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

2007 continues to be THE year of acquisitions for telecommunication companies in Pakistan. According to media reports, after months of talks, the deal has been officially announced: Omantel is to buy 65 percent of Pakistan’s Worldcall for $156 million. See our previous related coverage and detailed analysis here and here.

Oman Telecommunications expects to conclude a deal to buy 65 percent of Pakistan’s Worldcall by the end of the month, its chief executive said on Sunday. The deal would be worth 9.43 billion Pakistan rupees ($156 million) at the stock’s closing price of 19.3 rupees on Friday.

“It is a 65 percent stake,” Mohammed al-Wohaibi told Reuters by telephone. Omantel had initially expected to conclude the purchase of a majority stake in the Pakistan-based wireless local loop operator in June, without saying the size of the stake it was seeking or how much it would pay. “We expect to conclude the deal before the end of the month. There were procedural delays,” Wohaibi said.

Omantel, the country’s second-largest firm by market value, is bracing for the end of its fixed-line monopoly this year, two years after the government opened the mobile business to competition.

Shares of the state-controlled company, which reported a 13 percent rise in second-quarter profit on Sunday, have risen more than 3 percent this month.

As the first cell phone company in Pakistan Instaphone has a unique brand presence, even thought it has been losing market share steadily. Many of the top executives at rival companies such as ufone started their careers at Instaphone. Recently I asked a question about Instaphone’s future and TM wrote on Jul 14 that: “According to unconfirmed but reliable news, South Korea’s SK Telecom and the Arfeens Telecommunication Group of Pakistan have finalized a deal in which the South Korean player will acquire 70% stakes of the Instaphone (& Telecard?) along with management control.”

Given the reliable nature of the source above, some kind of deal with SK is likely to go through. If this happens - and I hope it does - it will make the telecom situation in Pakistan a most interesting one. My only concern is that will Pakistan be able to play a good host to all the international investors? There are a number of infrastructure and political issues which can make a big difference. It will be interesting to track the stock price of Telecard.

A couple of points from TM’s post which I recommend reading in entirety.

• In anticipation of a possible cash injection and to reduce time-to-service, Instaphone’s management had already finalized a hardware supply deal with Huawei for an all IP CDMA EvDO Rev A earlier this year.
• Arfeen Group manages three major voice and data brands in Pakistan (Instaphone, Telecard and Supernet) with Telecard’s being listed at the Karachi Stock Exchange.
• The last un-taken group of Arfeens Telecom represent a power-house of telecommunication with all licenses tied to a single ownership flag - from the super-duper cellular to the mundane dialup ISP license.

The annual conference of CTIA, the wireless association, was held last week of March 2007 in Florida. The CTIA annual event is said to be ”the world’s largest technology event dedicated exclusively to wireless, broadband convergence and mobile computing technologies”. It is a great place to showcase new technologies, network and socialize with top decision makers and create buzz about upcoming work. For example the much awaited voice search applications from Google and Yahoo were announced here.

The event covers the entire industry from network infrastructure to microprocessors to applications to content to end-user hardware. More info at the CTIA site.

The covered topics for 2007 conference include:
- The Quadruple Play
- Mobile Enterprise
- Mobile Payments
- Mobile Entertainment
- Social Networking & Mobile Communities
- Advertising
- Globalization
- WiMAX

See the webcasts of the conference here.

One of the major highlights is the Emerging Technology Forum track at the conference. The forum focussed on the following four tracks:

For detailed roundup of the conference see this post.

In this post I’ll look at the options for those who are visiting Pakistan and need temporary mobile phone service there. It addresses questions such as: Which cell phones work in Pakistan, what is a SIM, how to choose a service provider and how to pay for your calls.

Different parts of the world use different phone technologies (GSM, CDMA … see this post).  Therefore you need to have the right handset with the right settings for a given country. Most providers in US use CDMA but Cingular and T-Mobil use GSM. Europe, Africa and most of Asia, including Pakistan is on GSM. However GSM service providers in different countries may operate at different frequencies. GSM phones use a small chip or card called SIM, which stands for ‘Subscriber Identification Module’. SIM holds subscriber’s information and phone settings and it can be easily switched from phone to phone - thus making your phone an attractive target for snatching. In some countries (in US for example)  mobile phones are “locked” by the phone company to work only with specific SIM cards. For more about GSM and SIM cards see this post and the last section of the post.

You will need a SIM-unlocked GSM 900 compatible phone in Pakistan. You can take your own (you’ll need a 220V charger), rent one or buy a new or buy a used one from Pakistan. See this site for more on unlocking .

Phone Rental Service for Pakistan: Rental works best when for some reason you do not want to get into the hassle of choosing a set and provider and want prompt and preplanned service. Usuall the package includes a phone and a bucket of minutes with instructions on how to get more minutes.  Two of the companies which provide such serivces for Pakistan include Cellular Abroad  and Telestial. 

There are many factors which play into your choice of a provider: cost, signal and service features. Visit the page for service providers on this blog for a brief overview and browse their web sites for more information. If you are going to stay in the major urban cities then any provider should work fine. If you are looking for data or Ineternet service or for service in rural or remote areas you’ll need to do more research.

