Imports • Related Industries o The state of Pakistan hand set market- an analysis o Mobile Phone Repair Industry of Pakistan • Recent Social Impacts o Telecom and technology mega trends for Pakistan o Late night calling packages and Pakistani youth o Which one is best post paid or pre paid? o Cell phone users in Pakistan prefer style over features o Mobile web and mobile advertising in Pakistan o An Insight into the Mind of Mobile Phone users 4

Telecom Cellular Sector

Top Reasons for Selecting a Mobile Provider • Group Discussion • Bibliography o

History of Telecom cellular sector Since the inception of Pakistan, basic telecom services were being provided by a monopolist, previously called as Telephone and Telegraph department (T&T). The department was being run by the government and played multiple roles as regulator, policy maker, operator and service provider in the country. The T& T department was later converted into a corporation. Although the corporation was earning huge profits from the services, it was re-investing the same profits into the sector for the provision of more telecom service but the investment was not enough. Further, with the technological advancement, more and more telecom services were becoming available but there was not enough money available with the corporation to install new telecom systems for the provision of modern services. Resultantly, a digital divide prevailed in Pakistan keeping it behind its neighbors and other comparable countries in terms of telecom access. Cellular mobile services in Pakistan commenced in 90s when two cellular mobile telephone licenses were awarded to Paktel and Pak Com (Instaphone) for provision of cellular mobile telephony in Pakistan. Currently there are six cellular players in the market. Pakistan Telecommunication Company Ltd has emerged as a successful Forbes 2000 conglomerate with over $1 billion in sales in 2005. In addition, there are over 60 million landlines in the country. As a result, Pakistan won the prestigious Government Leadership award of GSM Association in 2006. By March 2009, Pakistan had 91 million mobile subscribers out of 161 million population possess mobile phones - 25 million more subscribers than reported in the same period 2008. According to the PC World, a total of 6.37 billion text messages were sent through messaging systems across Asia Pacific over the 2008/2009 Christmas and New Year period. Pakistan was amongst the top five ranker with one of the highest SMS traffic with 763 million messages. Although tremendous growth has taken place in the Pakistan telecom sector but most of it can be attributed to the cellular growth. Fixed line is still awaiting a take off. Similarly Value Added Services have grown but are still a drop in the bucket. Now that the competition has been introduced in the telecom cellular sector some very positive impact have been observed on the growth of the sector in a 5

Telecom Cellular Sector short span of time which is expected to continue to grow for at least next five years.

Cellular Companies Mobilink In Pakistan, the Pakistan Mobile communications Ltd (“Mobilink”) started its operations in 1994 and, until early 2001, had a market share of 40%. In April 2001, OTH took over management control of the company. As the market leader, Mobilink serves more than 31.5 million subscribers, representing a market share of 38.5% (as of March 2008). Mobilink GSM (PMCL), a subsidiary of Orascom Telecom, started its operations in 1994, and has become the market leader both in terms of growth as well as having the largest customer subscriber base in Pakistan - a base of over 28 million and growing. We pride ourselves on being the first cellular service provider to operate on a 100% digital GSM technology in Pakistan that also provides state-of-the-art communication solutions to its customers. Mobilink offers exclusively designed tariff plans that cater to the communication needs of a diverse group of people, from individuals to businessmen to corporate and multinationals. To achieve this objective, it offers both postpaid (Indigo) and prepaid (JAZZ) solutions to its customers. Compared to its competitors, both the postpaid (Indigo) and prepaid (JAZZ) brands are the largest brands of their kind in the Pakistan cellular industry. In addition to providing advanced voice communication services that makes the lives of millions that much easy, they also offer a host of value-added-services to their customers. At the same time, Mobilink places high importance to its coverage, which is why they cover in 10,000+ cities and towns nationwide as well as over 130 countries on international roaming service.

Ufone The company commenced its operations under the brand name of Ufone from Islamabad on January 29 2001. During the year, as a consequence of PTCL’s privatization, its shares were acquired by Emirates Telecommunication Corporation (Etisalat). Being part of PTCL, the management of Ufone has also been handed over to Etisalat. During the years, Ufone continued on the path to success.

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Telecom Cellular Sector The Company further expanded its coverage and has added new cities and highways. Ufone has network coverage in more than 5885 locations and across all major highways of the country. Ufone expanded its coverage and has added new cities and highways to its coverage network. As mobile users in the country have been growing at a very rapid pace, Ufone has maintained itself as the 3rd largest cellular operator in Pakistan with a market share of nearly 21%.

Warid Warid is a Pakistani telecommunication company based in Lahore, Pakistan. Warid Telecom is a joint venture between Abu Dhabi Group & SingTel Group. Abu Dhabi Group entered into a strategic alliance with Singapore Telecom. Subsequent to this transaction in July 2007, telecom giant SingTel acquired 30% percent equity stake in Warid Telecom, Pakistan, for US$758 million. This partnership is part of a strategy to support Warid Telecom’s continued growth and to enhance its market position. Warid Pakistan provides both post-paid and pre-paid connection plans. The postpaid plan is branded and marketed across the country under the name Zahi Postpaid, which means leader or royalty. The pre-paid segment is branded and marketed as Zem Pre-Paid. It is ranked as the fourth largest operator in Pakistan. Warid Pakistan claims it has the largest "post-paid" subscriber base in Pakistan.

