State of Telecom Industry in Pakistan

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.

We (bloggers, consumers, industry experts) are usually quick to criticize organizations such as PTA. Main reason is that these organizations have a lot of authority and their decisions have significant impact on consumer’s pockets and industry’s profit margins. They face a lot of challenges and have to make difficult decisions. Consider the presentation “Telecom Policy Evolution“, by Mudassar Hussain of MOITT, at the TeleCON 2008 event. It acknowledges that convergence (IP, telecom + media) has significantly changed the landscape and policy makers need to address these changes. The time to do that is the upcoming 5 year policy review cycle which starts in July 2008. It is an important time for the policy makers to look back and assess their performance and to define objectives on which to base their new policies. And with a new government in place there will be additional twists. Excerpt:

Synergies between different regulatory areas should be developed:
• Telecom contributing with infrastructure and access issues
• Broadcasting with access and content issues
• IT with privacy and security, access to PCs, etc.
• Policies to supplement each other and work in cohesion even
if not converged

Objectives of Policy:

Policy has to be well thought out keeping in mind local market
objectives to be achieved: Consultation and partnership of all
key industry stakeholders is crucial.

Industry concerns of protection of investment have to be duly
addressed with full industry participation by both the policy
makers and the regulators.

Strength of the markets has to be ensured by dynamic and
timely actions of the Govt. in direct partnership and consultation
with industry and consumer community stakeholders.

Inputs of all stakeholders present in the forum are welcome on
all areas of format, scope and outlook as well as specific issue
related proposals.

For full presentation click below.
Telecom Policy Evolution - Muddasir Husain

Guest Post From Umar Farooq

Telecom Infrastructure Sharing is an important concept in emerging telecommunication markets. Here’s an extract from a GSM World report

Commercial considerations, rather than regulatory mandates, appear to be driving the increasing trend for Mobile Operators to adopt a variety of infrastructure models. Examples of mobile network sharing can be found in both mature and developing markets, with 3G providing an added impetus to assess the commercial and regulatory viability of network sharing. Network sharing may take many forms, ranging from passive sharing of cell sites and masts to sharing of radio access networks (RANs) and other active elements such as network roaming and the core.

In Pakistan, this concept’s utilization has taken place. However, we still have to see an effective regulation from PTA on this one (Editor’s note: See this link on PTA website for consultation paper on Infrastructure sharing - the pdf is also available here). We have seen different operators having their towers erected on the same roof top and at times within feet from each other on ground. Why couldn’t they use the same tower to place their antennas and share the cost ?

Infrastructure sharing has been taking place where Telenor did strike a lease deal with Wateen Telecom to use their Fibre capacity for their core transmission ring. But here, Wateen established the Fibre to sell its capacity to telecom operators. Infrastructure of RAN or Core Transmission has still some grounds to cover, before telecom operators in Pakistan become mature enough to operate shared structures while reducing operations costs.

The element of operator maturity is key here, because infrastructure sharing, does reduce costs if it is operated efficiently. If not operated efficiently, additional operational costs plus the reduced QOS loss, makes it useless for an operator.

From an end-user’s point of view, you see less number of towers and operators competing on their services rather than coverage.

First Global TeleCON conference was held in Karachi Sheraton on April 29-30. The organizer’s website has full agenda details and the summary is provided below. The organizers, Shamrock Conferences, deserve credit for sharing the agenda and making the presentations available online. The impressive thing about this conference was that there were many senior level speakers representing all stakeholders (industry, government, academia, consumers) in Pakistan telecom. The discussion was organized along the following tracks:

• Policy & Regulatory Framework
• Connectivity & Mobility
• Putting Customers First
• Converging Technology & Infrastructure into Business
• Preparing Today for Tomorrow
• Role Playing in Telecom Industry

I browsed through a few presentations and found the presentations on policy issues, consumer protection and challenges for emerging markets to be educational and interesting. In the coming days I’ll write more about them. There were of course some other talks (for example by PTA and mobile companies) which fell in the category of self-promotion. I wonder if this conference was a mere networking event or was there some other purpose to it?

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”.

Read more »

PTA has released annual report for 2007 at its website (Media Center >> News/Updates). It is professionally written and has a wealth of information and supporting content (67 figures, 28 tables and 10 annexes) . Students, journalists and analysts should find this very useful. The contents of the report will be discussed and debated here in upcoming posts.

