State of Telecom Industry in Pakistan

Consider some statistics about Pakistan’s mobile handset market.

Source: PakTribune. Read the complete article.

The price of handsets is one of the most important factors for mobile growth. This is especially true for rural markets which is the next stage of competition. It is also an important factor for 3G and next generation technologies to take hold in emerging markets. If people can afford phones with more than voice capabilities they are more likely to try out these value-added services. The picture below was taken from the GSM Asia conference brochure.

As illustrated beautifully above there’s plenty more than voice coming our way through a combination of high network speeds and better handsets: games, multimedia messaging, videos/TV, advertisements, mobile commerce (payments via phone etc). It may take a while though as technology struggles with a multitude of challenges (user interface complexity, battery life/weight, lack of standards) which has resulted in slow adoption of the such services in Europe and US. For now simpler features such as text messaging and ringtones are boosting revenues for operators and handset makers.

When expatriate Pakistanis visit Pakistan they are often impressed by the latest glitzy models available in Pakistan. Camera phones became popular very quickly and music phones followed soon. The mobile phone has become a status symbol in Pakistan and in many emerging markets. Of course with all this trend mobile phone snatching has increased. The recent introduction of a system (based on phone serial number) to block stolen/snatched phones has come under attack as it can be foiled without too much effort, depending on the phone set. However many consider prefer it to no action by the government - the better approach would be multifaceted: to educate the consumers, actively work towards a better technology and to crack down on illegal reseller market. Note that I skipped “catch the snatchers” as that is way too much to ask for our police. Another impact of these gadgets is on the social scene in Pakistan - I don’t have any stats on this but these phones are radically changing the ways boys and girls socialize and interact. For conservatives (and/or parents of teenagers), this must be a concern.

Now something at the global level. GSM Association (GSMA), the global trade association which represents more than 680 mobile operators worldwide, runs a program called “Emerging Market Handset programme” in which mobile operators in developing countries buy ultra-low cost handsets from Motorola. “Motorola is set to exceed the programme’s target of 12 million phones, proving that there is a huge appetite for mobile communications beyond the affluent markets traditionally served by this industry,” said Rob Conway, CEO of the GSMA.

GSMA estimates that there are more than one billion people worldwide who still won’t be able to afford a mobile phone for the foreseeable future. To help give these people access to telecommunications, the GSMA is funding projects designed to stimulate the rollout of ‘shared access’ mobile solutions across the developing world. Grameen phone in Bangladesh and Sharedphone in South African are examples of the shared access business model.

Next door to Pakistan is the world’s largest telecommunication market: China. In part 2 of telecom growth in Pakistan’s neighbors I present an overview of the Chinese telecom industry. This post will cover the major service providers and top telecom equipment makers in China. I’ll also touch upon China-Pakistan collaboration in the telecom sector.

With a country the size of China one post cannot do justice. This post will not cover the role / influence of Chinese government in its telecom industry or the legal and regulatory situation in China. These will be taken up in a separate post.

According to data from the Ministry of Information Industry, China had 437 million mobile-phone subscribers, 368 million fixed-line users and 47 million broadband subscribers as of the end of August 2006.

Here are the major telecommunication service providers - follow links to their websites for details. 

1. China Telecom (NYSE: CHA) provides fixed/landline, fixed wireless and internet services. It has 60% of market share. There have been reports that China Telecom will sell a stake to a foreign strategic investor.

2. China Netcom (NYSE: CN)  is th fixed line competitor to China Telecom and has a market share of about 33%. China Netcom has two strategic partners in PCCW of Hong Kong and Spain’s Telefónica.

3. China Mobile  (NYSE: CHL) is the world’s largest mobile company with near to 300 million customers. It was spun off from former monopoly China Telecom in 2000. China Mobile provides GSM mobile service and is the dominant player with 65% market share. See its profile here and a recent article about its performance here. Vodafone has a 3.27% holding in China Mobile.  

4. China Unicom (NYSE: CHU)  provides mobile services on GSM (its core business) and CDMA networks. It has a market share around 32%.