Telenor Telenor Pakistan is a Pakistani GSM cellular service provider, and is a subsidiary of Telenor, Norway. Telenor Pakistan is 100% owned by Telenor ASA and adds on to its operations in Asia together with Thailand, Malaysia and Bangladesh. Telenor Pakistan launched its operations in March 2005 as the single largest direct European investment in Pakistan, setting precedence for further foreign investments in the telecom sector. The company has crossed many milestones and grown in a number of directions, making Telenor Pakistan a leading telecom operator of the country. Telenor covers a total of coverage area in more than 3000 cities, towns and highways throughout Pakistan, making it the 2nd largest GSM service provider in Pakistan with a share of 21%. Telenor is the fastest growing mobile network in the country, with coverage reaching deep into many of the remotest areas of Pakistan. Telenor is keeping

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Telecom Cellular Sector ahead by investing heavily in infrastructure expansion. With USD2 billion already invested, Telenor have extended agreements with our vendors for network expansion and services until 2009. The agreements, with a potential to result in USD750 million worth of orders from Telenor Pakistan, are some of the biggest of their kind in the industry.

CM Pak (Zong) China Mobile is the world's largest telecom operator. Having a customer base of over 300 million customers, its network routes 700 million text messages every day and handles 250 million calls every hour. China Mobile is perhaps the only cellular network that provides uninterrupted, reliable coverage through tunnels, on highways, inside sky scrapper elevators as well on top of Mount Everest. ZONG is the first International brand of China Mobile being launched in Pakistan. The company is often cited as CM Pak (Zong). CMPak has invested more than US$ 700 million in the telecom sector in Pakistan and an additional US$ 800 million will be invested till the end of year 2008. It is fifth largest company but with fastest growth in 2008.

Instaphone Instaphone is the pioneer of cellular industry in Pakistan. Initially the company was owned by Millicom International; later on Arfeen Group acquired it. The company under the renewed license is planning to role out a countrywide CDMA mobile network and would be the only CDMA mobile operator in Pakistan to launch first 3G services in Pakistan. It is ranked at sixth number in terms of market share.

Economics of telecom cellular sector Pakistan's service sector accounts for about 53.3% of GDP. Services sector of Pakistan’s economy, telecom being part of it, is the largest contributor in the composition of GDP and in 2007-08, its contribution to the real GDP of the country was reported at 73% compared to 58% in 2006-07. Telecom cellular sector is an engine to Pakistan Telecom sector and 70% of GDP Contribution of Telecom sector to services comes from cellular sector.

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Telecom Cellular Sector

Telecom Revenues Telecom revenues growth remained slow in 2007-08. During the year, telecom grew by 18% and reached 278.5 billion while this growth was reported 21% in 2006-07. Cellular sector has increased from 56% in 2006-07 to 65% in 2008. Fixed line sector has shown negative growth in revenues. Cellular Mobile revenues increased by 37% in 2007-08 and reached RS. 182billion.

Subscribers Growth and Penetration Cellular Mobile sector has shown an impressive growth over the years. Pakistan has been one of the fastest growing mobile markets among the emerging telecom markets. Subscription of subscribers remained impressive for another year and all companies together added more than 25 million subscribers to their networks. Total subscribers crossed 88 million at the end of 2007-08. During the year 200708, Telenor added about 7.4 million subscribers as compared to 7.1 million in 2006-07. Mobilink comes second with the addition of 5.7 million subscribers during the same period. Warid telecom succeeded to add another 4.8 million subscribers this year. Ufone added 4.0 million subscribers in 2007-08 as compared to its addition of 6.5 million in previous year. CMPak (Zong) entered the cellular market with aggressive marketing and infrastructure roll out. Its growth was negative previous year but in 2008 it has added 2.9 million subscribers in last few months. Cellular Mobile penetration in Pakistan reached 54.7% at the end of 2007-08, which is 15.3 percentage points higher than the last year. In August, it was at its peak of about 55.6%. Despite impressive addition of cellular subscribers by operators during 2007-08, Cellular Mobile market could not maintain its growth patterns of the last 3-4 9

Telecom Cellular Sector years. Generally, the growth of subscribers has declined considerably in 200708, which is evident in table. Total subscribers growth has been reported 40% in 2007-08, which has declined from 82% in the year 2006-07. Growth of cellular subscribers has declined by all major companies. Mobilink growth declined from 53% to 22% while Telenor growth has declined from 199% in 2006-07 to 69% in 2007-08. CMPak (Zong) has entered the market recently and has shown positive growth. Cellular Mobile Penetration in all provinces has increased in last one year. The

province of Punjab toped in numbers though its total teledensity is second to Sindh. Total subscribers in Punjab at the end of June 2008 reached 52 million compared to 37 million in 2006-07. Growth of cellular subscribers remained highest in the province of Balochistan where subscription grew by 57% in 200708 with total cellular subscribers approaching 2.2 million compared to 1.4 million in 2006-07. When compared with 2006-07 and 2007- 08, Cellular Mobile penetration has increased by 36.8 percentage points in Punjab and its total teledensity climbed to 58.0% at the end of 2007- 08, which was 42.4% in 200607. A significant improvement in Balochistan has been noted where its cellular Mobile teledensity ha reached 27% in 2007-08 which was just 17% at the end of 2006-07. This improvement is due to the special attention of regulator and Government of Pakistan for this province in telecom sector in last year.

