November 23, 2009

Telecom Sector shows 20% Revenue Growth in year 2008-09

Islamabad: Telecom sector of Pakistan has shown 20% growth in its revenues by generating Rs.327.8 billion total revenues in fiscal year 2008-09 while the Government collected Rs.112 billion in the form of taxes from the sector. According to the Annual Report for year 2008-09 issued by Pakistan Telecommunication Authority (PTA), teledensity of Pakistan stood at 62% showing a growth rate of 5.4% hence sustaining positive growth trends in the sector.

The PTA report further says that in the reported period telecom sector continued to grow positively in terms of subscription, revenues and teledensity. It managed to attract US$ 815 million Foreign Direct Investment (FDI) in 2008-09. However, as most of the operators are foreign-based, the pessimistic outlook of global economy compelled the telecom operators to curtail the infrastructure expansion plans, still total investments in the sector stood at US$ 1.7 billion. During the year (i.e.2008-09) the sector contributed a total of Rs. 112 billion to national exchequer in the form of taxes whereas telecom imports also grew by 20% and reached US$ 1.6 billion.

The mobile penetration reached 58.2% and total mobile subscribers reached 94.3 million with more than 90% of the country having access to mobile services. The trend in subscription remained tilted towards prepaid subscription with 98% prepaid subscriptions whereas only 2% subscribers are postpaid. Although the financial strength of mobile segment remained invariable still the cellular revenues grew by 16% and stood at Rs. 212 billion at the end of 2008-09. The mobile investments dropped by 48% and reached US$ 1.2 billion in the reported year. The industry ARPU stands at US$ 2.48 showing a drop of 20% from last year.

Major milestones achieved by PTA for mobile sector include taking up the responsibility to convince the Government of Pakistan to facilitate the sector by brining down the tax rates on telecom industry which resulted in reduction in the rate of GST from 21% to 19.5%, in addition to bringing down the activation tax by 50% while reducing the import duty on mobile handsets by 66% by cutting it down from Rs.750 to Rs.250 in budget 2008-09. Moreover, cleaning of unverified SIMs and SIM activation system (789) now in place is expected to curb the unsocial activities.

During 2008-09, basic services (LL, WLL & LDI) showed a healthy revenue growth rate of 26% contributing Rs. 113 billion to the sector revenue which is around 34% of the total telecom sector revenue, however, with the declining trend fixed line teledensity reaching 2.2% with a total of 3.5 million fixed-line subscribers in the country. Wireless local loop (WLL) has been able to sustain positive growth by winning the trust of customers. The WLL teledensity stands at 1.6% with 2.65 million subscribers across Pakistan. Long Distance & International (LDI) operators have been in quandary for last few years due to high settlement rates and alarmingly high grey/illegal telecom traffic. PTA took notice of the situation and initiated a number of steps in close coordination with LDI stakeholders. As a result, LDI sector experienced exceptional growth, reduction in illegal traffic and improved call rates. Currently, there are 09 companies providing LDI services via 163 Points of Presence (POP's) all across Pakistan.

Pakistan has been experiencing proliferation of Broadband in the past two years. Broadband subscriber base grew by 146% adding 245,727 subscribers during 2008-09. There are currently 413,809 Broadband subscribers in Pakistan as compared to 168,082 in 2008. As Broadband is still in its infancy in Pakistan, therefore, penetration level is relatively low i.e. 0.26 %. Broadband connection charges for 1Mbps connection dropped below Rs. 1000/- for the first time in history which is an unusual incentive for new broadband customers.

Telecom sector showed growth in areas of Azad Jamu & Kashmir and Northern Areas of Pakistan (AJK & NAs) also as by the end of fiscal year 2008-09, total teledensity of AJK & NAs stands at 39.9% up from 33.1% last year. Cellular industry has been showing a fast-paced growth since its arrival and total subscriber number has reached 1,973,742 by the end of June 2009 while the mobile penetration has reached 33% in just 2 years. Almost 82% population of the AJK & NAs is covered with mobile services. Today more than 270 cities/villages and towns are covered by all six operators in the region. PTA has also completed licensing of WLL services in AJK & NAs and has auctioned spectrum in 3 telecom regions. It is expected that WLL will be a successful service in AJK and NAs due to cheaper rates and easy availability.

With the current global and local political and financial situation, the telecom sector had to face tough challenges in the current year. However, being a Regulator, PTA has worked diligently for the betterment of the sector so that consumers, investors and Government can all be benefited from it. Due to the reforms in the sector carried out by the Government and effective regulatory interventions of PTA signs of recovery can be seen and it is expected that during the ongoing financial year the telecom sector would perform well and stand up to the expectations of all.

Keeping in view the vision of the present government of Pakistan, PTA worked for the betterment of the people of nation at large and for national security. It kept on promoting local businesses, attract foreign investment and increase sector contribution in national exchequer. This year PTA decided to work on following four focus areas namely Consumer Protection, Promoting ICTs, Promoting Competition and Ensuring National Security in addition to routine regulatory activities.

During the year 2008-09 PTA donated Rs. 201 million (20 Crore 10 Lac Rupees) to the “Prime Minister's Special Fund for the Victims of Terrorism”, established for the welfare and rehabilitation of Internally Displaced Person's (IDPs). Additionally, PTA in collaboration with mobile operators, through SMS service, contributed Rs. 5.67 million to Prime Minister's Special Fund for Victims of Terrorism and Chief Minister Punjab's Special Fund for IDP's. PTA employees also contributed their one day salary to the relief fund for earthquake victims of Balochistan.

In order to safeguard consumer interest and tackle their grievances, PTA launched a comprehensive complaint handling mechanism on 24th July 2009. Consumer Protection Department at PTA has received and redressed more than 80,000 individual consumer complaints since its establishment. PTA issued Consumer Protection Regulations, Anti-SPAMs Regulations to control the obnoxious & unsolicited calls and Subscribers verification Regulations. In order to encourage dialogue and input from all stakeholders, PTA arranged a public forum in Karachi on 7th August, 2009 and similar events are also in the pipeline for other cities.

The second most important focus area of work for PTA was the promotion of ICT's in Pakistan where the Authority intended to devise an effective mechanism to introduce emerging information & communication technologies and extensive proliferation of broadband services in Pakistan. In this regard, a number of steps have been taken during the year including the establishment of regulatory platform for Government and the stakeholder's interaction to identify core areas and develop guidelines for different ICT issues.

In order to promote competition PTA took number of steps during the reported year including Reviews of Access Promotion Charges, pricing policies of mobile operators, interconnection guidelines, PTCL RIO etc. In addition to this a number of surveys were carried out to check the quality of different telecom services. PTA finalized a revenue sharing agreement between ISP's and PTCL for providing free Dialup internet services in Pakistan. It issued directives to mobile operators for proper advertisement of Government taxes and services charges on telecom services. The deteriorating security situation in Pakistan pushed the regulator to take some major precautionary steps in order to assist Government of Pakistan in curbing the unsocial activities and security threats. In this regard a number of steps were taken including blocking of unregistered SIM, measures against elimination of gray traffic, preparing comprehensive plan for disaster management, monitoring and reconciliation of international telephony traffic and putting up system for activation of new SIM after verification. In addition to this PTA carried out research work in different areas as a result of which several consultation papers were floated in the industry to get feedback.


Khurram A. Mehran

Director (PR)