State of Telecom Industry in Pakistan

Here’s a nice summary view of how people are using iPhone today. (source: Morgan Stanley Tech Research)

On a related note, adoption by businesses is a major goal for Apple. See this Computerworld article on whether iPhone will be able to win over the resistance by enterprise and their IT support groups?

Companies need to obtain digital certificates for homegrown applications from Apple, then transmit the applications to Macs and PCs running iTunes. Individual iPhones have to be connected via a cable to an iTunes-equipped desktop computer in order to synchronize with the software and get access to the applications.

The direct-connect synchronization plan left IT managers such as Vivek Kundra, chief technology officer for the District of Columbia, looking for more options from Apple.

Kundra is beta-testing about 15 first-generation iPhones along with the iPhone 2.0 software that Apple announced earlier this year. The $199 price tag for the entry-level iPhone 3G will make the device “a lot more palatable for the enterprise,” he said.

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The Legatum Center for Development and Entrepreneurship is a new initiative at Massachusetts Institute of Technology which aims to serve as a launching pad for a new generation of entrepreneurs who want to launch innovative businesses in developing markets such as Pakistan. I was glad to see that Adnan Shahid, a Pakistani student is among the fellows of the Center. Below see an excerpt from Adnan’s profile and his plans for the incubation center.

Working as the Director IT Strategy with Mobilink, Pakistan’s largest cellular service provider, I witnessed the success of a single mobile phone turning into a business model. Mobilink started the ‘PCO Self Employment Package’, which included a wireless pay phone to be used as a Public Call Office. This one phone scheme provided employment opportunities to the less privileged households- becoming a financial earning source for the otherwise unemployed. This first-hand experience helped me develop a business idea and professional goal in life: to set-up a mobile technologies incubation center for low-income countries. The goal is to increase the commercialization of communication technologies and incentivize entrepreneurs and innovators.

I am curious to know further details about this work and will report more on it as I collect the information. A bit more about the Legatum Center. Funded in Sep 2007 and based at the Massachusetts Institute of Technology (MIT), Legatum Center for Development and Entrepreneurship is founded upon the idea that bottom-up entrepreneurship is the central driver of both economic development and the emergence of good governance. Iqbal Quadir leads the Legatum Center. The Center website has more information on how their approach can “create a path toward poverty alleviation, elimination of corruption, and improvements in health and education.” I view the Legatum Center as academia’s contribution to make the concept of social businesses a reality.

My previous posts about Zong received a lot of queries about how to get a desired number from the new Zong series. For all of those who  are still looking for that special number, Zong has started offering Book Your Number feature online. You can check the availability of numbers online and if the number is available, fill out the form, attach your CNIC and then pick up the SIM from Zong office. The site also gives ideas on what numbers to get:

We have been talking about this trend for a while. The rate of growth of Telenor subscribers (or SIMs) has been faster than Ufone. The numbers released by PTA for May 2008 show that Telenor(17.84M) has a slight lead over Ufone(17.80M).

I think the difference in numbers is minor but this is a major symbolic victory for Telenor. Ufone had a huge advantage in the beginning but Telenor was able to come in from outside and within 3 years it has proved to be a formidable competitor.

More analysis to come later about how Zong is taking away Mobilink customers.

Mansoor has written a good post about the implications of 2008-2009 budget for telecom and IT industry in Pakistan. Thanks to Mansoor’s hard work, it is easy for the rest of us to understand the impact of budget decisions on consumer and business activities related to voice and data. I am appalled by the rate of increase of taxes and its negative impact on consumers.

Mobile and telecom industry has been a great money making machine for Pakistan Treasury. Last year The GSM association did a detailed study on the impact of taxes on mobile phones in Pakistan and advised the government to reduce the activation taxe on SIMs. The study pointed out that by reducing the taxes the consumption will go up and government will get more money in. Here the government seems to be going in opposite direction.

The tax increases are  wrong and will hurt both consumers the overall industry. I would like to know who was behind this irrational increase in taxes and fees on telecom services? Here’s an excerpt from Mansoor’s post:

The first levy which comes to mind is the standard Rs. 500 levied on each imported handset. While it may be argued that levying a standard amount on sets which vary in price from under Rs. 2000 to Rs. 30000+ is unfair, given how our country operates in terms of corruption, a single rate at least has a much lessor chance of being misused.