Regional comparison

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Telecom Cellular Sector Growth of cellular mobile sector in Pakistan has placed Pakistan among emerging East Asian economies like Malaysia and Singapore. Cellular Mobile penetration of Pakistan surpassed all its South Asian counterparts. Pakistan Cellular Mobile penetration in 2007-08 was over 54.7%which is 34.4 percentage points higher than India and 31 percentage higher than Bangladesh. This tremendous growth is attributed to many internal and external factors starting from deregulation down to implementation of Mobile Number Portability. The Government and Regulator are facilitating the sector and making every effort to provide mobile access to every corner of the country. Today almost 91% of population of Pakistan is covered with mobile, fixed and WLL networks. All operators are expending their networks to number of cities/towns/villages. By 2007-08 more than 9,369 cities/ towns and villages have mobile networks coverage by one or all operators.

Market Share Market share of operators is considered an important tool to gauge the level of competition in any sector of the economy. Marker shares of Cellular Mobile Operators indicate that market is moving toward perfect competition where the

share of major operators are declining and new entrants are able to grab more share in the market. During the year 2007- 08, Telenor has emerged as fastest growing operator who has improved its market share from 17% in 2006-07 to above 21% slightly higher than Ufone who also has 21% market share. On the other hand, the leading mobile operator, Mobilink is loosing its Significant Marker Power place rapidly and its share has declined by about 5 percentage points and

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Telecom Cellular Sector reached 36% in 2007-08 compare to 41% in 2006-07. CMPak (Zong) is also growing very fast and it has added 2.9 million subscribers, which is an impressive number and one could hoped that in future it will grab more market share. CM Pak has added more subscribers in last few months and it has continued its aggressive media campaign along with infrastructure rollout which helping it to grab more market share in short span of time.

Coverage Low Average Revenue Per User (ARPU) and tough competition in cellular mobile market of Pakistan compelled all operators to expand the network rapidly so that they can add more subscribers on their network to improve their revenue. Currently more than 91% of the population has access to cellular mobile service all across Pakistan though the access is more in thickly populated localities. Some areas of Balochitsan and NWFP remained uncovered due to disturbances in those areas; rest of the country is almost covered by now. To expand the infrastructure, operators are rapidly installing new cell sites all across the country. During the year 2007-08 all operators have added around 8,000 new cell sites, which is an impressive figure because it takes huge investments to install the cell sites. Ufone has added the highest number of cell sites in 2007-08 and that addition was 1,827 new cell sites during 2007-08. With addition of these, Ufone total cell sites have reached to 3,471. Next was Mobilink who added 1,817 cell sites, its total sites stand at 7,339 which is the highest among all. Total Cell sites in Pakistan reached 21,518 which were only 13, 752 in 2006-07. In terms cell sites growth, Ufone growth was 111% while CM Pak growth remained 100%. Despite aggressive cellular subscriber growth, franchises increased normally at 3%. During the year 2007-08, total cellular operators franchises increased to 1,679 which were 1,619 the pervious year. One reason for this slow growth could 12

Telecom Cellular Sector be the closure of some franchises by PTA being involved in unauthorized sale of SIMs which was causing problem of law and order in the country. Other reason could be that expansion is going on unpopulated areas where the operators already allotted franchises.

Financials Financial health of the cellular mobile industry seems to be volatile and most of the operators are operating in loss though their revenues have increased significantly over the last few years. The only operator, Ufone has reported profit of Rs. 1.3 billion in 2006-07 who is not dependent on off shore loans and rapid infrastructure roll out. Most of the operators are engaged in rolling out infrastructure and operators have to spend a huge amount on import of machinery and equipments. Depreciation of Pakistani currency has further exacerbated the financial position of the industry. Particularly those operators who are engaged in rapid infrastructure rollout and dependent on foreign loans from off shore sources have to bear loss due depreciation of currency. Depreciation of local currency has increased the cost of doing business considerably. Moreover, low tariffs and increased tax rates could also be responsible factors for low profit margins in the industry. However, the revenue growth seems quite comfortable of all operators though it lower as compared to previous years. In the year 2007-08, revenue grew by 35% compare to 48% last year. Among the operators, Telenor is the most efficient operator in terms of revenue generation who has increased about 97% revenue in 2007-08 compared to previous year and reported Rs. 45 billion revenues in the fiscal year 2007-08. Mobilink earned about Rs. 80 billion revenues, which is 24%.

Average Revenue per User Average Revenue per User (ARPU) is an important tool to measure the financial health of any telecom sector. The emerging markets of cellular mobile segments in South Asia are considered the low ARPU markets. In Pakistan ARPU has declined significantly over the years. In the year 2003-04, ARPU in Pakistan was US$ 9 which has declined to only US$ 3.1 in 2007-08. However, the cellular mobile operators in Pakistan succeeded to maintain ARPU in 2007-08 at the level of previous year and reported only 3% further decline. ARPU for Instaphone phone declined by 57. CMPak (Zong)’s ARPU has declined by 52% in 2007-08 which is due to its large expansion and

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Telecom Cellular Sector low level of subscribers. Mobilink's ARPU declined to US$ 3.5 compare to to US$ 3.8 in the year 2006-07. Similarly, the Telenor's ARPU declined by only 3% and reached to US$ 3.9 compare to its US$ 4 in 2006-07.