There are many other smaller operators which are attractive partners for foreign firms so it is expected that we will see many international deals in coming years.

On the global front China is also making its mark with its telecom equipment makers. The chinese telecom companies are taking on bigger rivals from around the world. Chinese government wants its telecom industry to become a leading force in research, innovation and standards.

o Huawei  is one of the world’s leading networking and telecommunications equipment supplier with R&D centers worldwide (China, US, Europe, India). See related post on telecompk for Huawei’s profile and its march towards global growth.

o ZTE - is another major Chinese telecom equipment maker. It started as a government company in 1985. Recently ZTE has been pursuing internationl telecoms markets and has been successfully working in Europe. ZTE is a major supplier for Pakistan’s service providers such as PTCL. You may have seen ZTE name on PTCL V wireless phone.

As I mentioned in a previous post the above mentioned Chinese telecom equipment firms are working in collaboration with Pakistan: Huawei is working with UET Lahore and ZTE is setting up a R&D center in Islamabad.

China and Next Generation Network Technologies

3G will be a huge factor in China and depending on how 3G works out in China, it will influence adoption in India, Pakistan and other Asian emerging telecom markets.

China is set to become the world’s largest 3G customer base in the next decade. As is the case in rapidly growing markets the real growth areas for Chinese operators lie no longer in their voice service business, but instead with non-voice and data services. China Mobile is aggressively going after next-generation technologies to boost profit levels. China Unicom is also looking for 3G to increase its market share. China Telecom has its eyes on IPTV service which is expected to be out in near future, though the market and regulatory framework for IPTV is not fully defined yet.

China is developing a home-grown 3G standard:TD-SCDMA, which is undergoing testing this year. It is believed that China will wait for TD-SCDMA technology to mature before opening up the 3G market to all 3G platforms. Critics argue that such moves will make it hard for foreign companies to compete in China.

I close with a few related Articles from Businessweek:

- China Mobile at Full Speed

- A China Telecom Play With A Quiet Ring

- On The Cutting Edge: 10 Chinese Innovators

The International Telecommunication Union (ITU) has declared it will set up an Asia Pacific Centre of Excellence in Pakistan for imparting training to member countries in issues ranging from telecom policy to regulations.

The ITU, headquartered in Geneva, Switzerland is an international organization within the United Nations Systemwhere governments and the private sector coordinate, standardize and regulate global telecom networks and services.

This center of excellence in Pakistan is one of the four centers of excellence being setup in Asia by ITU. According to the statement by Telecom Ministry of Pakistan, “ITU would provide assistance to Pakistan for setting up and running the training centre for specialised policy and regulatory training. The decision to set up the centre of excellence in Pakistan was taken at a meeting of the 1st ITU Asia Pacific Centre of Excellence Stakeholders held in Bangkok recently.”

Pakistan’s strategic role in international telecommunication scene has been growing steadily over the last few years. This month Pakistan won the council seat of International Telecommunication Union (ITU) and Chairman Pakistan Telecommunication Authority (PTA) was elected as member of Radio Regulation Board of ITU. Pakistan also holds the office of President in Asia Pacific Telecommunity.

There’s a lot more work waiting for the policy makers. Pakistan needs to push more towards telecom research and development work within the country. As noted in my previous posts, China and India are in the process of becoming world’s major R&D centers for technology and telecommunication. Two of the top Chinese telecom equipment firms have announced their plans to collaborate with Pakistan: Huawei is working with UET Lahore and ZTE will setup R&D center in Islamabad. The goal of the policy makers should be to increase the rate of transfer of technology from abroad, broaden the pool of local skilled workforce and accelerate the local production of telecom equipment and handset parts etc. If that can be achieved it will be more than consumerism - it will be real progress. 

From time to time I’ll write about telecom action in other emerging economies especially in Asia. The first in this series is an overview of mobile telecom market in India. In last few years the Indian mobile market has seen remarkable growth (average 5 million new subscribers per month during Q3 2006) and at this time India is the fastest growing mobile market in the World. With almost 100 million mobile users India is 4th in terms of total subscriber numbers.

