In a competitive market driven by an insatiable thirst for more and backed by a pro-active government policy, service providers are gearing up for good times
It was inevitable. With a fast-growing market and four service providers trying to out muscle each other in this highly competitive market, it was inevitable that the number of mobile phone users would surpass that of fix-line phone users in the country. And today, as the number of PTCL subscribers stand at a mere 4.5 million, there are 6.13 million people in the country who possess mobile phone connections.
It took landline phone subscriptions 50 years to get to the 4.5 million mark and just 10 years for the mobile phone market to surpass that figure. And with two more operators expected to enter the market in the immediate future, this market is expected to grow further.
Things can only get better for the customers. However, the future is full of action and suspense for the existing mobile phone operators. Dawn Magazine had a word with the existing four mobile operators in Pakistan about the their future plans, at the threshold of renewed vigorous competition amongst themselves and sharing the market with the two incoming mobile phone operators.
MOBILINK: With an investment totalling $750 million the company claims to have a subscriber base of four million served by over 1,600 cell sites connected by 10 switches. Mobilink’s network reaches across over 300 Pakistani cities and towns. And with the future looking bright and healthy, the company aims to increase its investment to a billion dollars and expand its service to more than 2,000 cell sites across Pakistan with the aim of providing cellular coverage to more than 350 cities, all before the end of this year.
The overall cellular penetration in the country stands today at four per cent. “There is still tremendous potential in the market and the industry will continue its current growth rate into the next year,” says Mobilink’s Director Marketing, Bilal Munir Shiaikh.
The company, he says, demands a conducive environment, stability in policy and a level playing field. The current PTA policy has been quite encouraging and the recent explosion in the subscriber base in Pakistan can be attributed to the positive and progressive policies of the government, he adds.
On the advent of new players, Munir contends that competition drives all players towards excellence and ultimately benefits the end-consumer. “Mobilink has always welcomed competition. Consumers know the advantages of being on its network which is the reason why it is the favourite cellular service in Pakistan,” he says.
However, Munir avoids commenting on the incentive and tariff packages offered to the new cellular companies with the existing four companies, saying that the new operators are currently in the phase of developing their network and connectivity infrastructures.
“Mobilink, which covers 90 per cent of the urban population in more than 300 towns and cities across the nation, will continue to aggressively expand its network over the rest of Pakistan,” he adds.
He says the company is confident of remaining the market leader in the coming months and years.
UFONE: President and Chief Executive Officer of Pak Telecom Mobile Limited, the operator of Ufone, Babar Khan estimates that the current market has a potential to grow to 12-15 million users, possibly even 30 million in the next five years. The company has signed a ‘phase IV expansion’ contract with Nortel and Siemens worth $160 million to help facilitate its additional capacity of three million customers and new city expansion plans to over 200 new cites by mid-June 2005. The company claims to have added one million customers in the last four months alone which also includes 300,000 new subscribers when Ufone was distributing connections free of charge in August.
Having a 24 per cent market share with 1.6 million customers, Babar favours a cut in government tax to zero from Rs1,000 in order to reduce cellular entry barriers because it acts as a catalyst to enhance cellular market growth.
“Ufone,” he adds, “does not feel threatened of market share erosion when two (or more) players enter the market. The entry of new GSM operators will surely fuel overall market growth and his company welcomes the market competition as the benefits of a highly competitive market trickle down to the end users.
“The key factor on the arrival of new comers is how they can operate with profitability; provide quality service and their ability to retain a high level of customer satisfaction.”
INSTAPHONE: Chief Executive Officer of Instaphone Iain Williams says that his company has already invested well over $100 million. And with the CDMA (code development multiple access) investment, he’s looking at more than doubling this investment within the next 18 months. The towers etc. for the CDMA equipment are in place and the telecom equipment will be installed in the coming months.
The company is looking towards a sustained growth of one million net customers per year; therefore, three million after three years, and five million after five years. “The number of cell sites is not a parameter that we use, as subscriber growth will not be even.” He says he will have the number of sites needed for good capacity and coverage.