Investment In this competitive market, operators are bound to increase the investment to get more share of subscribers. In last 5 years, cellular mobile operators have invested over US$ 8.4 billion in Pakistan which has created large number of employment opportunities all across the country. During 2007-08, Cellular players invested over US$ 2.3 billion, which is 12% lower than the previous year. One reason for this decline could be that operators have already covered the urban areas and are not investing to as much in the rural areas, which are less lucrative from business point of view. Moreover, substantial taxes could be another reason to stop investors from further expansion. During the year 200708, Mobilink invested over US$ 919 million while Telenor invested over US$ 565 million. CMPak (Zong) is another operator who started expanding lately and invested over US$ 200 million in last few months. Warid and Ufone invested US$ 480 and US$ 232 million respectively during the year 2007-08.

Taxes on Cellular Mobile In the current budget, government has increased the rate of GST on telecom sector significantly and analysts are of the view that it may have an advance impact on telecom usage and resultantly, the GST collection may drop considerably from the sector. So far, the Government revenue from telecom sector in terms of taxes is increasing continuously since 2004-05 after the liberalization of the sector. During the year 2007-08 mobile segments contributed more than Rs. 79 billion to national exchequer in the form of taxes, which is 25% higher than the last year. Cellular Mobile sector contributes more than 80% telecom tax collection. This Tax collection continued to rise over the years and was recorded at Rs. 44.6 billion in 2007-08. In terms of GST sector has contributed about Rs. 37 billion, which is 30% more than of the last year. However, the growth of the GST collection from cellular mobile sector has declined from 50% in 2006-07 to 30% in the year 2007-08. The main reason for this decline in GST collection growth rate could be low tariffs, closure of over 10 million SIMs and increased rates of GST. However, the complete impact of

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Telecom Cellular Sector increased GST will be captured in next years because the rate has been increased at the end of year. Activation tax is charged @ Rs. 500/per new connection and it has been the major demand of the industry to remove this tax because operators are unable to pass on this tax to consumers due to competition in the market. Activation tax collection has increased from Rs. 17.57 billion in 2006-07 to Rs. 19.18 billion in 2007-08 which is 11% higher than the previous year. Among the operators, Mobilink is contributing about one fourth of the total activation tax, which has market share in subscribers over 37%. Telenor contribution was reported around 28% whose market share in total subscription is 21%. Ufone share in activation tax was reported 16% while it has market share in total subscribers is similar to that of Telenor. It indicates that Ufone addition is lower than the Telenor. Withholding tax is an advance income tax, which may be adjusted at the end of the year. Cellular Mobile sector contributes a huge sum of amount in the form of withholding tax to FBR. During the year 2007-08, cellular mobile companies deposited over Rs. 23.2 billion, which is 33% higher than the last year. Mobilink has deposited over Rs. 10.1 billion in this head, which is 44% of total WHT deposited to FBR in 2007-08. Telenor's share in total WHT was 25% who deposited over Rs. 5.8 billion during 2007-08.

Imports Imports for telecom sector in 2007-08 have declined marginally and stood at US$1.33 billion, which are 4% of the total imports. Imports of cellular Mobile handsets reduced significantly by about 33% during the year 2007-08, which indicates saturation of the market while imports of the telecom equipment has increased by 31% in the same period. To discourage imports of cellular mobile handsets the

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Telecom Cellular Sector government has imposed a duty of RS. 500 per mobile hand set in the budget of 2007-08. The competitive environment has compelled all operators to import machinery and equipment to expand their infrastructure.

Related Industries The State of Pakistan’s Handset Market – An Analysis Handset market has played the most pivotal role in the overall growth of Pakistan’s telecom industry. The 2008 was a difficult period for telecom industry in general with plenty of political uncertainty, negative economic indicators, ever rising inflation & unfavorable budget policies played their role in restraining the growth pattern of previous years.

The hardest hit area in this declining growth pattern has been the handset market of Pakistan. Till Dec, 2007, the growth of handset market was excellent with around 1 Million handsets were being sold on monthly basis. However in 2008 the figures came down to 600 K units per month.

Handset Market - Current Scenario Pakistan’s handset market is primarily a low-end market with majority of volume comes from low-end mobile phones. Another important aspect is that our handset market is extremely price sensitive just like any other handset market of a developing country.

