The State Bank of Pakistan has reported a decline or 34.4% in foreign investments during July-January period as compared to same period last year.
Dawn reports that fall is observed in telecom, financial, cement, oil and gas exploration and automobile sectors.
We had written about the issues holding up $800 million payment from Etisalat. Pakistan’s Minister of Privatisation has stated that Pakistan will receive a payment of $800 million by the end of March from the UAE’s Etisalat for a stake in Pakistan Telecommunication Co (PTCL). Read more »
The Etisalat-PTCL deal has been controversial since the days when privatization talks began. In the 4 years after the deal, PTCL went through a transformation with many changes impacting its employees including layoffs. But the issues associated with Etisalat-PTCL deal are not over yet. Recently news has surfaced that Etisalat is still in dispute with Pakistan Government over US$1 billion (Dh3.67bn) payment. Etisalat agreed to pay $2.6bn to the government in installments for a 26 per cent stake in PTCL in January 2006. But it has withheld payments for more than a year because of a dispute over the ownership of several properties in Pakistan that were part of the deal.
“Transfer of land is part of the contract. It says if it doesn’t happen we can stop the payments,” said Mohammed Omran, the chairman of the UAE’s largest telecoms operator. A committee that is led by Waqar Ahmed Khan, the Pakistani minister for privatization, and includes two other federal ministers has been established to negotiate with Etisalat. Read more »
Here are the key highlights of the PTA Report for Pakistan telecom industry for fiscal year 2008-09 (July 2008 - June 2009) issued* on Friday.
Highlights
Telenor Pakistan is making good progress towards an anticipated cash flow break-even in 2010, with the unit increasing revenue for the quarter by 19.6% compared to the same period a year earlier. Telenor Pakistan market share is now 22%, driven by strong organic growth in 2009.
• Organic growth – 766k net subscriber growth boosted by 50% reduction in activation tax.
• ARPU remains stable – consistent with market conditions
• Revenue growth driven by higher subscriber base
• Profit margins edge higher – the EBITDA margin of 24% was the highest quarterly EBITDA margin reported so far by Telenor Pakistan.
• Network investments are still low, some catch-up expected in Q4
Source: Telenor Website – 3Q Report
PTA has issued a revised framework for MVNOs in Pakistan. Read the official pdf here or read below for highlights. A Daily times article by Muhammad Yasir says that Pakistan Telecommunication Authority (PTA) has finally set $5 million initial licence fee for Mobile Virtual Network Operator (MVNO) to be valid for the period of 10 years. Would this mean that we may see some new foreign investment in Pakistan telecom?
A MVNO is a mobile operator that does not own its own spectrum and usually does not have its own network infrastructure. Instead, MVNO’s have business arrangements with traditional mobile operators to buy minutes of use (MOU) for sale to their own customers.
While MVNO’s typically do not have their own infrastructure, some leading providers are actually deploying their own Mobile Switching Centers (MSC) and even Service Control Points (SCP) in some cases. Leading MVNO’s deploy their own mobile infrastructure in order to facilitate the means to offer value-added services.
In this way, MNVO’s can treat incumbent infrastructure such as radio equipment as a commodity, while the MVNO offers its own advanced and differentiated services based on exploitation of their own intelligent network infrastructure. The goal of offering value-added services is to differentiate versus the incumbent mobile operator, allowing for customer acquisition and preventing the MVNO from needing to compete on the basis of price alone.
MVNO’s have full control over the SIM card, branding, marketing, billing, and customer care operations. While sometimes offering operational support systems (OSS) and business support systems (BSS) to support the MVNO, the incumbent mobile operators most keep their own OSS/BSS processes and procedures separate and distinct from those of the MVNO.
Pakistan and China signed memorandum of understanding to cooperate on a number of technology and industry initiatives. One of the MoU is on Global Open Trunking Architecture (Gota) for Emergency Communication and Disaster Control management in Pakistan between Ministry of IT and Telecom (National Telecommunication Corporation) and ZTE Corporation People’s Republic of China.