This post will cover 3 topics: Overall business environment for mobile industry, Mobile Players and Growth Areas & trends - 3G’s future.

The business environment for India’s telecommunications industry is excellent . The government policies have encouraged the growth, increased competition and high levels of foreign direct investment (up to 74% foreign investment is now allowed) . The Indian government’s goal is to provide an environment where service companies, handset manufacturers and network companies will invest in India and use India for research and development work (R&D). The favorable business environment has attracted a number of foreign multinational firms such as Hutchison, Vodafone, Nokia, Huawei, Maxis and Malaysia Telecom. In my opinion the real edge for India will be the R&D facilities being setup there which can provide innovation for next generation technologies - not only for India but for everywhere else as well. China is in the same race to position itself as an R&D hub (see my post on Huawei). Pakistan lags behind in this important area, perhaps due to a smaller pool of skilled resources and lower political stability. 

Mobile Players

For list of GSM providers in India see this page from website of Cellular Operators’ Association of India operators (COAI).

Based on June 2006 data from Cellular Operators’ Association of India (COAI),  Bharti Airtel is the country’s No 1 mobile operator with over 23 million customers on its GSM network and a 21.9% share of the market. Vodafone has 10% stake in Bharti and it is considering to increase that.

Reliance Infocomm is the second largest operator with 20 million customers on its CDMA network and about 2.5 million subscribe on its GSM network. Reliance is in the process to acquire GSM spectrum for additional 21 regional circles and with this it may overtake Bharti as India’s leading mobile operator. On the left is a snapshot of Reliance website showing its value add features such as ringtones, multimedia messaging and alerts. 

State-owned BSNLis third in size. With all the issues of an inefficient state-run company, it faces stiff competition but it has potential in rural areas and with fixed wireless technology. Compared with PTCL of Pakistan which has was privatized this year, BSNL seems to be a step behind. Indian mobile unit of Hong Kong-based Hutchison Telecommunications International Ltd is India’s fourth-largest mobile services provider. Interestingly Orascom has about 20% share in Hutchison.

All the major equipment makers of the world are in India. Nokia is the major handset maker (it earned $1 billion from India alone). LG of Korea is a major new player - it signed a USD 100 million contract to provide sets to Reliance.

See this blog post about quality of services of the operators by TRAI, the telecom regulatory agency in India. And if you want to read about the emerging Asian giants which have invested in India see this.

Growth Areas and Trends: Rural demand, 3G?

The ARPU rates fell on average by 11% in early 2006 causing some conern for the mobile operators. This is a typical situation faced in new markets where mobile phones are mainly used for voice communications. As the growth in urban areas slows down and the rural areas become the growth focus, the rural region will be the next stage of competition. The demand for voice will continue with rural growth but the trend of low revenue per user is also likely to continue.

The 3G technology has not hit the Indian market yet.  

Currently the Indian telecom regulatory agency (TRAI) is in consultations over its licensing strategy after which it will present pricing recommendations. COAI is pushing for 3G services and policies so that average revenues per user can be increased. The commercial deployments expected in 2007. All the major operators have expressed interest in rolling out next-generation services and BSNL in particular is betting that 3G will boost its subscriber base. Meanwhile Bharti has signed a USD 400 million deal with Nokia to expand its GSM/GPRS/EDGE networks in eight regions.  Others are also planning similar expansions. 3G rollout and adoption will be an important test for Indian mobile operators. 

Here are some excerpts from an article about 3G at Wireless Forum.

Swedish telecom equipment maker Ericsson believes that the rollout of 3G telecom networks in India will help operators reduce costs, offer an array of services to users, and connect millions in rural areas who have never used a phone.

“3G as a technology is more advanced and more efficient. One base station in a 3G network can take 80 calls as against 17 calls per base station in 2G,” says Sudhin Mathur, Manager, Sony-Ericsson.

