State of Telecom Industry in Pakistan

Pakistan market reached the 90 million milestone at the end of September 2008. A review of mobile subscriber (SIM) numbers from January to September of 2008 shows some interesting trends. Telenor added over 3.8 million new SIMs. Zong added 3.2 million. Mobilink scored some gains but then lost subscribers …. it still maintains a market leading 35% share. Zong continued showing strong momentum and crossed the 5 million mark. Overall the market gained 12 million SIMs in 9 months of 2008. My projection is that the full year gain will be near 14 million.

Sep-2008 subscriber numbers (Source: PTA).
Mobilink: 31,359,049
Ufone: 18,801,402
Telenor: 18,472,445
Warid: 16,157,778
Zong: 5,092,476
Total: 90,204,284

PTCL recently announced that it will offer free dial-up Internet service to its phone customers. From PTCL point of view, they can offer the excess capacity to users and claim it as a sticky factor and a valuable service for its customers. However this free offering is worrisome for the competitors of PTCL. This issue has brought back one of the old rivalries in Pakistan telecom industry: PTCL versus Internet service providers of Pakistan. Some people think that the quality of service of this free dial-up is so bad that it amounts to a gimmick and it will frustrate those who try it.  Others believe that this is a great idea and service for those who have limited or no broadband choice. What do you think?

Via Trading Markets.

Pakistan Telecommunication Authority (PTA) has called the management of Pakistan Telecommunication Company Limited (PTCL) to explain its position on providing free dial-up Internet services to its customers.

Chairman PTA, Dr Mohammad Yasin while talking to a private TV channel here Monday said that most private Internet Service Providers (ISPs) have lodged complaints to the Authority against PTCLs free Internet service terming it anti-competitive and predatory pricing move.

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We may call it the exaggerated form of complaint or seriously disturbed customer. The picture was taken in Lahore and appreared in Daily Times newspaper last week. Its quiet a show from the person who hung this banner. This shows the customer service and ignorance of PTCL towards their customers. The picture speaks for itself and is an explanation within.

As covered here before, the process to get a new SIM has undergone many changes. The franchises are following the PTA guidelines strictly as well. You need to provide the original NIC and a thumb print to get a SIM. The franchises are connected online (and via their mobile phones) to NADRA systems to verify the NIC. Individuals can send a blank message to 667 to verify their ownership. The response includes the name of the person and the NIC number. If you just purchased a new SIM then the data is not available for a few days and you’ll get a message with Unknown name and 1111 as NIC.

Do you see any security and privacy issues? There is no security mechanism (such as a PIN). Anyone who gets a hold of your phone can get the name and NIC. If you lose your phone then the thief can know your name and NIC number.

While many numbers and policies have been floating around for the unverified SIM issue, PTA has issued a new statement which I am sharing here. As we know this has been one of the most difficult issues for the industry. A few big changes announced:

• The control of sale /verification will shift from Franchisee/Retailers to Mobile Companies
• No more than 10 connections against single person (CNIC)

Not only has it required a change in the way business has been done but it also has made an impact on the revenues and that too in an already difficult economic and business environment. This shows how important it is to craft thoughtful policies at the beginning. Any mess that you try to fix after it is in the market takes a much longer time and effort.

Chairman, Pakistan Telecommunication Authority (PTA), Dr. Mohammed Yaseen presided over a high level meeting of Chief Executive Officers of all Mobile Companies on 7th October, 2008 to discuss the progress of different deadlines given by PTA for blocking of unregistered SIMs, blocking of more than 10 connections on single CNIC and on the proposed project for activation of SIMs After verification.

Chairman PTA showed great concerns on the outcome of recently concluded survey of franchisee and retailers done jointly by PTA and Mobile Companies. The results showed violation of Standing Operating Procedure (SOP) on verification by franchisees and retailers. He further emphasized that PTA may take stern action against the Mobile Companies on the basis of these violations.

The meeting was informed that after considerable efforts total 10.5 million connections have been blocked so far. In first phase connections sold uptill 30th April, 2008 have got verified through NADRA. More than 7.3 million connections found unverified have been blocked. In the second phase, PTA is endeavoring to clean subscriber’s data of connections sold from 1st May, 2008 to 30th May, 2008. Uptill now a total of 0.6 million connections which remained unverified have been blocked.

SOP on verification also binds the Mobile Companies to block more than 10 connections against single CNIC. Mobile companies were asked to block additional connections by 30th September, 2008. Uptill now 2.6 million of extra connections have been blocked.