However, Iain is concerned over the government’s visualization of the telecom sector, more for short-term revenue collection and less for development. He hopes that more focus will be kept on ensuring maximum competitiveness in the market — which basically means maximum number of operators. This competition will mean better prices, quality and coverage for consumers.
On the advent of two cell phone operators, he says Instaphone will be running a CDMA network, therefore the competition will be indirect. “We will be able to compete efficiently in a cost efficient way and fully expect our market share to grow,” he adds.
He says that currently there is very little difference in the postpaid and normal prepaid packages of the four companies. “The lowest outgoing airtime rates though are those offered with our InstaXcite package where the per minute tariff is as low as Rs1.99,” claims Iain.
He thinks that there is a sizable population to be covered and will be prioritizing new coverage wherever the population is. He expects the subscriber base will quickly move to 15 million within three years from the present six million.
On the wireless local loop (WLL) technology, which helps a person to carry phone set and make calls in the area of 25km, he says he does not feel threatened by the WLL so long as the company’s policies of mobility limited to a single cell are kept to and are regulated. The only instance where there could be 25km mobility would be in a remote area with few subscribers. Whereas, in main cities this mobility would be no more than a couple of hundred feet. Indeed WLL will be a good addition to the telecom sector by providing more fixed lines.
PAKTEL: After a long drawn tussle with the PTA over the issue of introducing its GSM network, Paktel is now settled for a competitive outing. With a 350,000 plus customer base the company is providing service to its customers in 31 cities and towns across Pakistan. In a bid to broaden its customer base, the company is currently offering the ‘first 100 SMS free’ deal to all new customers.
Chief Executive Officer of Xavier Rocoplan says the company has already invested around $75 million to building its GSM overlay. Further investment plans are under consideration with phase three expected to reach $150 million.
The company’s next key milestone is to reach a million customers a year after the launch. At the same time, Paktel is now initiating the third phase of its network expansion and is in the process of rolling out another 500 sites to address 2005 coverage and capacity issues.
Xavier is of the opinion that Paktel and the mobile market in general really suffered due to a delay in the launch of its GSM service (the license renewal issues was also the first exercise of this type in the industry in Pakistan).
The government — and more particularly the regulator — has a major role to play so that the telecom adventure becomes the success story all the market players are expecting. Nevertheless, work needs to be done as the industry — and competition — is still in its early days.
On the entry of two new operators, Xavier says his company cannot be regarded as an existing player only because mainly of a timing issue for the GSM launch. “Unfortunately for the mobile customers, the reality of competition is only materializing now — although it could be argued that other GSM players reacted in advance to the Paktel GSM launch. So the question for Paktel is not an issue of market share erosion — the question is customer acquisition like for the two newcomers.”
He sees a big difference in incentive and tariff packages offered to the new cellular companies as compared to the existing companies. “Paktel chose route of the long-term commitment for its customers rather than being aggressive on the connection cost. Customers have to bear the government activation tax only to embark on the cheapest tariffs on the market. It is a one-time additional cost burden compared to our competition with savings each time you make calls afterwards,” he says.
He says there is a minimum coverage commitment specified in the mobile cellular licenses of the new mobile policy regime. Because of its existing footprint, Paktel could deliver 57 per cent of the four-years commitment from day one.
With over six million people having mobile phones today, he terms it a beginning of the story and the “addressable” market has not been penetrated yet. There could probably be 20 to 25 million mobile customers in the next three to five years .
Says he: “The potential challenge for WLL services is clearly on the regulatory side. There shouldn’t be any misunderstanding here that WLL services should benefit the industry overall by increasing the overall traffic, provided they stick to fixed line services. The threat is to see these operators start offering mobile services, ruining all efforts of the deregulation process. Mobile cellular operators have just taken a huge investment commitment and the regulator has its role to play here as well to make sure the rules of limited mobility are enforced. There is no such guarantee today, but the regulator initiated discussions with us in that sense — technically, there is no ambiguity to restrict customers to a single cell only, which can be very different than a complete city.”
In a competitive market driven by an insatiable thirst for more and backed by a pro-active government policy, service providers are gearing up for good times 
