State of Telecom Industry in Pakistan

LIRNE Asia has produced an analytical report on the performance of PTA under Shahzada Alam’s tenure (2002-2008). The complete document is available here. I’d recommend it to see all the factors which were taken into consideration in the analysis. Excerpts below from Prof. Samarajiva’s post, first from the introduction:

Pakistan’s recent telecom developments constitute a South Asian success story. From two million in 2002, the number of active mobile SIMs increased to 79 million by end 2007. This is a compound annual growth rate of 115 per cent a year, one of the highest in the world, and the highest in South Asia for that period. This article documents the achievements of the Pakistan telecom sector in 2002-07. The period covers the tenure of Major General Shahzada Alam Malik (retd.), who stepped down as the Chairman of the Pakistan Telecom Authority in July 2008.

Leadership matters. It is not the only thing, but without it, reforms do not happen and performance suffers.

If a country’s telecom sector does well, the main contributions come from the business-process innovations of suppliers and the creativity of consumers. However, they can contribute only if the government and the regulatory agency remove the road blocks, described in our 2008 book, ICT infrastructure in emerging Asia: Policy and regulatory roadblocks. Absent good leadership, regulatory agencies become roadblocks, not facilitators.

And the conclusion:

Major General Malik can depart with a happy heart. The reforms that he championed and helped get implemented have borne good results for the people of Pakistan.

As an organization committed to the creation of a policy and regulatory environment conducive to greater ICT use by the people of the Asia Pacific, we thank Chairman Malik and his team for bringing Pakistan to the forefront of sector developments. We salute his leadership. The reforms of 2004 unleashed competitive energies that can connect more people to each other and to the potential of Information and Communication Technologies, absent any new roadblocks.

The flaws in original policy creation and implementation resulted in millions of unregistered SIMs. Now the shift in SIM registration policy is causing big headaches for consumers and contributing to the slowdown in mobile growth. My previous posts on this topic can be found here. It looks like the SIM blocking has been implemented for about 6 million SIMs.

According to this report from Business Recorder:

The initiative taken by Senate’s Standing Committee on Interior to curb unregistered Subscriber Identity Modules (SIMs) Card culture has resulted in blockage of eight million unidentified connections, said Senator Talha Mehmood, Chairman of the committee, here on Friday.

He said that the CEOs (of all the mobile companies) had informed him that their business was adversely affected by the action taken by the committee. The CEO’s also handed over the CDs of 8 million unregistered SIMs for verification, he added. The CDs had been handed over to law enforcing agencies, he further said.

Out of these 8 million unregistered SIMs, 1.2 million had been reissued after proper verification and documentation. Whereas, 0.8 million blocked SIMs were given a dead line of July 25 for verifications, he added. He said that in order to find the culprits behind the distribution of unregistered SIMs, special teams raided across the country.

Talha said that the mobile companies were given a time frame till July 31 to complete their work in this respect. “Afterwards, from August 1, we will launch a crackdown against them,” he warned. He said that after completing this task the committee would take action against the dilapidated condition of jails in the country.

Image credit: Intouch

Telenor recently announced second quarter results for 2008 and lowered its growth forecast. The stock price fell down afterwards. This comes at a time when the leadership of Telenor Pakistan is about to change. This is in line with my previous post in which I commented on the slowdown for Telenor after a few months of rapid growth. On a positive note the margins improved.

According to Bloomberg “Increased costs of living in Pakistan, Bangladesh and Thailand and a rising Norwegian krone prompted Telenor to lower its 2008 revenue growth forecast to 3 percent from 5 percent. The company relies on eastern Europe and Asia for growth as Nordic markets reach saturation and traditional phone usage decreases.”

Among other trends, revenue per user (ARPU) continues to slide and there were fluctuations in the currency exchange rates. The highlights below are taken from Telenor’s second quarter earnings report available at Telenor website.

• The subscription growth slowed down compared to the previous quarter with net additions of 1.4 million, while the market share have remained stable at 20%, ranking Telenor Pakistan as the second largest mobile operator in Pakistan.

• ARPU in local currency decreased by 14% as increased average usage was more than offset by declining average prices.

• Total revenues in local currency increased by 54% mainly due to subscription growth of more than 7 million, partially offset by lower ARPU.

• EBITDA continued to improve and increased by 29% measured in local currency compared to the previous quarter.

• Capital expenditure was related to network roll-out to accommodate subscription growth and increased traffic.

• From 1 June 2008, in line with the national regulator‘s decision, the mobile termination rates in Pakistan were reduced from PKR 1.25 to PKR 1.10. The rates will be further reduced to PKR 1.00 from 1 January 2009 and to PKR 0.90 from 1 January 2010.

The long distrance rates for calls from Pakistan to some countries such as US and Hong Kong are the lowest compared to other countries in South Asia. However this is not true for calls from Pakistan to its neighbors in SAARC region. This disparity of rates was noted by Prof. Rohan Samarajiva at this LIRNE Asia post recently.