Chairman PTA further informed the CEOs that a considerable improvement has been seen in the verification process, however PTA feels that unless sale of Pre-active SIMs are not stopped, full implementation on the SOP will not be possible. The meeting discussed in detail the proposed system under which company will sell non activated SIMs and Mobile companies will activate the SIM after verification of subscriber’s antecedents from NADRA. The proposed system will have number of advantages like; The control of sale /verification will shift from Franchisee/Retailers to Mobile Companies; It will have added security parameters and being automated will be more reliable.

Since this is new concept which requires considerable operational and administrative arrangements, therefore Chairman PTA formulated a working group of Cellular Mobile Companies, NADRA and PTA to propose workable solution so that all aspects of verification is catered, by 20th October 2008.

Here is part 2 of the 3-part series of interview with the Chief Executive Officer of Universal Service Fund, Pakistan. In this part Mr. Iftikhar explains about subsidies, financial allocations and the criteria/data used to select the region where USF will invest.

What is your budget and how do you apportion it for voice vs broadband?

The disbursement budget for the current year is more than 4 Billion Rupees but this is a misleading figure due to two reasons.

1. It shows the amount that will be disbursed and not the amount that will be committed by signing contracts with the operators. The committed amount is disbursed over more than one year as the projects take time to complete.
2. It must be understood that this kind of budget can only be indicative. The actual disbursement of funds depends on the subsidies determined through open competitive bidding. For instance last year we achieved our target of the number of Lots to be auctioned, however the subsidies demanded by the bidders turned out to be lower than our budget! For every 100 Rupees of investment, Operators asked 20 Rupees subsidy.

In a way this under “under-utilisation” of the budget was a good thing, in that the Operators’ stake was substantially higher. In the meanwhile this trend is undergoing change and the operators are increasingly asking for higher subsidies. As of now an investment of Rs. 5.3 Billion is taking place in those remote areas with only Rs.1.49 Billion USF subsidy.

As for its apportionment, let me answer your question by a pie char.

What criteria do you use to decide where to invest?

Our first priority is to go to unserved areas. We use data from different sources to determine which areas are really unserved. We take:
• topographic maps from Survey of Pakistan,
• satellite imagery from Suparco,
• village population data from Census Organization of Pakistan
• and finally telecom coverage from Telecom Operators

Based on this we gather the un-served areas into “Lots” and auction the Lots one by one.

In case of Broadband it was easier. We eliminated from our program, all those big cities where there is some broadband service available. Although we consider those cities to be under-served, we are not going into those large urban areas for the time being.

And in case of Optic Fiber again the decision was rather easy. We carried out a field survey to determine which Tehsils of the country do not have Optic fiber connectivity, which turned out to be 31% of the total Tehsils. That is where we have launched our programme.

The criteria as to which area to cover first, one tries to cover maximum unserved population in as short a time as possible. As in any endeavor we have are also learning as we are moving ahead. For example when we tried to auction the large Lot of Chaghi-Noshki in Baluchistan, no bidder turned up. So we broke up the very large Lots and also decided to first concentrate on Lots nearer to the served areas and then move outwards. Similarly in case of the project ‘Optic Fiber for all Tehsils’, we chose Sindh province first because that way we can cover maximum Tehsils with minimum KMs of Fiber cable – kind of low hanging fruits first.

It would be pertinent to mention here that all such proposals are discussed and debated in the Board where collective wisdom of Government as well as Private Industry is applied before such decisions are reached.

Let me add here that the level of support and help that we get from the Board Members is beyond what I ever expected – especially the Ministry and PTA. Without this we could not have moved ahead.

Chairman Pakistan Telecom Authority (PTA) Dr. Muhammad Yaseen talked about a number of upcoming telecom initiatives in Pakistan. The list includes 3G, MVNO, Boradband and Rural communications. I consider such announcements as public relation management. I am skeptical. In my opinion, none of these initiatives are likely to have a major positive impact on the telecom industry or consumers. The government needs to stop treating telecom industry in Pakistan as a cow they can keep milking (through insanely high taxes) forever. The need is to address the fundamental issues and problems, most of which relate to the economy and fiscal policies.

Here are my brief reactions on PTA’s announcements:

• 3G Launch - mobile companies are hesitant to invest.
• Consumer Protection Cell - long overdue, past performance was dismal.
• Mobile Virtual Network Operators - uncertain future because of the low levels of interest shown.
• Strategy and Development Division - how come they did not have a strategy group before? how have they been creating policies till now? Do we need another “Think Tank” ?
• This one takes the cake: PTA is launching Broadband! Actually this is true. The broadband numbers are so low that we can safely say that broadband was NEVER there and start from zero.