Here are the chapters, each available in pdf from the PTA site:

Chapter 1 - Economic Performance of Industry
Chapter 2 - Regulating the Competition
Chapter 3 - International Relations
Chapter 4 - Mobile Cellular Services
Chapter 5 - Long Distance International
Chapter 6 - Local Loop Services
Chapter 7 - Broadband and Value Added Services
Chapter 8 - Telecom Deregulation in AJ&K and NAs
Chapter 9 - Trends in Telecom Technologies

In this issue:

1. China - Opens Handset Manufacturing Market To Outsiders; SK Telecom Attempts To Break Into Chinese Telecom Market
2. India Working On 3G Policy, New Players Expected
3. Cell Phones To Solve Africa’s Problems?

China will allow foreign handset manufacturers to compete for their huge market, reports Shanghai Daily. China now has more than 500 million mobile-phone subscribers and is adding an average of about 6.8 million subscribers per month, according to the Ministry of Information Industry. 

China announced that it would relax license regulations for handset manufacturing. China’s State Council has abolished some 186 administrative examination and approval items covering mobile communication systems and terminals. Now is the time to let the market rule and see qualified new players replace the market positions held by established companies which depended heavily on the income from renting licenses to other companies, according to United Securities. The new players such as Tianyu, largely unknown by established industry players, have challenged and even surpassed leading domestic firms like Ningbo Bird and TCL Communications.

At PT/EXPO COMM China 2007, a telecom tech fair held in Beijing, SK Telecom offered tech-savvy Chinese consumers a taste of their mobile future. Using a Chinese-developed mobile telecommunication technology called TD-SCDMA, Korea’s largest mobile phone operator showcased international video telephony and high-speed mobile multimedia functions such as video on demand and real-time TV. SK Telecom is expected to accelerate a foray into the Chinese telecom market after becoming the second largest shareholder of China Unicom.

Read more »

Spotted this at RegulateOnline. The news item suggests that a new competition commission is in the making which may take over the pricing policy responsibility from PTA. However the details about the division of regulatory authority between PTA and the new competition commission are unclear. Apparently the telcos are upset about the lack of openness about the process.

An article in Pakistan’s Daily Times reports that the country’s telecom operators are in favour of the government’s move to replace the Monopoly Control Authority with an independent competition commission, but are concerned that “secrecy around the process is making the whole exercise counter-productive”.

According to the Daily Times operators are asking for a transparent consultation process “to ensure that this new regulatory body will have well-defined areas of authority”. According to the article the new commission “is likely to restructure the required law and initiate step-by-step changes in price management policies for the local market, which includes price monitoring, determination of demand, supply and production levels and implementation of policies with the help of private sector.”

Daily Times adds that the ministry of law and finance has jointly prepared the draft of the ordinance, which is currently with the Prime Minister.

Of the many challenges that our nation faces, educating and training of our youth is one of the most important. We need to prepare the next generation of information and communication technology professionals who are skilled, knowledgeable and competitive. We need to cultivate leadership from the next generation who can solve problems through research and innovation.

Currently we face a shortage of skilled engineers and researchers. Even if you combine the graduates of all tiers of universities and colleges, the numbers are far below the need. But there’s an even bigger challenge - are we producing the right quality of  resources? The answer is a definite NO.

There is work to be done in many areas. Funding the right programs, education policy, quality of existing education, training fresh graduates to transition to a professional life etc. I get plenty of mails and comments from students looking for internship or ideas for projects. It is evident from these interactions that many do not have the training to do fundamental research. They also lack the necessary communication skills which are critical to meet the global workforce standards.  The lack of information about what opportunities are available to them further hinders their prospects.

On a positive note there are groups and agencies which are working to make a difference. I recently heard about a promising effort: The National ICT R&D Fund. Here are  some excerpts from an email from the General Manager Solicitation and Evaluation, of this Fund.

National ICT R&D Fundwas created in January 2007 by Ministry of IT with the vision to transform Pakistan’s  economy into a knowledge based economy by promoting efficient, sustainable and effective ICT (IT and Telecommunications) initiatives through synergy of industrial and academic resources. We have significant funds available for proposals that are geared towards  creating ICT related technologies. We have a very positive and nurturing attitude and would like to fund projects that enhance the state of the art and create opportunities by solving industrial problems.

Read more »

I am sharing a piece about WiMAX in Paksitan, which I wrote for All Things Pakistan. As this is an overview, some of the information here may already be in my previous WiMAX posts.

Pakistan’s telecommunication industry - mobile communication in particular - has made impressive strides in the last few years after deregulation. However broadband growth in the country has been very disappointing - there are less than 100,000 broadband users in Pakistan. The open competition observed in mobile industry has not been replicated to broadband. Reasons include high prices, control of PTCL over bandwidth resources, policy issues, lack of infrastructure and legal disputes.

