ISLAMABAD, 21 July 2003 — The just announced deregulation of the telecom sector offers major investment opportunities in Pakistan. These opportunities of a fast paced growth come at a time when telecom industry in most developed countries is facing a stagnation. “Deregulation policy for the telecommunications sector” has been unveiled by Awais Ahmad Khan Leghari, federal minister for IT and Telecommunications. It provides for two types of licenses for fixed line operators. Any person or company can apply to the government’s telecom regulator, Pakistan Telecommunication Authority (PTA), for a license to start business either with Local Loop (LL), or with Long Distance & International (LDI) fixed line telecommunication.
Besides deregulating telecom, the government, at the same time, has opened up its policy and allowed launching of private television channels, and radio stations, that have good earning prospects both from viewers and the South Asia’s growing advertisement pie of commercials. Ten new satellite-based private television channels are expected to show up on South Asian-Gulf- Middle East screens within months, under the new policy. Nearly a dozen applications for permission to launch TV channels were pending with the government for years. Under the Pakistan Electronic Media Regulatory Authority (Pemra) ordinance, newspaper owners were banned from launching TV channels or establish radio stations, in order to discourage media monopolies. This ordinance will now be amended.
As the new, private telecom companies, mainly foreign-owned and funded, come in 149 million Pakistanis feel, they can find a phone soon, and at a much less cost, the state-owned monopoly, Pakistan Telecommunication Company (PTCL), was charging. PTCL will, however, still continue to dominate the scene until its projected year-end sale, and transfer of management and control passes into private hands.
Three short-listed bidders are seeking PTCL. These are: Saudi Oger Limited (SOL), Orascom Telecom (OTH), and Menara Telecom Consortium. Turkish Telecom Ministry, the last to come on the scene, is also seeking PTCL.
The industry and the government project a $15 billion investment in Pakistan’s telecom sector. There are good reasons for this. The industry has recorded a 6.5 annual growth over the last several years. A major spurt in fixed telephoney, cell phones, and other modes of communications and value-added services, is expected as the country is set to more than double its teledensity from the present 2.7 phones for each 100 persons, to 5.6 phone in the short run. It is meant to keep pace with GDP growth of 5.3 GDP in the current fiscal 2004 that will rise to 6.0 percent in three years.
The exclusive rights of 88 percent state-owned PTCL to provide basic telephone services — local, longdistance, international and leased line — ended Dec. 31, 2002. The future growth can be deduced from the fact that PTCL demonstrated an impressive expansion and upgrading in the last five years. It manages a well-developed domestic telecom infrastructure of 4.85 million access lines, nationwide optic fiber backbone, an international communications through submarine cable — SMW3 — and satellite links. The 6.0 percent annual growth in phones, over the last six years, has increased the teledensity to 2.7 percent. The PTCL telecom network is almost entirely digital.
Alongside improvement in various services, the government’s tariff “rebalancing program,” started in 1997, the prices of longdistance and international calls were significantly reduced, partly pushed by international competition, and cell phones.
Besides PTCL-operated 4.85 million phone lines, the state- owned National Telecommunications Corporation (NTC) serves the government sector with 72,000 phones and the military-operated Special Communications Organization (SCO) provides 60,000 lines in the country’s northern areas and Pakistan-side of Kashmir.
Four fast growing cell phone companies provide 2.2 million mobile phones. This number has tripled in the last two years, especially as a result of introduction of Calling Party Pays (CPP) regime in 2000. There are three privately-owned companies: Mobilink, Instaphone, and Paktel. The fourth one — U-Fone is a wholly-owned subsidiary of PTCL. Two companies use GSM, one D-Amps, and one AMPS technology. Cell phones are being constantly lapped up by customers as soon as the companies announce expansion. A huge customer potential exists for cell phones that are competitively priced and convenient compared to the overall cost of fixed line phones.
Among other telecom facilities, 1,400 cities and towns are served by 70 Internet service providers. Private companies are providing a wide range of value-added services. They have installed 120,000 payphones and public call offices. Private service providers operate fiber-based cable TV and Internet services. PTCL has O&M contracts with private companies to offer several services including wireless local loop, pay phones, DSL-based Internet services, prepaid calling cards, and international voice termination using VoIP technology. companies in IT business can establish satellite-based direct international connectivity for call centers under PTCL franchise.
The telecom new policy specifies that licenses will be granted to the private sector for Local Loop (LL) fixed line telecom within a PTCL region, and Long Distance & International (LDI) fixed line telecom.
Entry to LL market, under the new policy, is now unrestricted and open. The fee for an LL license is $10,000.
Entry to LDI market is now also unrestricted and open. The license fee is $500,000. “In order to ensure that only serious bidders enter the LDI market, requirements of technical and financial capabilities, experience and rollout will be incorporated in the licensing documents. The decision of award of license will be preceded by an open, public hearing process.