The next item on the agenda, would be the increase of withholding tax on calls to 21%, which basically means that for each Rs. 100 card you now put into your credit line, you’ll be paying Rs. 30 as taxes instead of Rs. 24 as we did previously. The one thing it will not hurt is cell phone companies, since they already advertise their charges as rate+tax.

And lastly, an additional tax of Rs. 100 on all phone bills exceeding Rs. 1500 is a major blow. I’m pretty sure this is applicable only on landlines but please correct me if im wrong. Essentially, this means that if you have a landline and manage to accumulate a bill of over Rs. 1500 e.g. by having PTCL DSL on the line, then you pay an additional Rs. 100 each month to the government.

According to a comment by Waqas “The withholding tax on fixed line is 10% if the bill is more then Rs. 1000 (not a fixed Rs.100 and pre req amount is not 1500).”

After a relative period of calm, PTA has launched a new campaign against illegal telephony. With the help of technology by Naurus, PTA busted an operation at Karachi. Full details are at this news release By PTA. See grey telephony and VOIP coverage from the past at TelecomPk.net and a recent discussion on this topic at TGP.

Good development. PTA has proposed a few actions for dealing with spam. This includes spams SMS, emails and unwanted calls. See the proposal here or get it from PTA website. I doubt that a fine of 300 Rs will discourage professional spammers. Legitimate companies should start working on their opt-in lists.

It is proposed that a do not call register (DNC) may be maintained by telecom operators. The DNC Register will be a database having the list of all telephone numbers of the subscribers who do not want to receive unsolicited calls. After the establishment of DNC register a subscriber who does not wish to receive Unsolicited calls, can register their telephone number with their telecom service provider to be included in the DNC.

Operator shall upload the number to the DNC within 45 days of receipt. The Telemarketer will have to verify their calling mobile numbers list with the DNC register before making a call. An amount of Rs 300/- per call/message should be prescribed to discourage telemarketers who make calls to numbers registered in Do Not Call list. The defaulter telemarketer will face legal action.The impact of imposing a higher charge for calls and messages which have a commercial purpose attached to them will to some extent ensure that only legitimate calls are made i.e calls to recipients who do not have any problem with attending commercial calls.

Awareness is the key to fighting the spam problem. There are a number of channels listed by PTA but surprisingly blogs and other new media is not mentioned.

The Authority puts forward a media campaign check list which shall be followed by the Authority in collaboration with operators to create spam awareness:
  a) Public awareness activities to target users first and foremost, but also large corporations, small and medium-sized enterprises, direct marketers and online operators.
  b) General awareness activities to be posted on the Web or other media such as television, newspapers and magazines. Brochures may be distributed in schools, made available on all operators’ websites, and also distributed as a leaflet in IT magazines. Educational cartoons about spam, unsolicited and obnoxious calls controlling and reporting and online security broadcast.

Pakistan is in second place compared to other South Asian countries in terms of certain economic indicators according to a report from World Bank on global business ranking . The business rankings report highlights the business reforms which have been implemented in Pakistan and provides details of various aspects of starting and running a business. In terms of issues, energy shortage is one of the major problem in Pakistan just like other emerging economies.

Here’s a summary, taken from Dawn Blog.

A recent World Bank report has declared Pakistan as one of the top favourable economies in the world. The “Doing Business 2008″ report states that Pakistan is in second place compared to other South Asian countries in terms of certain economic indicators, such as: ease of doing business, dealing with licenses, and protecting investors.

Pakistan is quickly emerging as a powerhouse in the region, partly due to its fast paced IT industry. The government’s policies towards foreign investors have also contributed in helping the country stand out. These include 100 per cent foreign equity ownership, 100 per cent repatriation of profits for foreign investors and tax exemption for the sector till 2013.

An increasing number of foreign companies also prefer Pakistan for their outsourcing operations. This is due to the large pool of English-proficient professionals, cheap connectivity rates and competitive operational costs.

‘Doing Business 2008? is an annual report that evaluates the regulations that directly impact economic growth and provides objective measures of business regulations and their enforcement. The report evaluates business
activities based on regulation affecting the “10 stages” of a business’s life: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

Story via Telecom Grid Pakistan.

