ISLAMABAD, 30 June 2003 — Pakistan has opened its new and existing multi-billion dollar telecom business for private investment. Things seem to be moving fast toward major decisions in tandem with this policy.

This may be news to many global telecom operators who are facing a prolonged business slowdown. But several groups, including Saudi, Egyptian, and Turkish are bidding to make major investment in Pakistan.

Telecom Ministry says, it expects a $15 billion investment in Pakistan’s large telecom infrastructure. The financial size of telecom companies listed on the bourse was Rs.164.568 billion and their turnover Rs.90.375 billion in fiscal 2002. The growth in size that year was 7.30 percent and in turnover 21.30 percent, compared to fiscal 2001.

The financial size of cellular mobile companies, alone, in fiscal 2002 was Rs.27.464 billion, and turnover Rs.19.206 billion. The growth in the financial size that year was 47 percent, and in turnover 147.25 percent compared to 2001. As far as investment in telecom industry is concerned, 79 percent of it is shared by companies listed on the bourses, 13 percent are mobiles, 4.0 percent Internet, 3.0 percent payphones, and 1.0 percent equipment manufacturers. The share of the listed companies in the total turnover in fiscal 2002 was 69 percent, 15 percent was mobiles, and eight percent each of payphones and manufacturers.

Four cellular companies, Mobilink, Instaphone, Paktel, and U-Phone, share two millions phones among themselves, officials says. The number is projected to increase to three million this year. A total of 68 percent mobile phones operate on GSM, 12 percent on CDMA, 10 percent on TDMA, six percent on PDC, and four percent analog technology. The cellular phones saw a 142 percent growth in 2001 and 67 percent in 2002.

The telecom market covers both the public and private sectors. Major business decisions are slated to be taken in the weeks to come. This multi-billion dollar businesses will receive a big boost as soon as the government announces its new, market-based telecom policy within the next few days, as part of a nearly-total deregulation of the telecom sector.

Awais Ahmad Khan Leghari, minister for Information Technology and Telecommunications is urging the public and private sectors to take “drastic measures to increase the teledensity, especially in the rural areas.” Radical steps are required to promote telecommunications in the remote areas as only 1,213 out of 50,588 villages are connected, so far,” says Leghari. The present rural teledensity is 0.77 — phones per 100 population, while it is 5.76 for urban areas — or a country average of 2.6.

Maldives, India, Bangladesh and Sri Lanka, are the other countries in the region that have done far better in telecom. Bangladesh has also performed remarkably by providing Grameen Bank loans for establishing rural telecenters. The average teledensity for the world is 17.19. It varies from 52 in the high income countries, to 1.48 in the low income countries.

Pakistan has a variety of choices to expand telecom facilities and access to rural areas. Shahzada Alam Malik, chairman, Pakistan Telecommunication Authority (PTA), the telecom regulator, says telephones should be provided in all villages. It can be done through copper-based system, rural radio telephony, digital radio system, VSAT, rural telecommunication via Pakistan’s Pak-Sat-1, WLL (wireless local loop), cordless telephone, digital European Cordless Technologies (DETC), CMST, cellular mobile, and GMPCS. Also there is the need to establish telecenters in the government’s existing rural health centers for telemedince, distant education as well as other uses.

The quickest way to provide access to people in remote areas is to provide Public Call Offices (PCOs), using cellular mobile services, and digital longrange cordless telephones as a cost effective and practical solution for developing rural telecoms. WLL can be the long-term and permanent coalition. VSAT through PakSat-1 or satellite phones though Thurraya (GMPCS) could also be a practical approach.

Who should fund the expansion of telecom facilities, particularly in the low-yield rural areas where investment payback period is seven to eight years, compared to three to five years in urban areas?

Naturally, private investors would like the government to do the funding, while the administration’s rationale is that it should be the private investors who will make the profit. However, the proposed telecom policy will provide a framework for setting up a Universal Obligation Fund (UOF) to which all the operators, playing a major role in telecom industry should contribute.

Deregulation of the telecom sector, currently going on, will encourage investment in various segments of the industry. “The government is proactively engaged in creating an investor-friendly environment. A liberal policy framework will definitely facilitate the flow of investment and technology to cater to the increasing demand of telecom services,” Leghari hopes.