Other equipment vendors such as Nokia and Motorola are also gearing up to meet the demands of the Indian market. Nokia, for instance, is developing a High Speed Downlink Packet Access (HSDPA), a natural evolution to 3G that will bring even higher data speeds with a simple software upgrade.

In conclusion Indian mobile market is set to grow remarkably well with the current business climate and if it can go beyond voice and make 3G a success then it will be an exceptional success story.

It is hard not to notice the mobile phone advertising campaigns in Pakistan. The mobile phone and services advertisements are  in the media, on billboards and everywhere else imaginable. The competition among the mobile phone companies is driving this trend of intense advertising campaigns. The marketing department of every major mobile phone compamy is trying their best to get attention with catchy phrases, jingles by pop artists and attractive models to represent their products and services.

The quality and aggressiveness of the advertising campaigns indicates the level of effort to gain market share. According to studies Pakistan has been adding 2 million subscribers each month in 2006. The market segments mobile companies are targeting include: 
  a) tech-savvy youth 
  b) business users (due to the their higher average revenue per user)
  c) first-time subscribers in remote and rural areas
  d) previously ignored segments, for instance housewives and women (see this post)

The ads are vibrant and colorful, conveying a sense of excitement and empowerment - but I did not find them very creative.

The pretty picture these ads paint is separated from the real world where poor cellular service has led to PTA to announce that punitive action will be taken if problems persist (more at the end of this previous post).

Take a look at some of the recent advertisements and enjoy. I found it interesting to see the way these ads convey new features or lower rates.

Mobilink

Telenor (TalkShawk Package)

Ufone

What’s your take on these marketing efforts?

Continuing the series of posts on Pakistan’s mobile companies, this one will present a snapshot of Norway based Telenor ASA. Telenor has international operations in the areas of mobile telephony and satellite operations in more than 12 countries. Its global footrpint includes Nordic region (Denmark, Sweden and Norway), Eastern and Central Europe (Hungary, Serbia and more) and Asia (Malaysia, Bangladesh, Pakistan, Thailand).  

Asia is a major contributor to Telenor’s Success. According to a recent article in Telecom Insight, Norway’s Telenor is becoming an increasingly significant global mobile player. The article states that “Whereas two years ago, approximately 40% of its customers were from Scandinavia, this figure has fallen to about 10% as of September 2006. In contrast, Asia, where it only had operations in Malaysia (DiGi) and Bangladesh(Grameen Phone) at the beginning of 2004, now accounts for over half of Telenor’s entire wireless subscriber base.”

Telenor’s wholly owned subsidiary Telenor Pakistan launched GSM mobile services on 15 March 2005. Telenor acquired the license to build and operate a mobile network in Pakistan in at a price of USD 291 million. Currently total investment is around USD 1 billion with a market share of 11%.

According to telecom analysts entrance of Telenor and Warid intensified competition in Pakistan mobile market significantly. Both Mobilink and Ufone were slow to respond with the result that Warid and Telenor made substantial gains in market share. This shows the growth potential of Pakistan’s mobile market.

An example of increased competition in Pakistan is SMS. When Mobilink introduced Octane, Telenor reciprocated with Djuice with even lower rates for text. Telenor also introduced 30 second billing which in my opinion ended up confusing many consumers. Telenor has also introduced EDGE data services which should contribute to better revenues and it may lead the way to 3G services in Pakistan.

In conclusion, Telenor has shown stellar growth and I believe it is a great investment choice. Read on to understand the basis of my opinion.

Latest Earnings

In the third quarter of 2006, Telenor’s overall revenues amounted to NOK 23.9 billion, which was an increase of 35% compared to the third quarter of 2005. Profit before taxes was NOK 6.1 billion.

One year net profit margins were about 16%, better than the industry average of 11%.