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Telecom Cellular Sector

To comprehend the local market dynamics, below is the price segmentation analysis along with the market share each price segment comprised upon. If we look at the figure of how the current market stands with respect to market share of each handset manufacturer, Nokia still has a sizeable lead though their market share has been deteriorating steadily (from 65% in 2006 to 48% at the end of July, 08). The progress of Samsung has been phenomenal from 8% market share in 2006 to the current 30% with indication of further progression in 2009. LG is the second biggest gainer (approx 17% share for a player who has just been active since 2 years) with most of the success came from its 2 successful models LG KG195 & KG270. Sony Ericsson & Motorola represent 2 of the biggest loosers in the handset market with only 5% & 1% share in the total pie. Since in Pakistan most still think Sony Ericsson is the second major player in the Pakistan’s handset market which isn’t correct any more. Pakistan is primarily a low end market with approx 63%-65% volume generates from phones worth less than 3k and in Sony Ericsson local product portfolio there is not even a single SE model in this price range, strangely enough their majority of portfolio compete in a price segment (High-end) which is just a mere 5% of the total handset market. Motorola is just vanishing in Pakistan, the disaster of their F-3 model started a vicious slide from which they never recovered with the future seems more bleak. The Koreans are playing their cards really well with the success of both Samsung & LG they are really flying high. Especially the success of Samsung is very impressive with a very strong portfolio (the most balance portfolio in the industry covering all price segments with good products). This success in Pakistan has come down from the global success Samsung Mobile has been enjoying from the start of 2007. Their flagship model SGH C-160 targeting the low-end category is making waves in the most lucrative (volume vise) price segment in Pakistan’s 17

Telecom Cellular Sector handset market. With more emphasis on R&D & product development the future looks bright for this giant conglomerate. LG has also succeeded really well through getting direct benefit from the absence of any substantial products by SE. But the question mark on the product quality is hurting the brand to grow exponentially. Nokia, the global leader in the world is still the player to beat in Pakistan’s handset market with the resounding success of Nokia 1200 & 1208; this global giant has so much to offer in-terms of quality products. In Pakistan, Nokia plays a major role in 3 main price categories (Low-end, Low Mid & High) which comprised upon 82% of the total market.

Mobile Phone Repair Industry of Pakistan The huge influx of imported mobile phones in Pakistan has spawned a whole industry around mobile phone repair work. The trend of mobile repair as a small business in Pakistan has taken off rapidly in the last few years. One reason for this could be the increase in handset prices caused by higher duty on handsets and falling value of Rupee. Most of these “repair technicians” lack formal training and have most likely picked up mobile repairing skills on the job.

The small mobile repair shops have opened up everywhere. In Lahore, markets like Hafeez centre and Hall road are among the most popular for mobile repair work. There are signs outside these shops which claim that they can repair and unlock phones from anywhere in the world. These shops charge around 300 to 18

Telecom Cellular Sector 500 Rs to unlock a phone, depending on the model and difficulty involved. These shops are equipped with tools, hardware and Internet access.. On the high-end, mobile phone retail networks like MobileZone have their own technical facilities to service their customers and the phones under warranty. In May 2008, Nokia started NOKIA CARE centers in Pakistan, located in Lahore and Karachi. Nokia’s official outlet provides services like warranty claims and mobile repair. This specific service is the only one by a global retail brand in Pakistan (at the moment), providing their customers with top notch repair lab, complete with quality control standards and good customer services. But apart from Nokia, markets are loaded with other brands such as Motorola, Samsung, Sony Ericsson, Blackberry etc for which there are no such quality repair facilities. The perception of general public is that once mobile gets into a repair shop its value decreases instantly. Usually 80% of the second hand mobile phones are repaired because of technical issues and then sold again in the market. Above all, it is clear that the quality in repairing these hand sets is below standard. The tools employed are usually not specifically designed to do that work. The physical environment of the repair unit is open with dust and pollution.

Recent Social Impacts Telecom And Technology Mega trends For Pakistan Twelve recent, noticeable telecom and technology trends from Pakistan.  Popular: iPhone 3G, Book your number by Zong, Mobile Internet with USB modems  Success Stories: Zong brand launch, Telenor strategy  Survivors: Ptcl, Warid  On the defensive: Mobilink  Wrong Turns: Tax increase on telecom, charging for customer service call  Defying the odds: Entrepreneurship continues to thrive and inspire  Becoming mainstream: Social networking  Getting noticed: bloggers and Internet users by Google  Shift in business model: User generated content threatens traditional media  Challenges: economy, energy & power shortage, political instability  On track: WiMAX with second commercial rollout  Policy issues: Enforcement of new SIM registration policy, when to rollout 3G

Late Night Calling Packages and Pakistani Youth 19

Telecom Cellular Sector These days there is a rush of packages out in the market from the mobile service providers, targeting different market segments and offering all kinds of discounts depending on who you call or when you call. Off-peak timings have always been used by service providers to create interest and to lure customers. There was a time not too long ago when the Internet access used to be free at night. Nowadays the mobile service providers are trying to shift customers from PC to mobile phones usage. This is true for voice, data and even Internet. There has been a subsequent change in the Internet and data usage via mobile phones since the GPRS rates have gone down, for example you can send hundreds of text messages per day to any network in the country.