For those who have a working phone (perhaps a borrowed one!) and want their own number and service the best option is to go to the service center of one of the providers (see this page for providers) and fill out the paper work, pay the fee  and get a package of SIM card with a phone number. You will need to provide copy of your national identity card and a landline number.  My assumption here is that you want a prepaid service. If a service center is not nearby, many retail and convenience stores also carry and sell SIMs (for example see a list of where to buy from Telenor) - they will forward your paperwork to the service providers. In either case, you can start using the service fairly quickly.  Phone cards are available almost everywhere to recharge your account. Incoming calls and text messages are free. 

If you are travelling to areas outside cellular coverage you need a satellite phone. Read more »

According to this news item Pakistani mobile companies are going after the WLL operators - yet again. Since deregulation of telecom started in Pakistan the GSM based mobile companies and CDMA based WLL operators have been pitched in a battle. This is ironic as the WLL operators are not known for their quality of services. A quick look at Pakistani forums here shows many messages about wrong billing, poor performance and lack of customer service.

Wireless Local Loop (WLL) it is a fixed wireless access technology through which phone and internet service is offered through a wireless device (see the Huawei WLL phone on the right) but only within a limited location.

The idea of “limited mobility” was to avoid direct competetion with mobile phone but that’s not how mobile industry looks at it. Paktel, Telenor, Warid and Mobilink signed and sent a formal complaint letter to the Pakistan Telecommunication Authority pointing out the violations of regulated policies by the WLL operators. This complaint was followed soon after PTA announced results of its WLL quality of service (QoS) survey.

The PTA QoS Survey was conducted in 8 major cities including Karachi, Lahore, Rawalpindi/Islamabad, Peshawar, Quetta, Multan, Faisalabad and Hyderabad to gauge the quality of WLL service. The Limited Mobility aspect of WLL service was also surveyed. The operators checked include PTCL V Wireless, Telecard (Go CDMA), Great Bear and World Call. Survey was conducted within the network of the operators and with other networks that included PTCL, Mobile Operators and all other WLL.

PTA site says that: It was also observed in the survey that WLL operators are not strictly following the determination on limited mobility. Therefore, they have been asked to take immediate action to implement the same and submit a compliance report to PTA by 15 December 2006.

A few words about PTA policy on WLL. PTA had decided to restrict mobility in CDMA-based WLL networks to so-called “home-cell”. The resolution limits mobility of WLL subscribers in Pakistan to within 1-2 km in urban areas and up to 25 km in rural areas, a far cry from total mobility available to CDMA subscribers in India. The policy also known as fixed-line policy proposes two types of licenses, which includes local loop fixed-line and long distance and international (LDI) fixed-line.

More from the news article: “The complaint, in fact, defines overall violation by the WLL operators for effectively providing cellular services, which amounts to clear violation of the determination on implementation of limited mobility issued by the PTA,” said a source citing the complaint text. “It is important to keep in mind that the aim of the WLL was not to provide mobility to the customers, rather it was to provide fixed wireless access, which is an alternative to fixed line or Plain Old Telephone Service” he said.

The government awarded some licenses to 30 companies for fixed telephony; sixteen companies have been given licenses for WLL while 14 licenses were issued licenses for LDI.

Lets see what happens this year - poor consumers are losing anyway.

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 purpose of this post is to present a simple explanation about CDMA for ordinary consumers. The post will touch upon CDMA flavors (CDMA2000, W-CDMA), explain 3G technologies for mobile phones, and CDMA-based fixed or mobile Internet and phone service using wireless local loop.

For users and consumers the important thing is that CDMA is the prevailing mobile communication technology of the next generation: it enables 3G (short for third-generation technology, for mobile phones) and wireless internet access at high speeds. CDMA and 3G allow you to check your email from a smart phone, browse the web on the go on your laptop, send multimedia messages or watch streaming videos on your mobile.

At the risk of over-simplification, here’s a brief overview of CDMA flavors:

W-CDMA is the 3G technology (mobile phone protocol) for GSM mobile phone (wireless) networks, as in Pakistan and Europe. It is also referred to as 3GSM (3G and GSM). Wireless Intelligence reports that there are 83 million W-CDMA customers in 49 countries.

CDMA2000 is a whole family the 3G telecommunications standards for non-GSM networks, such as most of the mobile phone companies in US and some companies in Japan and South Korea. There are about 275 million users of CDMA2000 in 75 countries (estimated by CDMA Development Group). As explained below Pakistan is using CDMA2000 for Wireless phone and Internet.

The key point:

W-CDMA and CDMA2000 are competing standards and are incompatible!

And if that was not enough China has its own 3G standard, TD-SCDMA! Below is a view of CDMA subscribers over the years.

Above I have described CDMA for mobile telecommunication. CDMA is enabler of Wireless Local Loop (WLL) as well. That is, the use of a wireless communications link as the “last mile / first mile” connection for delivering plain old telephone service and broadband Internet to telecommunications customers. WLL can be fixed or mobile (with limitations). A number of Pakistani companies (listed as “operators” here) are providing wireless phone and Internet service using CDMA2000 technology. The state-of-the-art CDMA2000 1xEV-DO is provides a peak data rate of 2.4 Mbps.

There is a wealth of information about CDMA in Pakistan at PakCDMA Website.

As a disclaimer I admit there are lots of technical details which I’ve chosen to ignore here for the purpose of keeping this post simple. For those who would like to dig deeper, I’d suggest these Wikipedia resources:
CDMA2000
W-CDMA