Wikipedia defines Global Open Trunking Architecture as:
In telephony, GoTa or “Global Open Trunking Architecture” is a CDMA-based digital trunking system. The GoTA system was developed by ZTE, a Chinese manufacturer. The GoTA system can be used for both private and public trunking network applications.
GoTa is capable of providing a variety of trunking services:
* One-to-one private calls and one-to-many group calls
* The ability to set the user’s priority
* The ability to perform forced insertion/forced release based on the user’s priority
* The ability to provide special services such as system paging, group paging, sub-group paging, and dedicated Push-To-Talk services as required
* The ability to classify the groups into permanent and temporary groups, in which the group members can be managed by the user.
Why did S&P raise ratings for Mobilink, despite the tough economic conditions in Pakistan? Two reasons: reduction in capital expenses and savings resulting from suspension of management fees to Orascom. From Cellular-News.
Mobilink continues to remain exposed to the weak macroeconomic environment, external liquidity position and security situation in Pakistan. However, they expect the recent improvement in macroeconomic environment to result in better operating performance. Also, in the near term, S&P expects Mobilink to face less funding challenges as it is expected to register positive free operating cash flows through significant reduction in capital expenditure and suspension of management fees to Orascom Telecom. Pakistan’s cellular market continues to face intense competition, resulting in lower subscriber numbers and market share for Mobilink. Nevertheless, Mobilink has maintained its No. 1 market share both in terms of subscribers and revenue in Pakistan’s wireless market.
S&P believes parent Orascom Telecom would continue to provide support to Mobilink, if required, considering: (1) the cross-default clause at the parent company in the event of a covenant breach of material subsidiaries, including Mobilink; and (2) Mobilink is the second-largest operation of Orascom Telecom by most financial measures and accounted for 20.6% of the consolidated EBITDA for 2008.
This follows Standard & Poor’s decision to raise the long-term sovereign credit ratings on Pakistan (B-/Stable/C).
The SeenReport team of Sharjeel, Yasser and Adil have reached a major milestone. Congratulations to the team on staying firm and having a strong faith in their work. I met the team last year in Lahore and appreciated their focus, skills and hard work. See our previous coverage of SeenReport here and here. A few snippets from Yasser’s blog about the funds raised and their plans.
I am excited to announce another big news about SeenReport (pvt.) Limited. We have raised Series A VC funding from Al-Janabi Group (A prominent International Venture Capital Firm). With this step SeenReport joins a very small list of Pakistani Startups who have raised VC money. The capital injection takes overall worth of our startup to several million dollars.
It has been really tough throughout this time period, as in Pakistan there is absolutely no platform where one could raise Angel Investment let alone VC Funding. This really is a milestone for a Pakistani Startup and we believe that this will mark a new era taking Pakistan’s name to the next level where internationally people would start taking Pakistani Startups more seriously and may be more opportunities open up for Venture Capital injection. Pakistan would start to get even more attention for being a place where innovative work is being done. Hopefully this will also encourage many other young Entrepreneurs who are struggling to make an impression or thinking about starting their own business.
The series A investment will really help us in taking SeenReport’s platform to a new level where we would be able to make an even better impression on MainStream Media by promoting Life Streaming, Freedom of Expression, Citizen and Process Journalism and involving technology in bridging the gap between Internet, mobile users and common people across the globe.
As we discussed before, President called for the setting up of a Telecom University, a telecom research and development center and a plant to manufacture and assemble mobile handsets in the country. Nokia (40% market share in Pakistan) and Samsung (23% market share) are two of the leading handset companies doing business in Pakistan. The News recently asked Nokia and Samsung about their interest in producing handsets in Pakistan. Both said no for different reasons. Samsung gave a hint that it may consider the option in future, subject to favorable business conditions. Regardless of the reasons given by them, it is clear that if a country’s infrastructure, energy and political situation is unstable, it is very difficult to persuade outsiders to invest in manufacturing sector. Find the article excerpt below.