Highlights from Telenor Pakistan 3Q Earnings Report

• Telenor – Pakistan experienced a significant growth in the number
of subscriptions with net additions of 1.4 million during this quarter
alone.
• Telenor – Pakistan’s estimated market share increased further by
1 percentage point to 11% from the previous quarter.
• ARPU in local currency decreased by 9% compared to the second
quarter of 2006 primarily due to a reduction of interconnect charges
from 1 July 2006.
• Compared to the second quarter of 2006, total revenues in local
currency increased by 25% mainly due to subscription growth
partially offset by reduction in ARPU.
• Compared to the second quarter of 2006 there was a positive
development in EBITDA, mainly due to higher revenues.
• The increase in capital expenditure was related to the roll-out of
the mobile network.
• 1 July 2006, following a decision made by the regulator, the interconnection
charges of mobile operators were reduced from PKR 1.6
to PKR 1.25 per minute. At the same time the charging principle was
changed from per minute to per second charging.

How to invest
Telenor is traded on NASDAQ as ‘TELN’ and also in Oslo stock market. See these websites for more info:
  o Stock snapshot 
  0 Telenor on JP Morgans website*

For another view point and details about Telenor’s subscriber numbers & market share visit this site. 

*About ADR:
An American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage.

Recent news about decline in profit of PTCL has concerned many investors and shareholders. Will Ufone, mobile phone arm of PTCL, be able to fight back and reverse this trend? In this post I present a snapshot of Ufone. I’ll discuss its strengths, weaknesses, threats to its current position and its future prospects.

Conclusion:Lots of potential if Ufone and its parent get its act together and execute well on their expansion and competitive plan. Read on to understand the basis for this conclusion.

 About Ufone

Ufone (official name: PTML)  is a PTCL company and Etisalat of UAE owns 26% of PTCL. For more information about Etisalat I recommend reading this investment report from Shuaa. This report also includes details of how PTCL was privatised earlier this year in April. Please note: PTCL does not report detailed earnings results for Ufone. Therefore we need to look at PTCL results as a whole.

Highlights of Recent Earning Report

The annual 2005-2006 and first quarter 2006-2007 financial reports are available at ptcl website.

For the first quarter 2006-07 ending Ocotber 30, 2006 the profit before tax was Rs.7.7 billion with net Profit of Rs.5.1 billion, which is 7% lower than that of the corresponding quarter of last year. For the full year 2005-06 after tax profit was Rs 20.78 billion which was 22% less than previous year’s profit.
Dividend of Rs 3 per share was awarded which corresponds to an impressive dividend yield of 12.3% !

PTML (Ufone) - a wholly-owned subsidiary has improved its financial performance compared to the first quarter of last year.  It added over 1.37 million new subscribers during July to September 2006 quarter, making its total subscriber base in excess of 7.52 million as of end September 2006. Ufone earned a net profit of Rs.666 million compared to Rs.389 million recorded for the same period last year.

Network and infrastructure expansion was carried out in 2006 progress and more is being planned to deploy WLL, Wimax etc. In the largest network expansion deal of Pakistan, PTCL signed up Huawei for a US$550 milliondeal which will allow Ufone to double its capacity. Financial reporting standards have also been improved. Details are in the directors report at PTCL website. Note that analysts expect Ufone to be an increasingly major contributor to PTCL earnings. This indicates the growth in wireless sector and the competition in fixed-line and other sectors.

Weaknesses and Threats

* Increased Competition from new investors (Mobile firms such as Telenor, WLL operators)
* Poor service (see more on service quality and PTA interjections below)
* Network capacity and quality
* Management Style and approach

How to Invest

Through Pakistan mutual fund companies such as Abamco who offer funds with PTCL as holdings. For example: UTP-ISF fund has about 10% PTCL stock. You can buy stock directly as well but the Pakistan stock market is not without its risk. In 2005 the Pakistan stock market crashed amid rumours of scandals which are now under investigation (see this article from DAWN, read more here and take a look at the website of Securities and Exchange Commission of Pakistan).

Here is a professional report (by Imtiaz Gadar - Merril Lynch, see the full pdf here which is from Sep 2006) about Ufone and PTCL (refrerred to as PakTel):

“Having traded down materially during 1H06, PakTel now offers an attractive yield and substantial upside to our DCF valuation of Rs60. PakTel is marked down for its low earnings growth outlook from increasing wage costs and fixed line deregulation.

