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Telecom: A booming industry of Pakistan with promising and vibrant future

Published on 12th Dec, Edition 50, 2016

 

Total revenues of Pakistan’s telecom sector have been raised to Rs452.8 billion in fiscal year 2016 as compared to Rs446 billion in fiscal year 2015. The telecom sector in Pakistan, besides the auto industry, is moving in fast path enjoying high demand as it contributed Rs157.8 billion to the national exchequer.

Increasing is ongoing in several sectors in which IT and mobile companies are providing new services and the most modern technology. Present government clear policies have especially revolutionized the telecom sector and successful launch of 3G and 4G in the recent past is a testimony to this. Government believes in open and transparent business policies so that both local and foreign investors are further motivated to explore the business opportunities in Pakistan.

The country is encouraging the telecom companies to expand their outreach to far-flung areas of the country so that majority of the masses benefit from the technology.

The year-on-year increase is small but the sector has big potential to return to high-growth mode after this period of consolidation. It has introduced 3G and 4G technologies which have fully become operational.

The telecom sector contributed Rs157.8 billion to the national exchequer on account of tax payments as against Rs126 billion in fiscal year 2015.

The general sales tax paid by telephone operators totaled Rs41.65 billion as compared to Rs45.8 billion a year ago. It was a record Rs60.1 billion in fiscal year 2014.

The good performance of both the telecom and auto sectors in Pakistan is that they attract big foreign investment, deploy the latest technology and meet the requirements of a population with a rising per capita income.

The last 10 years have seen the entry of IT and mobile telephony, chiefly from foreign investors. The number of users of mobile telephones and IT climbed to over 133 million. The conventional land line sector has grown too and users now number 3.931 million plus, under the management of the Pakistan Telecommunications Corporation.

The Pakistan Telecommunication Authority (PTA) also reports that the telecom sector attracted $719.7 million investment in fiscal year 2016. Of the $719.7 million investment, telephone companies got $659.4 million.

PTA mentioned that the telecom sector of Pakistan is one of the sectors which are open for foreign investment by the Government of Pakistan. New international renowned players entered in the telecom market of Pakistan.

PTA stated in report that $5 to 8 billion Foreign Direct Investment would come to the cellular mobile and fixed line telephony in next 3 to 5 years.

The LDI (long distance and international) segment received $6.3 million and local long distance companies got $4 million.

The class value-added services showed a remarkable growth and generated Rs43 million in revenue, up from just Rs3.78 million a year ago.

Pakistan’s telecom industry as ‘promising and vibrant’, the CEO of VimpelCom, parent company of Mobilink, appreciated the business-friendly policies of the present government.

The tele-density in Pakistan was one of the highest in the region, which makes the country one of the favorite destinations for foreign investors.

Since its inception VimpelCom had invested $5 billion in Pakistan and delivered services to 38 million customers.

The merger of Warid Telecom with Mobilink, if approved, would open a new window of opportunity for enhancing investment and employment generation in Pakistan.

In January 2016, the CEOs of Telecom companies declared the issuance of the long-awaited Telecom Policy 2015 as a landmark achievement and a forward looking document.

There has been an exponential growth in different areas over the years including prominent increase in broadband users, implementation of E-office suite at the IT Ministry, 40 per cent growth in IT remittances and nine USF projects in underserved areas have also been launched at a cost of Rs20 billion.

Future investment

Mobilink GSM, one of the top telecoms in Pakistan said that they are now in the process of raising $200m from export agencies to help fund their $400m investment program for next year.

Telenor and Warid have planned to invest over $500 million and part of this investment would be financed by foreign sources while rest would be finance from local sources including the reinvestment of their profits.

Six cellular operators planned investment of over $1 billion every year in next three years in their roll out plan.

Besides cellular operators, government has also divested 26 percent PTCL shares to a UAE based company and fetched over $2.5 billion as FDI.

This huge flow of FDI in Pakistan telecom sector certainly creates positive impact on domestic economy.

Regulating the FDI properly, PTA and State Bank together might help achieve multiple effect of this investment in true sense.

The telecom sector has received $21 million as Foreign Direct Investment (FDI) in the first quarter of the current fiscal year as against the $6.9 million in the corresponding period of last year. Information Technology sector fetched $3.3 million FDI in July-September 2016 as compared to 0.2 million in the corresponding period of last fiscal year.

Figures published by State Bank of Pakistan (SBP) on revealed overall communications sector comprising telecommunication, Information Technology and postal & courier services) registered $24.2 million net FDI with $40.9 million inflow and $16.7 million outflows.

Telecommunication sector registered $37.6 million inflow, US $16.6 million outflows and $21 million net FDI during the period under review.

Net FDI in software development remained at the $1.5 million during July-September.

This increase in FDI is a welcome boost to the economy of Pakistan and it is hoped that things keep progressing in a similar stance as our IT industry is a major backbone of the country’s economy.

More smartphone users

There will be 40 million smartphones in Pakistan by December 2016, according to market estimates, based on current trends in the e-commerce sector, says a major player.

According to sources in the e-commerce market, the estimate, along with the optimism surrounding it, is being driven by the recent growth of telecom sector, particularly the increase in number of mobile broadband users.

In Pakistan, third-generation (3G) and 4G mobile phone users stand at 14.6 million as of July 2015 and continue to grow, creating a huge demand for smartphones, which is the top selling category across all major e-commerce platforms.

Market sources say less than 20 percent of Pakistan’s monthly mobile phone import comprises smartphones. This equation though is likely to change in a couple of years.

To capitalize on the growing demand, major industry players from service providers (telecom operators) to mobile phone makers and an e-commerce platform have partnered with internet giant Google to promote online trade by offering exclusive discounts on mobile phone purchases.

It is considered that the telecom sector of Pakistan is the most frequently raising and booming industry of the country. The industry boosted to extreme levels during the period of former president, Pervez Musharraf.

Due to the highly competitive market in Pakistan, consumers are enjoying high quality services with low cost cellular products.

The other reason for the growth in the telecom industry is the value added services the telecommunication companies are providing, which are voice mails, message services, affordable overseas call rates, MMS services and connecting people through internet facilities.

The 5 giant cellular companies continue to present more innovation and competitive opportunities to engage more subscribers.

Pakistan is gaining more stature when compared to its neighbors in the field of telecommunication. Cellular mobile services have reached almost all the corners of Pakistan.

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