The News talked to Nokia and Samsung and asked if the companies are interested in locally manufacturing mobile handsets.
However, both the companies have no plans to set up a manufacturing plant in the country as they say their already existing plants are fulfilling the demand.
Samsung has 23 production bases, spread all over the world with over 42 sales subsidiaries strategically located in various countries. Currently, the manufacturing plants of Samsung located across the continent of Asia have been fulfilling the Pakistan’s fast growing market very conveniently, efficiently, and cost-effectively.
Moreover, Samsung operates 26 R&D Centres, located in developed and advanced surroundings, where newer and better technologies, processes and products are sought constantly.
Owing to the rapid development of the Pakistan market over the past two decades, Samsung may be prompted to establish domestic production plants.
However, it would depend upon further market growth, abundant availability of specialised human resources and facilitation from the Government in terms of securing the local production.
Further enhancements in technological infrastructure along with frequent exchange & training of specialized cellular engineers, in a safe and secured industrial environment is needed. The export potential and market volume also needs to be evaluated before such an advanced industrial undertaking is initiated by Samsung.
Nokia Head in Pakistan said that Nokia has its Headquartered in Finland, Nokia is a truly global company with strong strategic presence at key locations. Nokia has an established global production base, which comprises of nine mobile devices and technology production units in: Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania and South Korea.
He added: “we work on an optimized capacity model rather than a country to country model, the 9 plants that we have are already fulfilling the global demand. For this reason, at the moment we feel no need to establish a new plant. Our investments in Pakistan are in the form of care centre networks, marketing, brand building activities, CSR activities, offices and people. There are no hurdles in establishing a manufacturing site. Just that, there’s no need to set up a new production unit at the moment as per our global strategy”.
As we discussed last year in this post, Zong has confirmed its plans to continue investing and expanding in Pakistan. As background to this, see the total number of sites by companies at 2008 end (source: PTA).
The daily times report (with some obvious errors corrected – it was full of mistakes) states:
China Mobile Pakistan has planned to maximise the coverage capacity of its cellular phone operator-Zong-by increasing its number of cellular sites up to 9,000 across the country with an investment of $500 million by the end of 2009.
According to Pakistan Telecommunication Authority (PTA), the country had overall 26,300 cellular sites by the end of 2008. Five operators have added 8,966 networking sites in the first half of the current fiscal year 2008-09.
The Chinese company has invested $1.66 billion so far in Pakistan, including $600 million invested in the closing fiscal year 2008-09, which is a handsome contribution to foreign direct investment (FDI) in telecommunication and IT industry.
According to the officials, the company will invest more to increase its number of services and sale centres across the country that would also generate more number of job opportunities.
The paradox of instability in Pakistan one one hand and the rapid growth of technical expertise on the other is surprising for many. Consider this snippet from the Businessweek article by Rachael King published on June 4 2009.
Pakistan has become the 20th most attractive outsourcing destination, according to consulting management firm A.T. Kearney. Even as concerns increase about Pakistan’s stability and the growing displaced population due to ongoing military operations with the Taliban, the country made a significant jump on A.T. Kearney’s 2009 Global Services Location Index released May 18. Pakistan went from #30 in 2007 to #20 in 2009.
As Jehan Ara writes, the A.T. Kearney index ranks the top 50 countries worldwide for locating outsourcing activities including IT services and support, contact centers and back-office support. Countries are measured on 43 different attributes related to financial attractiveness, people and skills availability and business environment.
This rise in the ranks happened without much institutional support and lack of a coherent policies. In my opinion, this represents the very nature of Pakistani culture. Resilience and the will to carve out ways to succeed is part of the Pakistani fabric. This is one of the many ways Pakistanis are answering the challenges posed by the current security environment. Consider for example the upcoming gathering of Pakistanis in Silicon Valley. One session is dedicated to discussion of how can entrepreneurship promote development and stability in Pakistan?
Tech Lahore has a good post about this as well. You should read the interesting discussion thread going on at the BusinessWeek site.
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