High yield may not be sustainable if new strategic shareholder (Etisalat) decides to invest more heavily in wireless. Earnings transparency is below average as mobile earnings are not disclosed to the market. Main positives are potential for long term cost cutting, and good secular growth prospects in
Wireless and internet given low teledensity (3.5%) and high GDP growth (7%).

Clear direction from new owners, management stability and dividend payout certainty are needed to reignite positive momentum. Valuation score have improved with the continued slide in share price and we now rate the stock a Buy.”

For more about Quality Of Service Issues at Ufone Read more »

Business Monitor International (BMI) has ranked Pakistan as a key destination for telecom growth.

The BMI ranking study states that as a result of foreign investments, growth potential and good deregulation policies by PTA, the telecom industry in Pakistan has grown tremendously. A few months ago Pakistan was lagging behind Thailand but due to the political fallout of the coup in Thailand, Pakistan has move ahead in rankings.

The BMI rankings take into account a number of factors including industry situation, growth potential,competitive landscape and economy and political risks etc. Therefore this ranking implies that the investment environment in Pakistan has improved to the point where it is better than many other countries in the region. This is a big first for Pakistan.

The rankings change with time but this finding is consistent with the opinion of most researchers.  The overall consensus of the analysts is that Pakistan is one of the countries with huge untapped potential for telcom growth and an attractive investment environment. Other Asian countries with good telecommunication potential include Vietnam, Indonesia and Thailand.

For more information visit the latest issue of BMI “Telecom Insight” here.

In my next post I’ll discuss the profile and outlook of PTCL and Ufone.

Here is all you wanted to know about Orascom, parent of Mobilink (official name: Pakistan Mobile Communications Ltd or PMCL) , in a nutshell. This snapshot will give you some insights into Mobilink’s parent group and is intended to educate potential investors. You may find its strategy and management approach interesting as well.

About Orascom’s International Reach
Orascom Telecom Holding S.A.E. (’Orascom Telecom’ or ‘OTH’) is a leading international telecommunications company operating GSM networks in seven high growth markets in the Middle East, Africa and South Asia, having a total population under license of approximately 460 million with an average mobile telephony penetration of approximately 19% as at 30 June 2006. Orascom Telecom
operates GSM networks in Algeria (’OTA’), Pakistan (’Mobilink’), Egypt (’Mobinil’), Tunisia (’Tunisiana’), Iraq (’Iraqna’), Bangladesh (’Banglalink’), and Zimbabwe (’Telecel Zimbabwe’). Among other international ventures, Orascom Telecom also owns 19.3% of Hong Kong-based Hutchison Telecommunications International Limited operating in 8 countries.

Investment Information
Primary Symbol & Exchange: ORTE - Cairo & Alexandria
Other Symbols & Exchanges: OTLD – London
An example Mutual Funds in US with Orascom holding:
T. Rowe Price Emerging European & Mediterranean TREMX (has 5-star ratings from Morningstar)

Highlights of results from first half 2006
Orascom had  41 Million Subscribers and revenues of over US$ 2 Billion. It added 20 Million subscribers in last 12 months which is impressive. However the average revenue per user (ARPU) kept falling, though slower than before. Capital expenditures increased in Pakistan but overall fell 7%. Net income increased
12% from June 2005. Earningsper share increase 8% in that period.

Full details from the most recent earnings report:
http://www.otelecom.com/Investor_Relations/EarningRelease.aspx

Recent Headlines about Orascom and Mobilink
Though this post is about Orascom (and not specific to Mobilink) but a relevant news is that Pakistan Mobile Communications Ltd raised US$250 million funds from abroad this week.

It is the first international corporate bond issuance by a Pakistani corporate issuer in 12 years and the
first ever high yield bond offering by a Pakistani corporate issue.