Leaving aside the question of the operators in the SAARC countries collectively lowering their termination rates to make possible more reasonable intra-SAARC call charges, the data also show that Pakistan has the overall lowest international telecom prices and Nepal has the highest. Hopefully, some of these prices will come down, now that the comparisons have been made!

The full study is here. I made a comment that the difference in prices to say US and Sri Lanka is perhaps due to market demand. As explained by Prof. Samarajiva:

International prices are driven by two factors: termination rates in the distant country and level of competition in the home market. Termination rates are not set by markets, though excessive termination rates will generate market response in the form of people trying to use arbitrage opportunities. Your argument holds only for the second factor. As the FCC recognized in the 1990s, govt action (ccordinated preferably) is needed to bring down termination rates.

I think it is very much a political factor that will drive the rates down. Hopefully the winds of change will help move in this direction as well.

The recent change in the leadership of PTA presents a good opportunity for the regulatory authority to take charge of the telecom situation in Pakistan. As reported widely in the media, Dr. Yaseen, former member technical of PTA, was appointed as the PTA head recently.

My first reaction was that a) change is good and b) a well-reputed technocrat is the right person for this position. Without knowing much about the internal power structure of PTA its hard to say about the impact of the change. I wish him all the best and look forward to some positive changes to PTA.

Here’s Dr. Yaseen’s profile - taken from Telecom Grid Pakistan.

After graduating from DCET (NED), he achieved Ministry of Science and Technology Scholarship in 1987 and completed his Ph.D. in 1992, from University of Essex, England with
specialization in Telecommunication Systems. After his PhD, he worked for:

1.      Essex University, England, as Senior Research Officer

2.      PTCL Pakistan, as Director Strategy

3.      Alcatel Submarine networks Australia as System and Project
Engineer,

4.      Advanced Networks and System Australia as Senior Consultant

He was working in Pakistan Telecom Authority (PTA) as Member Technical
for the last almost three years.

He has 30 International and national publications on Telecom
technologies, ICT growth, Strategies and design of telecom networks.

Dr. Yaseen has represented PTA at various International and National
forums including Asia Pacific Telecommunity (APT), where he was
selected as Vice Chairman, APT, Study Group 2 (Networks).

Warid has recently announced 2 location based services: friend finder and place finder (i.e. local search). These are pay-per-use services (Rs.3+tax). Using SMS or MMS. you can find the location of another warid cell phone customer or do a local search for a point of interest such as bank. Service is limited to major cities.

This is an interesting first step towards location based services (LBS) for the telecom industry. In US and EU, navigation and related data services are growing rapidly and account for a major portion of network operator’s revenue. The rules and privacy norms are quite different in developed countries and sharing of real-time location is subject to a lot of scrutiny. Warid is simply relying on per-request permission to work around the privacy concern. However I do not find this a good approach — it can be quite annoying to get such messages left and right.

In the US, LBS is a hot area with lots of startup acitivty. Companies such as brightkite, loopt and whrrl have received tons of VC money to develop all kinds of fancy mobile and web-based applications. Recent inclusion of GPS in 3G iPhone has created even more buzz!

Warid has taken a different and relatively simple approach where the application is based on back and forth sms or multimedia message (MMS). The SMS solution is pretty much the same which Google offers in the US and which works extremely well for quick searches. The MMS option is for the map display - limited to a few major cities. Since there is no mention of GPS requirement, Warid must be using triangulation algorithms to find the approximate location. See my previous post on Google maps and how it works.

Although there are many limitations of Warid’s LBS this still matters because this is the first attempt for location based service. I can assure you that this is just the start and we will soon plenty of other implementations around the buddy finder concept and LBS in general. There are so many creative ways to use this service, especially when combined with a personalized website and higher resolution maps.

VNL, a Swedish-Indian start-up claims to have developed a solar powered mobile network designed from the ground up to serve rural populations in developing economies — and do it profitably. Called WorldGSM, their product has been getting attention from the media because of its low cost (about $3,500) and near-zero energy consumption (100 watts) requirements. Another attractive feature is the relatively simple installation, without the need of engineers.

The solution is based on 3 hardware components: a base transceiver station, a base station controller and a Mobile switching center. The core network is supported by software which is a Linux based version of gsm standard. There are 2 versions: one for village center (higher voice traffic) and other near roads. Towers in fields could be put in virtual sleep mode to save electricity when there is no usage.

Such inventions have the potential of making a big positive impact for telecom users at the base of the pyramid - the underserved huge population in developing countries who may not spend much. VNL calls it microtelecom.

Here are some excerpts from a recent article which appeard in Wall Street Journal.

To power mobile networks in remote areas today, telecommunications operators pair base stations — the tower-top radio transmitters that form the backbone of mobile networks — with diesel-powered generators and batteries. These are impractical and expensive: Fuel accounts for 65% of the cost of operating a typical base station.