Here’s a view of how the mobile companies stack up against each other. In terms of the subscriber growth from Jan-Mar of 2008, Telenor is at the top.

In terms of total number of subscribers (see the chart on the right), Telenor (16.7 million) is closing the gap with Ufone (17.2 million). I am interested in hearing views about the drivers of this growth.

By end of Q2 it will be interesting to re-visit this and see whether Zong lived up to the buzz it created!

This is bad news for Pakistanis abroad: they will pay considerably more for calling Pakistan starting May 1. See the news item from Dawn. It seems to me that we are regressing in terms of policy making. Who benefits from this? PTA and long distance operators. What about consumers? Well, a lot of consumers and industry experts are upset and are taking various actions such as expressing their concerns through various offline and online channels (see this petition). One thing is certain: the grey telephony market will flourish because of this. Expect more noise around this in the coming days. I am not looking forward to my next bill for international calls!

Salman Ansari (former CEO of Paktel) has posted interesting predictions at various online forums. Here’s an excerpt:

Quality of calls of inbound calls specially from the US will become terrible (cellular terminations) as most inbound terminations will come in via low cost grey market – biggest culprits will be the biggest carriers (AT&T, Bell Canada, etc).

Wasim Baig summarized his views about this change at TGP:

Pros:
1. LDIs get a higher rate, higher margin
2. APC contribution increases
3. Origination increases
4. Balance of trade in PK’s favor

Cons:
1. Grey market increases
2. LDI may increase origination rates as well
3. Yet more regulation! PTA stays relevant to pricing ..
4. Market pricing takes a back seat

Here’s more from Dawn article.

“The PTA, in fact, has addressed the demand of local operators, who have been pleading for increase in such rates, as it would not affect the local consumers of the facility,” said the source. “But it would naturally increase the cost of calling to Pakistan from outside”.

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Taiwan-based High Tech Computer Corp. commonly known as HTC, has been doing some amazing things but without much fanfare. Now its getting well-deserved attention from the media and investors. Analysts are projecting HTC to be a major player in Asian handset markets. One of its star products is The Touch, which, like the iPhone, uses a touch-sensitive screen rather than dedicated buttons for many of its functions. Touch was a big profit-driver for the company last quarter. This week at CTIA, HTC Touch Dual was introduced with Windows Mobile 6.1. Later this year HTC is expected to launch Dream, an ultrathin version of Touch.

Thats not all though. HTC will be making android based phones as well. A recent WSJ article says that the buzz for Google phone may make HTC a smart stock for investors seeking growth in uncertain economic times.

HTC started in 2002 making Windows-based smart phones under contract for companies such as Palm Inc., Dell Inc, and Hewlett-Packard Co. Now, nearly 80% of its sales comes from handsets it makes in collaboration with telecom operators across the globe and under its own brand.

This month, HTC announced an alliance with Reliance Communications Ltd., India’s second-largest phone company by subscribers, to promote smart phones in that country. HTC’s CDMA handsets will be used on Reliance’s network, a move that will strengthen HTC’s foothold in one of the world’s fastest-growing phone markets.

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In our previous discussions we have observed the growth rates and overall positions of the mobile companies. Telenor has emerged as one of the leading company in 2007 with about 8 million new subscribers (or SIMs if you want to be accurate). Despite a few growing pains such as low ranking in the PTA quality ratings, Telenor is poised to push further its brand and subscriber growth.

Telenor has also started to become more involved in social activities. In addition to the typical corporate social responsibility activities, Telenor has sponsored recent Startup Insider series event in Islamabad. That is a good trend and I hope that it will continue. Companies such as Telenor can make a big impact in terms of guiding and training the youth through such activities.

Here’s an interview of Telenor CEO in which Tore Johnsen talks about the total investment Telenor has made, agreements with Nokia-Siemens & Multinet and his views on WiMAX and 3G. Excerpts:

We understand the government’s ambition of introducing 3G in the market, but growth and investment in the basic mobile infrastructure should not be sacrificed, as there are too many people still without basic access to mobile telephony.

we demand that the government should consider 3G not as a licensing opportunity, but rather as allocation of additional spectrum linked with roll out obligations and not hefty upfront fee. PTA and FAB should also make additional UMTS spectrum available in order to have equitable spectrum allocation