Most of the proceeds will be used to fund capital expenditures and refinance its outstanding bridging facilities. European investors bought 40 percent of the deal, while Asian buyers and U.S. accounts each took 30 percent. On Oct. 23, 2006, Standard&Poor’s Ratings Services assigned its ‘B+’ long-term corporate credit rating to Pakistan Mobile Communications Ltd.

Media Articles of Note
Orascom: This Mobile Upstart Really Gets Around - BusinessWeek
Recommended reading - How Orascom leverages emerging markets.

Egyptian Mobile Phone Provider Treads Where Others Dare Not - NY Times
This New York Times article is about Orascom entering in Iraq - interesting notes on risk and reward.

A Telecom King Broadens His Horizons - BusinessWeek
How Orascom is increasing its global power by buying stakes in other companies.

Continue to read more about Mobilink’s performance in 2006 and its position in the global telecom space. Read more »

Pakistan’s telecommunication market is one of the hottest in the emerging economies. This post will briefly review the mobile phone players in Pakistan and discuss how to evaluate and invest in these companies. In future posts I’ll review the major companies in more detail. See this page for the most recent numbers about mobile subscribers and companies.

As the number of mobile subscribers climb up in Pakistan to over 40 million, so does the competition and that makes it hard to tell which companies will do well in future. What are the success factors and the upcoming changes such as mobile number portability (discussed here)? FirstI’ll present the snapshots of the companies. Then I’ll go over some of the indicators and performance metrics which can be used to evaluate thse companies.

About Pakistani Mobile Companies & Their Foreign Connections

First lets look at the market share of the 6 mobile players in Pakistan. I took the subscriber numbers (in millions) from PTA site a few weeks ago.

At the top is Mobilink, the Pakistani unit of Egypt-based telecom company Orascom. It has been in Pakistan since 1994. With 19.2 million subscribers it has the largest market share. Its shares are listed on the Egyptian and London stock markets as GDRs. My next post will focus entirely on Orascom and its performance.

Ufone, a wholly owned subsidiary of Pakistan Telecommunication Co. Ltd (PTCL),  is now under the control of Etisalat group of UAE. With 8.4 million subscribers it is the runner up. For those in Pakistan it is the one company where they can easily invest locally.

Warid, owned by the Abu Dhabi group of the United Arab Emirates and sister of Wateen group is number 3 with 5.6 million subscribers, that is 14% market of subscribers.

Norway’s Telenor, a recent entrant with about a billion US dollar invesment in Pakistan has been doing well, based on its recent earning report. It has about 4.26 million subscribers or 11% of the market. Telenor stock is listed in the Oslo stock market (TEL) and Nasdaq NY (TELN).

Paketl was owned by Millicom International Cellular (listed in Nasdaq as MIC) at the time of writing of this post. (Later it was acquired by China Mobile)It has 3% of the subscriber share in Pakistan.

Total Telecom in July 2006 acquired Instaphone - a cellular business of Luxembourg’s Millicom, in the first ever sale of a mobile business in Pakistan by a foreign company. It has 0.3 million subscribers.

How do you tell the winner?

Put another way if you decided to invest money in one of these companies how would you make the choice? The actual investment logistics will be discussed in additional posts.

When you look at the performance and results of the mobile companies, here are some useful industry indicators to look out for (in addition to the financial results):
- Growth rate: how many net subscribers has it added in the quarter/year?
- What is the churn rate (customers who leave) ? Low churn indicates customer loyalty.
- What is the average revenue per user ARPU (what does average subscriber spend) and what is the profit margin per subscriber? How much of ARPU is voice vs data (eg sms)?
- What is the percentage of pre-paid subscribers (considered less loyal than postpaid)?
- How much does it cost to acquire a new subscriber?

Pakistan is still an unsaturated market and with the falling cost of handsets there are plenty of new subscribers to go for. But eventually as in saturated markets, if mobile operators want to avoid simply competing on price, they will have to compete on superior service,  innovative features and ease-of-use. As an example of new trends there were so many text messages (SMS) sent on this Eid that the networks of all 6 companies were kept extremely busy!

Look for future posts for more detailed analysis and performance discussion of the major players.