The bigger trend is on the heavily discounted late night time calling packages, which are in effect usually from 11pm at night to 7am in the morning. In these hours a single call costs you a total of 3 to 6 rupees an hour. All big names of the telecom sector are competing with each other. Some examples include Warid (infinite craze, zem nites), Mobilink (Raat Shuru Baat Shuru), Djuice (jaagtay raho package), Zong and Ufone. The most controversial idea behind these packages is the timing: from 11pm in the night till 7am in the morning. These packages are purely targeting the younger generation. A large percent of the people think these kind of activities are hurting our youth and blame the telecom companies for this trend. The times are gone when parents used to keep a close watch over their children and monitor their every single activity. Now a days the youth is much mature and have more exposure and more understanding of things. The parents perceive things quite differently from the youth though and the negative or positive aspects are seen differently. The responsibility falls over to children of how better they understand the life around them. Certain priorities must be set according to the age and these priorities should never be compromised. It’s not a disastrous marketing strategy or a false move by the telecom companies, its just how we think about it. Staying up at nights and fight through long working days will definitely affect your health, education and professional life. Staying up nights when the days are free makes sense. So its all about prioritizing your goals in a certain way so that not your sleep or professional life is disturbed. Cell phones nowadays have become symbol of independence – for our youth that mobile phone helps them to develop their own language and social groups away from the prying eyes of their parents. It has become Status Symbol or what people say Fashion statement - It is a way that people wear their phone in a style, color, cost and features and feel that a phone can enhance their looks. Although mobile phones have long been a part of the business community, they

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Telecom Cellular Sector are quietly becoming entrenched in personal lives. Cell phones play a crucial role in relationships among a group of young people, Mobile phones also influence the trend toward relaxing the traditional amount of contact permitted before marriage. Cell phone is also in the use of people who are working 24/7 environment and always remain on the go. It is privacy and not mobility that matters. Most youth have cell phone conversations in their bedroom. Lets have a look on few needs of new breed (Youth) that have been forcing them to get addicted to this cell phone night packages, the need to make their identity and to build “social and emotional ties”. The shrinking size of present day families explain why the youth today feel the need to communicate with virtual brothers and sisters. Youngsters have been using cell phones to form friendships and social groups away from their families, feeling that these phones give them privacy that they would not otherwise have. As cell phone use becomes even more widespread, communication between parents and their kids may become even more impersonal. The saying “romance is in the air” appears to be true. In today’s world, it is mobile phones which are carrying the messages of love. Youngsters are using mobile phones to maintain personal and romantic relationships. Grabbing our new generation, these free night packages services provided by Cellular Companies have become a great pleasure/encouragement to people like who aren’t responsible at all, it seems they are announced to spoil the future of our youth, just give it a thought which kind a people avail these services and what they do? Whole night they spent in useless, ungraceful conversation it’s all beyond morals. The immature generation has become addicted to avail these kind a packages. These kind portable platform providers are taking away our youth from family/ Cultural/ Traditional/ Religious values, they don’t even care about their health though they know how these RF radiation would be harmful as for as continuous use is concerned. The Cellular Companies should make some standards so they can provide such services which can be of use to make the youths future bright and should consider the social impact before announcing any such service, they should offer some M-Learning (Mobile Learning) services they are behind the race of announcing free night packages, low rates for one special number. No doubt most of the parents are equally responsible for this attitude in our new generation, in previous era what kind of environment we have had at homes —sitting together in TV-Lounges , One time/place to sit and eat together no friends/outings in late night, but this fast life where people are to avail luxurious

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Telecom Cellular Sector lifestyle parents themselves arrange separate rooms equipped with individual TV, personal Computer with high speed Internet connection and a latest model of any famous brand of Mobile handset though its of no use to them at around certain age , yup parents are equally responsible they should be responsible they should keep eye on their children’s activities, what kind a friends they are making how they are progressing academically how they are spending time. The generation gap between parents and children’s is not the main issue because its more than the gap, its about basics of raising good children. True that bad habits or friendships existed before this direct and private source of communication too but its all starts right from your basic education that our youth is getting at Home. So the message goes to parents: make your kids to avail good morals and talk to them on every matter to give them better understandings of what is right and what is wrong.

Which one Is Best For You: Postpay Or Prepaid? According to different market surveys and analysis of the customer preferences, prepaid and postpaid are perceived to be very different. Cost is the main factor. Students for example would not go postpaid because of their limited budget. Apart from that, postpaid packages have always been status symbols in the eye of customers. It is common knowledge that prepaid users are being catered with juicy rates and over night packages where you can call for as low as 4 to 5 rupees an hour. Post paid packages are still not as competitive and attractive as compared with prepaid. So how do people choose between prepaid and postpaid? It remains a fact that demographics (age, gender, income, disabilities, mobility, educational attainment, employment status, and even location) play an important role in choosing prepaid and post paid packages. But look carefully and there are some big differences which go beyond cost and status. Some post paid packages such as Warid Telecom provide a good deal and are within reach of common public. The package line rent amount is same as the free minutes cost every month. For example a Zahi package with a line rent of 150 gives you 150 free minutes. The zoom packages are also availiable on Zahi. There are five Friends & Family (FNF) number selections who you can call for 24/7 at 0.82 rupees a minute. But calls on other mobile networks and landline numbers can cost 5-6 rupees/min. Recently Zahi has launched the card billing system, through this you can charge your postpaid balance from the zem prepaid card. This makes the billing quiet easier for the postpaid customers. Other than Warid telecom, Mobilink, Ufone, and Persona post paid (Telenor’s postpaid) have less recognition and market share. But in prepaid Ufone, Telenor and djuice have made their mark. Mobilink is expensive for both post paid and prepaid but it has first-move advantage and subscribers who don’t want to experiment with mobile

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Telecom Cellular Sector number portability stick with it. Zong- the china mobile company is just prepaid as yet. Perhaps they have calculated that its not worth going for postpaid segment. There are actually some disadvantages of going with postpaid, these include: a) Bill payment is not as easy for postpaid as prepaid (again, it varies by the mobile operator and area). b) International calls are not as easy to make on postpaid as on prepaid. For example Warid demands a security (Rs. 4000) for enabling international calls. Get a prepaid line and call as long as you have balance. c) Service gets disconnected when 90% credit limit is reached and it takes quite an effort to get the service replaced. Time varies by operator and horrible customer service stories are common. This was discussed at Telecom Grid Pakistan forum.