VNL, which has headquarters in New Delhi and Stockholm, has spent the past four years developing a simplified base station that is powered by solar panels and requires just a fraction of the electricity of typical base stations.

But convincing telecom operators to buy a stripped-down base station made by a little-known start-up won’t be easy. VNL is among many companies trying to develop mobile-phone technologies for poor rural areas. Telecom-equipment giants Telefon AB L.M. Ericsson, Alcatel-Lucent and Motorola Inc. are all looking into how they could tweak existing telecom gear to run on less electricity or on renewable energy sources.

Read more »

The two pictures below tell a tale. First one is from Daily Times and shows a man talking on his mobile phone while carrying a deep freezer on his motorcycle in Lahore. To me it looks unreal but that is not the point here. This picture is a symbol of dangerous driving situation in today’s Pakistan.The second picture below is rom a small town in the US. This town has prohibited the use of hand held phones in school zones during school times. The fine is about $214 and it has been enforced very strictly. I myself almost got a ticket.

This shows the shifting attitudes towards cell phones and driving in the developed world. It is now commonly accepted that driving and talking on cell phone at the same time is distracting and should be avoided. State of California has banned the use of cell phone (headphones are ok).

What a contrast!

Thanks to the ATP post Stunned, Impressed, or Horrified where I spotted the first picture. The second picture was taken by the author.

As reported in Daily Times and blogged about at Karachi Metblogs. Regardless of the fairness of this rule, I think it is absurd to assume that such rules can be realistically implemented. There will be a task force which monitors all the SMS traffic and figures out who is “manipulating” the market, yeah right! This is more of a PR tactic. Lets see when the first offender gets nabbed.

Manipulation of the stock exchange market through short messaging services (SMS) from mobile phones will be treated as a cyber crime, the federal government decided on Sunday, July 20, 2008.

The Federal Investigation Agency (FIA) will deal with creating disinformation about the stock markets through SMS. The government has also directed the agency to take immediate notice of such cases in future.

The decision to bring the practice under the agency’s supervision comes in the backdrop of a major stock market decline last week, which saw small investors, the most affected by the slide, demonstrating violently outside the major exchanges at Karachi, Islamabad and Lahore.

The recent sharp fall was attributed to a range of factors. Most immediate was the decision of the Securities and Exchange Commission of Pakistan to remove a 1% daily limit on how far share prices could decline, bringing it back up to 5%.

It was only a matter of time. The situation was on slow boil for a while. There are some serious issues such as pay scales and a history of mistrust. This is yet another test for the Middle Eastern management. I find it a bit strange that they are not using their website effectively - but then they had difficulties keeping it up. According to APP:

Commenting on the Unified Pay Scale (UPS), the PTCL spokesman explained that this package is for the benefit of workers and those opposing it are misleading the entire work force without being fully aware of its salient features and benefits.

The PTCL employees are at the gaining end and shall receive a substantial raise in their salaries and pension on the other hand all of their service rights remain protected as according to PTCL Service Rules of 1996 and the Telecom Act 1996, said the spokesman.

The management, he said, held two meetings with the union on the UPS and the union were supposed to give their feedback on the salary issue but they simply did not come back for further talks. The Union, he said, was not in a mood to sit down and it appears that the strike was preplanned irrespective of UPS clarification announcement.

The 2008 mid-year numbers for mobile subscribers are available here. The data shows a few trends about the growth of mobile subscribers (see chart below):

The rate of growth has slowed. 1.3 million sims were added in June, compared with the average of around 2 milliom per month from Jan - May of ‘08.

Warid fought back by adding the largest number of subscribers in June. Telenor and Zong seem to be losing some steam after a few months of high subscriber intake. Mobilink continues at sluggish pace. Ufone and Telenor numbers remain extremely close to each other.

One thought is that the dip is seasonal and growth will resume after some time (the June numbers in 2007 also took a hit). The dip in FDI may also be a factor. More likely it could be that the rising food and oil prices are taking their toll.

 

 

Tough phones, laptops and other gadgets serve a niche market segment. I recently tested a tough phone: XP1 from Sonim, shown here. I was impressed by its design and high degree of tolerance to take abuse. The company, Sonim, claims it to be the world’s toughest phone.

This ruggedized GSM phone is great for use in rough and tough conditions such as construction, outdoor activities, under water and for security professionals. It comes with a push-to-talk feature and SOS service for emergencies. Otherwise it is a bare-bone phone. There are no fancy applications or multimedia capabilities.

This kind of phone is not cheap (around Rs. 22K) but apparently there is a good demand from certain industries and it is in use in Europe. Is there a market for this kind of phone in Pakistan or South Asia? At least its good for venting out anger. Check out the hilarious videos of the phone at toughestphone.com.