Enter WiMAX. Simply stated, it’s a relatively new standards-based wireless technology which is intended for large coverage areas on the order of several kilometers (instead of a few hundred meters, as is the case with Wi-Fi).

With base stations transmitting signals and some equipment at customer location, it promises fast bandwidth for both fixed locations and mobile users. In this backdrop, Pakistan made headlines in 2006 when Wateen announced plans to work with Motorola to rollout Mobile WiMAX, the largest network of its kind in the world.

Is WiMAX (Worldwide Interoperability for Microwave Access) the right technology for developing countries? In other words, will this new technology deliver the promise of broadband at affordable prices?

WiMAX comes with many theoretical advantages but its potential is yet unproven. Without getting too technical, it is purpose-built for Internet (IP) communication and is based on standards (as opposed to other proprietary solutions) endorsed by a respected world standards body, the Institute of Electrical & Electronic Engineers (IEEE)*.

Read more »

The fall of corporate giants like ENRON and WORLDCOM left many learning impressions for both public and private sector enterprises besides stakeholders including governments, employees, Board of Directors and strategic partners. In both of the above mentioned historical cases, the core reason was fraudulent conduct by the corporate level management. The top officers consistently kept hiding the true financial facts and figures bearing losses and public reports kept displaying healthy financial results and profitability, which strengthened the trust of shareholders and partners to keep investing besides helping the share price to grow further in the stock market.

Unfortunately, we might have another big financial scandal in Pakistan in upcoming days – this is about privatization of PTCL. As you may recall Etisalat acquired a 26% strategic stake along with management control in 2006 after months of deals and bargaining on the actual value of the deal. Now the scandal reported in the papers claims that PTCL was worth a lot more. PTCL no doubt is one of the strongest corporate enterprises not only in Pakistan but also in the continent known as Asia. Therefore, if the news story becomes true, it will have a devastating effect on the Pakistan’s Telecom market, Economy and Pakistan’s political stability. Pakistan’s image, which already is in crisis, will be hurt further. The business schools around the world surely will have another good case study.

Jang, one of leading Urdu newspaper in Pakistan, has highlighted news on the secret contract over privatization of PTCL as shown above. An ex-Senior Vice President has claimed the privatization as Pakistan’s Biggest Financial Scandal. PTCL former official further commented that the deal was closed on 2.6 billion dollars including U-fone & Paknet, however only U-fone had enterprise value of more than 6 billion dollars which does not include assets of U-fone. Moreover, pricing decisions were made through old records instead of determining current market value, which means, it was like Buy One Get 2 Free offer. It has been reported further that in September 2006, when Etisalat had refused to honor the deal, they were offered a secret price discount of 394 million dollars along with commitment to lay off 20,000 employees and to bear the 50% cost of layout. Supreme Court of Pakistan has already given decision against the privatization of PSO and Pakistan Steel and if PTCL’s privatization gets challenged on true facts, it will bring horrifying results.

Read more »

USF (see my previous post) is a way to provide telecom services to under-served areas based on the pooled funding collected from telecom services. It is an important regulatory tool to reduce the digital divide. Last week Pakistan’s Minister for Information Technology provided details about a plan to provide telecommunication services to 6 under-served areas of the country. As the first rollout of its kind in Pakistan, it will be important to see if this USF implementation meets the needs of citizens in these areas and if the funds are used in a fair and just manner.

According to media reports, the six geographical areas marked out in the divisions of Malakand, Sukkar, Sibbi, Chaghi, DG Khan and Attockwere selected due to a large part of the population in these areas still in want of telecommunication services. The project will be launched within the next few weeks. Note that some of the areas above (such as Sibbi) were heavily damaged by the recent floods. Click on the image to see a larger map.

Excerpts from the report below - [I’ve taken out the praise for the government policies]:

The funds for the project would be provided by the multi-billion rupees Universal Service Fund instituted within the Ministry of Information Technology through annual contributions received from the telecom operators. The auctioning of the funds is already under way. These funds will be provided to existing telecom operators which would implement the project

The minister said the designated under-served areas to be covered under the first phase of the project also constituted approximately 3 per cent of total population and 23 per cent area of the country. He said the USF had a plan to achieve 85 per cent population coverage and increase rural tele-density to 5 per cent by the year 2010. He said another goal the USF had set out to achieve was a nationwide broadband penetration, by adding on 1.5 million new users by the year 2010.

The minister was speaking at the 5th meeting of the USF Board of Directors. The meeting was also attended by IT secretary Farrakh Qayyum, member telecom Nooruddin Baqai, Telenor Pakistan’s CEO Tore Johnson, WOL CEO Azfar Manzoor and USF CEO Parvez Iftikhar.