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Pakistan Telecommunications Report Q1 2011
Business Monitor International, Jan 2011, Pages: 89
Pakistan Telecommunications Report provides industry professionals and strategists, corporate analysts, telecommunication associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's telecommunications industry.
In light of the latest figures released by the mobile operators and the Pakistan Telecommunication Authority (PTA), as well as the catastrophic floods that swept through the country in August 2010, BMI have adjusted their five-year forecasts for Pakistan’s telecoms sector and updated their Business Environment Ratings for the quarter.
There were a total of 98.698mn mobile subscribers in Pakistan as of September 2010, which represented a net loss of 488,000 subscribers from the previous quarter. BMI believe that effects of the floods, which have caused significant damages to the telecoms industry’s infrastructure and equipment such as fibre optic cables and radio tower bases, will sustain in the short run as the government had been slow to respond to the crisis. More importantly, Pakistan’s agricultural sector employs almost two-thirds of the country’s workforce and Pakistan’s main cotton growing provinces were severely affected by the floods, prompting the International Cotton Advisory Committee (ICAC) to lower its 2010/2011 cotton crop forecast by 15% to 8.7mn bales. This also suggests that the impact on private consumption in Pakistan is likely to be particularly severe. BMI therefore have lowered their forecasts for the country’s mobile and other telecoms industries as the country struggles to recover from the disaster.
Meanwhile, BMI believes that it is likely that the 3G licence auction due by end-2010 could be postponed as the immediate concern for the government and telecoms industry will be to restore the country's network. This has played out nicely after the PTA said during the ‘Calling All Innovators Pakistan 2010’ organised by Nokia that the development of mobile applications (apps) in the country would lead to the launch of 3G and mobile TV services by 2011. The PTA announced it has been in talks with the Pakistan Electronic Media Regulatory Authority (PEMRA) to work out a set of regulations to facilitate the development of mobile apps content for handsets, through the creation of a licence fee structure and revenue sharing mechanism in order to launch a one-stop mobile phone apps platform for developers and investors in H111.
Despite the regulator’s attempt to increase the industry’s dependence on the highly-lucrative value-added services, the PTA has been unsuccessful in improving the country’s telecoms competitive landscape. The country has yet to attract a mobile virtual network operator (MVNO) since the PTA increased the initial licence cost in October 2009 to US$5mn for a validity period of 10 years from US$10,000 for five years previously. BMI thinks the lack of interest is strong evidence that investors do not believe returns on investment in Pakistan's telecoms industry would be enough to justify the high fee.
Pakistan fell to 11th position from 10th position in BMI’s latest Business Environment Ratings in Q111 due to a decrease in the country’s Industry Rewards score, which dropped to 55.0 from 60.0 in the previous quarter. BMI’s own damage assessment suggests that the country will struggle to generate any meaningful real GDP growth in FY10/11 (July-June). Even after the clean-up operations are complete, we are unlikely to witness a return to the days of plus-5% economic growth (last seen between 2002 and 2007), as the government's poor fiscal health and a protracted internal struggle against extremist elements weigh heavily on private sector demand. We believe that Pakistan's business environment will remain highly challenging, with the shaky security situation and a dire energy shortage continuing to weigh on economic activity, particularly much-needed investment.
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