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Recently we have been discussing the recent slowdownin telecom growth in Pakistan. In a recent interview, Irfan Wahab Khan, Executive Vice President Telenor Pakistan, sharply criticized the recent policies of Pakistan government and PTA. He mentioned the high rate of tax - 21% - as a major issue for telecom industry. He also talked about the Rs. 500 subsidy provided by mobile companies for each SIM card sold and the controversy over handling of illegal SIM sellers.

We tend to agree with him. The last budget went overboard with the tax increase on telecom services. If an industry is doing well and is successful in bringing foreign investment to Pakistan (Wahab pointed out that Telenor alone invested $2 billion in last 3 years), let it work without the burden of unnecessary taxes.

There were other grievances as well. Irfan also said that his company was not against the quality surveying of the service providers but it should be transparent and impartial. I think Telenor did not do very well in the QoS surveys and there has been criticism of the way these surveys were conducted.

He appealed to the government to call a roundtable conference of all the service providers to get rid of the illegal sims being used for crime and the terrorist activities while the police action against retailers and franchisers should be stopped.

This has been a tough year for Pakistanis living abroad who want to stay in touch with their loved ones in Pakistan. Just when we were getting used to making calls to Pakistan at reasonable rates, PTA increased the rates which caused a huge disappointment. I have been searching for a cheap and high quality service for calls to Pakistan for a while. Last week I signed up for Localphone and I was very impressed by the convenience, quality and the cost (8.9c/minute) for calling Pakistan.

Signup was fast and easy. Localphone provides you a local number in your area which actually calls the number you want in Pakistan. Let’s say you are a Pakistani in Houston; you can get a local Houston number and that number will ring your home number in Lahore. You can specify the numbers from where you will be making calls (your home, mobile etc) and that’s it.

The Localphone.com website makes it real easy and convenient. I was up and running in a few minutes. A credit card is required to complete the registration. I have setup three local phone numbers for myself. Compared to the lengthy process of using calling cards, this is very convenient and the quality is way better than the cards offer.

I enjoy the convenience of making quick calls through a local number and the comfort of knowing that there are no hidden charges - all your call history is a click away. And you can earn credit by referrals - I have placed a link in the side bar so if you sign up through here you will be supporting the blog!

I am pleased to share a report on Telecom Opportunities in Pakistan. It was prepared by Salman Ansari in Aug 2007 for Pakistan Telecom Authority (PTA). I am thankful to Ansari Sahib for sharing this useful report with all of us. I believe that reports like this which present the facts and highlight the progress made in the telecom sector of Pakistan are extremely valuable - especially for those who are from outside Pakistan and are looking for a compact summary of Pakistan telecom sector.

The report provides a concise and fact-based overview of the economy, telecom road map, regulatory environment, telecom infrastructure (broadband, international connectivity), licence and spectrum situation, investment landscape, mergers and acquisitions and of course - the opportunities, as the excerpt below shows:

All this signals opportunities in the Traditional and Value Added sectors for not only creating new businesses by riding on these systems but also to be a part of new licenses which are being reviewed. These include MVNO, Regional Hosting, Call Centers, Telecenters, Video Conferencing, Content aggregation, Converged networks, etc. On another plane, the Regulatory environment permits spectrum trading, Mergers and Acquisitions as well as entry via Private equity arrangements. The market opening has nearly doubled the sector revenues and this trend is expected to grow.

The annex has a list of licensed operators as well. Obviously this an evergreen document and one should keep in mind that the numbers represent Aug 2007 and have changed during the last 12 months.

I came across this tariff sheet from PTA. Honestly it took me 30 minutes to figure it out. And I used to work for a phone company. I have written about the need for a simple rate plan before. Let me try to make a case for it again.

The bulletin is the result of hard work by some one at PTA. Good work but I do not know if such a complicated (12 rows x 24 columns) view will be really useful for the average Pakistani consumer. The footer alone - which explains all the mysterious terms such as off-net and LNO - can cause headache. Lets take a look at Zong rates - just for example. They have 4 packages with billing pulse varying from 1-second to 60-seconds. For the 8 Aanay package, the off-net rate is different for the first minute and second minute. I could go on and point a few things like this. Do we need all this complexity?

Consider a fictitious example: 1000 minutes on-net @Rs1.50/minute and 1000 off-net @Rs.2/minute and 1000 sms @Rs.0.50 per sms. Total = Rs. 40000. In other words, packages with buckets of minutes could make things simple.

For many users this much usage should be equivalent to an “unlimited” talk and text plan. In many countries calls on the same network are free in the evenings and weekends.

I must say that Warid has done a good job on this. Telenor has drifted in the opposite direction with the “widest” matrix of them all.