There were some doubters around lately questioning the wisdom of privatising state-run companies to local and foreign businesses … well, here is why.
The deregulation of Pakistan’s telecom industry is fast gaining momentum with dozens more communications providers and millions of customers entering both the fixed line and mobile markets.
Before the government announced the opening of its fixed line telephone sector to private investors in July last year, the landline penetration rate was just 2.5 percent of Pakistan’s 145 million people.
Now, in the wake of the success of the inaugural auction of fixed line licenses in August, the Pakistan Telecommunication Authority (PTA) estimates the penetration rate will rise to 8.0 percent by 2006.
PTA southern zonal director Rizwan Ahmed Hydri told AFP the authority had granted 98 local loop licenses and 12 long distance international licenses to 31 private companies in the auction.
The wave of reforms also included the granting of wireless local loop (WLL) licenses last month aimed at providing services for infrastructure-deficient rural Pakistan, which accounts for about 70 percent of the country.
“We expect the WLL subscriber base to reach 1.8 million and contribute about 12 billion rupees (201 million US dollars) to the telecom industry during the current fiscal year,” Capital One Securities’ research analyst Faisal Shaji said.
The fees for the three forms of various licences alone have earned Pakistan about 14.5 billion rupees.
The current reforms began a decade ago with the creation of the PTA, which was tasked with deregulating the telecom sector and providing a level playing field to local and international stakeholders.
“PTA was created to regulate the telecom sector and our major responsibilities are to ensure easy access (of telecom) to everybody, quality of service and choice,” Hydri said.
The state-owned Pakistan Telecommunication Company Limited (PTCL) has been forced to undergo major changes since its monopoly ended last year but Mashkoor Hussain, a senior executive with the firm, said it welcomed deregulation.
“We don’t think it is a threat to our company as it would significantly help grow the overall sector in the coming years,” Hussain said.
“We are an infrastructure-rich company with a large network from Karachi to Peshawar and our backbone is fiber-optic links.”
Hussain said PTCL had aggressive investment plans to double its number of million fixed phone connections from 4.46 million last year.
“We have prepared for the upcoming competition and allocated about 29 billion rupees for development work, which would add about four million connections to our network this year,” Hussain said.
The mobile phone sector is promising to be an even more lucrative market for the private sector, with the auctioning of two cell phone licenses to foreign companies last year earning Pakistan a combined 582 million US dollars.
As an emerging mobile phone market, Pakistan witnessed exponential growth of 106 percent this year to over five million subscribers compared with 2.4 million in 2002-03.
“We very much forecast that cell phones are likely to outnumber the fixed phone connections in the coming year because of increasing competition among the market players and the resultant cost effectiveness,” Hydri said.
The two foreign companies that were granted licenses, Al-Warid Telecom of the United Arab Emirates and Norway’s Telenor ASA, are expected to be important drivers to the industry when they enter the market over the next few months.
“These (new) companies are expected to invest 150 million dollars each in infrastructure in the coming years, which would generate a lot of economic activities,” Hydri said.
The present four cell phone companies Paktel, Instaphone, Ufone and Mobilink, are also bringing in more flexible and cheaper packages for their customers in efforts to maintain their market share.