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Pakistan provides ample opportunities for investment in telecom

Published on 14th Apr, Edition 15, 2014

 

With more than 180 million population and 132.33 million cellular mobile subscribers, Pakistan’s telecom sector offers huge opportunities for international and domestic investors. Foreign telecom firms have important presence in the country. These firms are fruitfully doing business in Pakistan. The telecom sector has attracted considerable foreign investment after the deregulation.

During FY06 to FY12, Pakistan’s telecom sector attracted more than US$12 billion of investments including $6 billion foreign direct investment (FDI). As telecom firms have already organized most of their networks, firms have declined their investments in the past two-year.

During FY13, a total of $451.40 million investment has been recorded in this sector, explaining 47.0 percent growth compared the investment of $240.3 million in the year before. This rise in investment is chiefly shared by the cellular mobile segment followed by WILL and FLL segments. Recently, cellular mobile firms have also raised investments in their networks in anticipation of upcoming 3G/4G services in Pakistan.

Despite the outstanding growth in overall investment, FDI still remained on the pessimistic side of the scale because of more capital outflows by firms than inflows. The negative FDI of $408 million during FY13 can probably be turned around by conducting further spectrum sales like 3G sales to introduce fresh technology in Pakistan and resultantly bringing considerable foreign investment into the country.

Revenue

The Telecom revenues have been touched an all-time high of Rs440.20 billion during FY13 with an expansion of 7.0 percent achieved over the previous fiscal year. The rising revenues from the telecom sector explain the size and strength of the market despite the economic challenges and tough competition, particularly in the cellular sector. The operators are now exploring fresh avenues to earn from, declining dependence on the voice channels alone. The Government of Pakistan has announced holding sale of much delayed 3G/4G telecom licenses on April 23, 2014. It is also predicted that the government will offer 3-licenses for the 3G telecom at minimum base price of $295 million each. Similarly, sale of 2-licenses of 4G would be offered at base price of $210 million each. The sales would create minimum $1.6 billion; however, the government considers that revenue accrued from the sales might rise to $2 billion.

Mobile penetration

To measure the expansion in telecom market, penetration is considered a highly effectual instrument. Mobile penetration has touched 71.7 percent during 2013 with 4.61 percent growth rate. The rate of penetration slowed down during FY13 owing to various factors but primarily because of strict government strategy for sale of SIMs only through franchises of the operators and customer service centers. Other significant factor could be movement of the market towards maturity.

Mobile services

Pakistan’s telecom sector, after the liberalization strategy organized during 2004 has been progressing steadily and for the previous couple of years overall well competition has been registered especially in the cellular mobile segment and continued the similar trend during the year 2013. Cellular services are playing a key role in social and economic activities of the country. Network coverage of cellular services has crossed 92 percent of Pakistan’s total land area and mobile services are being availed almost by every citizen regardless of his or her social status and income level. This service not only serves the main purpose of communication but is in fact assisting the business concerns and economic well being by a range of mobile applications and value added services. During FY13 a mixed tendency was registered in the cellular mobile segment. The cellular tele-density marginally increased by 4.6 percent and total cellular mobile tele-density recorded 71.7 percent during the end of June 2013.

 

PTA

Pakistan Telecommunication Authority (PTA) performed its regulatory responsibilities and duties with professional approach in accordance with the altering dynamics of the Pakistan’s telecom sector. Protecting users and maintaining an enabling business environment for telecom firms remained to be the main priorities of the Authority during the last year. Although the non-presence of PTA Authority for part of the year slowed down progress on various significant challenges where the Authority approval was needed, the officers of PTA acted their day to day duties professionally. The constitution of fresh authority is on the fast track the process and expedites the resolution of pending problems.

The Authority has been vigorously involved in curbing the menace of unauthorized SIMs. In this connection, modalities have been finalized among relevant stakeholders for deployment of biometric verification system at sale channels of mobile operators, which is predicted to be completed in August-2014. In the meanwhile, SIM sale as well as confirmation procedures are being kept under scrutiny through periodic surveys by the PTA.

To ensure quality delivery of services, PTA carried out broadband QoS survey in the federal and provincial capitals. It is also working with CMOs to develop an action plan in case of communication breakdown. PTA blocked 15,380 websites/links on the recommendation of the Inter-Ministerial Committee. During FY13, PTA received 31,266 complaints against telecom operators, 98 percent of which were fruitfully redressed.

FOREIGN DIRECT INVESTMENT (US $ in million)
DESCRIPTION 2009-10 2010-11 2011-12 2012-13
FDI in telecom 373.62 79.2 (361.4) (408.0)
Total FDI 2,199.44 1,574.0 820.6 1,576.0
Conclusion

No doubt, Pakistan gives ample opportunities (liberal and friendly-investment) for investment in the telecom sector and the government accords priority to the growth of the IT and Telecom sector.

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