Cell Phone Users in Pakistan Prefer Style Over Features Report from The Nation. A latest study conducted by Nokia pointed out that the people in Pakistan prefer style more than the need of being connected. The study says that the new devices combined with a attractive fold design with quick cover keys is bringing out substance to style, which is more acceptable in Pakistan as compared to other markets in the region of Asia and Asia Pacific. The study said that for innovation-conscious users ‘we need to offer intelligent and entertaining multimedia functionality in an easy to use, ultra slim package’. Users in Pakistan had surpassed others in the demand for innovation in technology.

The cell phone users in Pakistan were involved more in style, which was beyond their expectations. The users in Pakistan needed style and design more than other features. 23

Telecom Cellular Sector Nokia was considering of doubling its investment in Pakistan looking at the response. Youngsters demanded innovation in multimedia computer that brings the complete experience to a sleeker body. Nokia has created a very eyecatching device using premium materials to enclose world-class features and experiences. Nokia had introduced a trimmer fold model to its Nokia N-series line up, a new multimedia computer that brings the complete experience to a sleeker body, with little compromise.

Rise In Popularity Of Mobile Web And Mobile Advertising In Pakistan The analytics data from mKhoj, a mobile advertising company, shows that the number of impressions (views of advertisement) from Pakistan took an 80% jump in September and in the previous month, the impressions showed 300% growth. Pakistanis have always been big time fans of mobile games, ring tones and other fun downloads, a trend consistent with the mobile users worldwide. Now the public is moving from WAP suites to surfing the web and portals on mobiles. The unlimited data plans and EDGE service are contributors to this trend. As long as the marketers follow an ethics guideline and provide relevant ads, the mobile advertising will take off and become mainstream. Here is a summary of the trends which point to growth of mobile advertising:  89 million user base  Near 100,000 mobile data users (estimate)  Good EDGE services (in terms of options and coverage) by mobile operators  More wireless broadband services - such as Zong USB Internet  Growth of smart phones as a percentage of overall handsets  Preference to browse web on the phone  Acceptance of mobile ads - as shown by ad impressions  Emergence of local mobile ad players such as mKhoj Pakistan’s traffic for AdMob (a company for mobile advertising) ranks number 18 in the world. Given the limited number of mobile data users in Pakistan. In September 2008 the requests recorded from Pakistan were 28.9 millions, up 3.5 times from September of 2007. Note that this is data is only from one ad provider and the actual number is likely to be higher. However this is a very good indicator of mobile web trend in Pakistan and shows that the mobile web usage in Pakistan has taken off.

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Telecom Cellular Sector

An Insight into the Mind of Mobile Phone users - The battle of Needs & Aspirations! The mindset of our local mobile phone user is very unique & complex. Influences of socio-economic & demographic factors, peer pressures & life style etc are the main driving force through which the consumer ends up owning a particular model for his/her communication needs. “A professional looking guy is standing nearby you, he is pretty calm & collected but needlessly try to show of his latest PDA, few seconds forward than he pulls out his phone stylus & tap here & there on the screen than put the phone in his pocket while giving a good gaze to all the near by guys boasting a smirking proudly smile“.

To further explore this mindset, let’s look closely, the phenomenal growth in mobile penetration have created a very unique socio cultural psyche. Just imagine from a 12 year old kiddy to a 60 year old man are all playing with the small communication device known as mobile phone. A rough estimate suggests that in Pakistan the usage span of a new cell phone is mere 3 months (means majority of local users upgrade their cell phone within 3 months time). Pakistan’s mobile user into 2 main categories (2 basic types of users) have summed up as follows 1. Those who are driven by their needs (read 3 core phone functionalities) 2. Those who are driven by their aspirations (Users who can easily suffice their communication requirement through a say Rs. 10k mobile phone but instead they choose to carry a cell phones worth Rs. 40K or more)

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Telecom Cellular Sector

In every mobile phone user’s mind there is a battle going around, a battle between their needs & aspirations. Some own phones to suffice their communication needs while some own phones to meet their aspirational urges. Now look at the mobile phone user preference chart while making actual decision, the data is a study & I have used extrapolation for analysis purposes as it enable us to understand the psyche of local consumer. Also take a look at the chart depicting local consumer purchasing pattern.

