State of Telecom Industry in Pakistan

The telecommunication landscape in Pakistan is interesting because of may reasons. For one, after deregulation it allowed both GSM (for mobile service) and CDMA which was described as an alternative to traditional copper line. To avoid direct competition and conflicts about the license fee amounts, CDMA was confined to Limited Mobility.  Lets review the history and outlook of Wireless local loop (WLL) services which is based on CDMA technology.

CDMA operators started in Pakistan in 2004 when PTA auctioned four frequency spectrum ranges - 450 MHz, 479 MHz, 1900 MHz, and 3.5 GHz for each of the 14 of licensed regions of the country - with the necessity of providing services in Wireless Local Loop (WLL) standard. As of this writing, there are 16 WLL license holders (see the full list at PTA site) with licenses in different regions.

This led to some interesting scenarios. First the frequency allocations varied by region. For example, Worldcall Telecom Ltd. won frequencies in all 14 regions, but in Karachi it received the frequencies only in 450 MHz, in 10 regions only in 479 MHz, in 10 other regions only in 1900 MHz, and in 9 regions only in 3.5 GHz. It was also thought that some of the companies just wanted to get a license for future trading purpose and not with genuine intentions of using it.

Despite the limitations imposed on them, Pakistani CDMA-operators sold not only fixed but also mobile phones. According to the details covered in this well-written article about investment in Pakistan telecom: “the regulator limited the subscriber mobility by the zone of operation of one BTS. As CDMA operators do not have one frequency range for the whole country, they are fine with mobility within one region or large city, while some are happy to be limited by fixed or home phones or wireless payphones.”

The payphone market is lucrative - and has higher revenues per user. That’s why the mobile companies (Mobilink, Telenor) have also entered this market with their own offerings.

Market Share & Outlook
After 3 years of introduction where is the market today with WLL? As of June 2007 there are about 1.85 million WLL subscribers in Pakistan. Pakistan Telecommunication Company that works under the trademark PTCL V is the leader with a market share of 59%. TeleCard (GO CDMA) has 23% of the market. Worldcall Telecom (stock performance; also see coverage on its deal with Omantel) has 15% share of the WLL subscribers. Great Bear International Services (Pvt) Ltd (DIALLOG) which is covered here, has 3% share. Even though Diallog is a smaller player, it has been praised in blogs because of its good customer service and it has higher revenue per user (Rs. 600) than other companies.  

One area of growth for the WLL operators is WiMAX as they have the spectrum allocation for it. Actually this is what some of the companies were after from the beginning. PTA chairman was recently quoted in Daily Times as: The Wireless Local Loop (WLL) licence holders in 3.5 GHz frequency have now established their networks using WiMax technology after issuance of commencement certificates by the authority.

According to a KASB analyst, the WLL outlook is positive. Here’s an excerpt*:

While optic fiber would contribute a part, we believe the true growth in fixed line teledensity will come from WLL telephony given its effectiveness, in terms of cost and time, and suitability to Pakistan’s geographic terrain. Not only is WLL more suitable for hilly areas as no digging is required, but it is also comparatively cheaper (US$100-125 vs US$250-275 per line for fixed wire line).

Launched in 2004, WLL has been slow to get off the ground. While growth has started picking up with a 71% increase in connections over 9MFY07, we believe it is still not substantial enough with net adds coming in at only 150,000-180,000 connections per month vis-à-vis the 2-2.5mn additions in cellular subscribers. While cellular companies continue to pose a threat, increased marketing activities by WLL operators and positioning in the right areas should bear fruit going forward, in our view.

In terms of market share, PTCL’s declined from 64% to 59% over the last couple of years but still dominates the segment. Telecard, the first company in the private sector to explore the WLL segment, has a market share of 23% while Worldcall holds 15% of the market. Although competition has begun to heat up in the sector, we believe the market has enough room to accommodate existing operators.

* Source:  Merrill Lynch - Pakistan Pulse, July 2007.

Related Links:
Pakistan Next Generation Issues Blog on WLL