11 Jan 2010Pakistan Broadband Overview

The liberalisation of Pakistan's telecommunications industry started in 1997. In 2004, the Pakistan Telecommunications Authority (PTA) introduced two types of licence for ISPs – regional and nationwide, and also exempted them from Central Excise Duty. During 2008/2009, the Pakistani telecom sector continued to grow positively in terms of subscriptions and revenues and managed to attract USD 815 million of Foreign Direct Investment (FDI).

Over the last four years up to 2007, telecom companies invested USD 8 billion in the telecoms market, 73 per cent of which was directed into the mobile sector. The local loop sector also witnessed significant development following the investment and it is expected that the investment trend will continue during the next five years due to the high growth potential of the Pakistani telecoms market. In mid-2008, the Local Loop installed capacity reached around 5.5 million, but it is predicted that DSL technology may not be able to cater for future broadband needs. This leaves a huge investment potential with respect to fibre-optics and wireless broadband access technologies.

According to the regulator, fixed line operators including wireless local loop (WLL) covered only 6.6 per cent of the potential customer base by 2008 and is expected to reach 100 million by 2010. Since 66 per cent of potential customers live in rural areas, this offers high growth opportunities for WLL and mobile operators. Throughout 2008/2009, WLL has been able to sustain positive growth, reaching a density of 1.6 per cent or 2.65 million subscribers across Pakistan.

PTCL is the incumbent operator in Pakistan, which launched Internet services in 2000. The company started offering DSL services in June 2007. PTCL claims to have the largest reach in broadband service availability. When it started out in June 2007, broadband services were only available in three major cities. By late October 2008, PTCL offered services in 108 cities and communities. Despite this successful expansion, it remains unclear how many people will not be able to get broadband Internet access.

In September 2009, the mobile penetration reached 58.6 per cent; Pakistan had 95.9 million mobile subscribers with more than 90 per cent of the country having access to mobile services. Mobile subscription growth ground to a halt by mid-2009, mainly due to data-technical reasons. To prevent, unsocial or criminal use of SIMs the regulator insisted that operators clean up unverified SIMs and install SIM activation systems.

There are six licensed mobile operators in the country. Mobilink, owned by Egypt’s Orascom leads the market, followed by Telenor, PTCL-owned Ufone, Warid International, Zong (renamed CMPak of China Mobile) and Instaphone. Mobilink leads the market with a 31 per cent share, followed by Telenor with 22.6 per cent. Ufone and Warid are in joined third place with 19.9 per cent and 19.3 per cent shares. China-backed Zong is catching up, now serving 7 per cent of the market as of mid-2009.

Pakistan’s mobile market is a low margin business in which competitors regularly accuse each other of price-dumping. Operators are starting to look into reducing operating costs, differentiating their product offerings and achieving localised monopolies to increase revenues. Telenor, Pakistan’s second largest mobile operator, is a good example. From late 2009, the company will build off-grid cell sites using solar power. It is expected that the deal will help Telenor to expand its coverage in several regions that are currently not served. Telenor will pay for the expansion project by utilising funds it was awarded by the country’s Universal Service Fund (USF) earlier in 2009. CMPak had already started on a very similar project in April 2009, launching its first Solar-powered Macro Base Station (BTS) in Mirpur, AJK area.