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Telecom Cellular Sector Many professionals/ executives have come across who take their hands on any new business phone which hits the market, to few of them even the question was asked that why you are carrying a blackberry/ PDA or a latest Nokia E-series phone…. the only answer I got in reply was we need to check our emails 24/7 & that’s about it (surprisingly no words about PIM, one of the major feature of any business phone since majority of them doesn’t exactly know what this Personal Information Management really stand for). Majority of them have cell phones which can be met in exact requirement in half of the price they want to spend. The main reason lies in the consumer mindset (the aspirational value attached to carrying a business phone) since the consumer tend to believe that how he/ she will look professional (top executives) if they are not carrying a BlackBerry or a PDA phone. And this is not just a local phenomenon; even mobile users of developed countries tend to be manipulated by their desires & aspiration rather looking to their actual communication needs. Hence this battle between needs & aspiration will continue.

Top Reasons for Selecting a Mobile Provider in Pakistan In interesting study (based on a sample size of 1812, ages 18-60, lower income groups) from LIRNEAsia mobile phone users were asked the main reasons for selecting their primary mobile company. The study clearly shows that coverage is more important in rural areas, tariff is less important. Here’s the comparison of urban and rural trends.

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Telecom Cellular Sector

Group Discussion Business in Pakistan revolves around Cellular companies, print media and electronic media. 50 % space on newspaper is occupied by ads from different 28

Telecom Cellular Sector cellular companies and after every five minutes you are to watch ads of same cellular companies on electronic media.

In Pakistan cellular industry has shown rapid growth, especially in last few years. As per PTA stats, there are 91 million mobile users in the country, which were only couple of millions some years ago. Every company is trying to beat its competitor and efforts are clearly seen to beat each other in this corporate battle. Where these cellular companies brought tons of investment into country, and played constructive role in bettering lifestyles, at same time this battle between cellular companies has actively spoiled our youth. Every single boy and girl has a mobile phone and they are found texting and talking on their cell phone all the times.

Night Packages: These days every company is providing very inexpensive (or even free) calls at night. These calls are like Rs. 5 and, hence are affordable for even an average teen. They talk all night long with their (girl/boy) friends. Use their pocket money to buy credits. At times, even they cheat their parents, and use mobile without their permission. Many boys and girls also talk to their so called lovers. Which can be basically termed as a teen crush? Sms Craze: Messaging, messaging and messaging is what the teens do these days. It’s a symbol of being cool. The one who got more messages is considered the cool one. Teens forward jokes, romantic lines, riddles and even immoral adult messages. SMS Craze in teens can be judged by the typing speed and their accuracy to type messages on little dial pad. They just thumb the mobile and don’t stop. Wap/EDGE: Now days you don’t need to turn on your pc on to use internet. Internet is just a click away thanks to wap/EDGE enabled mobiles. This service is good for the people who really need it. But teens normally use it to waste their time. First are the messengers which don’t let teens sleep at night, then comes the facebook and other social websites to keep them awake. Un registered Sim cards:

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Telecom Cellular Sector The last thing which is the biggest menace is the un-registered sim cards. It gives you the passport to do all the wrong things because no one can catch you. We can bet that every single teen has a un-registered sim card. Our government tries so hard to block them but our teens are much smarter. You can talk to anyone, black mail them, do what ever you want. MMS/Videos There are hundreds of examples, where MMS and Videos of their lovers were captured by teenagers and what happens next is a topic that we are feeling is not good to touch… but one can imagine the seriousness of the issue.

Bibliography http://www.pcworld.com/article/158700/guess_which_county_texts_the_heaviest.html

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Telecom Cellular Sector http://www.dawn.com/2006/02/11/nat15.htm http://www.brecorder.com/index.php?id=30899&currPageNo=1&query=&search=&term =&supDate= http://en.wikipedia.org/wiki/Economy_of_Pakistan http://artistryofbranding.wordpress.com/2008/08/28/the-state-of-pakistan%e2%80%99shandset-market-%e2%80%93-an-analysis/ http://artistryofbranding.wordpress.com/2008/08/30/an-insight-into-the-mobile-phoneuser%e2%80%99s-mind-the-battle-of-needs-aspirations/ http://telecompk.net/2008/12/15/late-night-calling-packages-and-pakistani-youth-1/ http://telecompk.net/2008/12/16/late-night-calling-packages-and-pakistani-youth-2/ http://telecompk.net/2008/12/03/which-is-best-postpay-postpaid-or-prepaid/ http://telecompk.net/2007/03/28/cell-phone-users-in-pakistan-prefer-style-over-features/ http://www.lirneasia.net/wp-content/uploads/2007/06/teleusebop-pakistan.pdf http://telecompk.net/2008/11/09/mobile-phone-repair-industry-of-pakistan/ http://www.mkhoj.com/home/advertiser/ http://telecompk.net/2008/11/28/rise-mobile-web-popularity-mobile-advertising-pakistan/ http://telecompk.net/2008/11/05/mobile-advertising-traffic-numbers-for-pakistan/ http://telecompk.net/2009/01/01/telecom-and-technology-megatrends-for-pakistan/ http://www.instaphone.com/en/home.asp http://www.ufone.com/ http://www.mobilinkgsm.com/ http://www.telenor.com.pk/home/index.php http://www.zong.com.pk/ http://www.waridtel.com/ http://metrics.admob.com/

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http://www.pta.gov.pk/index.php?option=com_content&task=view&id=266&Itemid=137

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