THE EMERGING PAKISTAN TELECOM SECTOR
Pakistan symbolizes “the land of pure” and has been the centre of the great Indus Valley
civilization dating back at least 5,000 years. Excavations of historical sites at Taxila,
Harappa, and Mohenjo-Daro dating back to 3,000 BC speak volumes about the country’s rich
heritage. Pakistan is fast becoming the destination of choice for a significant number of
international IT/ITeS companies looking to relocate their operations offshore. The ready
availability of skilled professionals, an appropriate IT infrastructure, and affordable rates for
connectivity result in considerable time and cost-savings for investors. The total international
traffic (incoming and outgoing) reached an all-time high of 20.2 billion minutes during 2012.
(Hadi, 2013)
3G/4G SUBSCRIBERS IN PAKISTAN:
The very first Spectrum Auction for Electromagnetic Spectrum’s license took place on 23rd
April 2014 under Pakistan Telecommunication Authority (PTA). In this event 3G and 4G
telecom spectrum was successfully auctioned by Pakistan Telecommunication Authority.
Reported revenue generation from 3G auction was $903 million and that of 4G auctions was
$210 million obtaining a total revenue generation of $1.1 billion collaborate from both the
auctions. Zong, Ufone, Telenor and Mobilink submitted their BIDS to PTA where Zong and
Mobilink BID for 10 MHz’s Zong was first to achieve the licence of 4G in Pakistan from
1800 MHz band. (Anon., 2015). The auction for next-generation telecom spectrum in
Pakistan was a success raising $1.112 billion or Rs111 billion from the process. The Pakistan
Telecommunication Authority (PTA) had offered three bands for the 3G spectrum – with a
total available frequency of 30MHz and two bands for the 4G spectrum. Out of the four
competitors participating in the auction, only Zong managed to obtain licence for both 3G
and 4G spectrums while Mobilink, Telenor and Ufone secured only 3G licences. (Khan &
Rana, 2014)
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TELEDENSITY
Teledensity of Pakistan stood at 74.9% at the end of FY2012-13 as compared to 72% in the
FY 2011-12 representing progression of around 3 percentage points over the previous year.
There is a noticeable 11.49% increase in teldensity from 2010 to 2014. The main contributor
to the teledensity figure is cellular mobile sector covering 71.7% of the population. Fixed and
Wireless Local Loop services constitute the rest of the figure with 1.6% and 1.9% shares
respectively. The cellular mobile sector domination in the telecom sector of Pakistan is
possible due to the immense effort it took towards providing better connectivity, pure good
quality of service and continued focus of PTA.
FIGURE: GRAPHICAL REPRESENTATION OF GROWTH IN TELEDENSITY OVER
A PAST DECADE IN PAKISTAN
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FIGURE: GRAPHICAL REPRESENTATION OF GROWTH IN TELEDENSITY OVER A PAST
YEAR IN PAKISTAN
GROWTH IN 3G/4G SUBSCRIBERS:
Telcos made a huge investment of $ 1.2 Billion for acquiring these 3G/4G LTE spectrum.
Statists show an addition of 264583, 3G users in the month of August 2014 from July 2014.
Similarly an increase of 264966, 275278, 312279, 126366 3G users was evident on the month
of September, October, November and December 2014. This figure further incremented by
189023 on January 2015 and 266307 by the end of February 2015. From the actual graphical
representation shown below it is evident that there a consistent rate of increase of 3G user
from last year till date. On the contrary there is a significant increase in 4G users after its
launch. Period from August 2014 to October 2014 witnessed a steep increase in user
numbers. There were 744 4G users by the end of October 2014. It can be seen that November
2014 onwards this figure of 4G subscribers increased at a fast rate with 2242 users by
December 2014, 5023 by January 2015 and a further greater number of 7261 4G users were
reported by the end of February 2014. Looking at the pattern and the significant continual
grown in 4G LTE customer base it can be predicted that in near future 4G figures will out
cross 3G figures.
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FIGURE: 3G/4G SUBSCRIBERS IN PAKISTAN
It's been 1 year the next-gen 3G/4G data services are being officially launched in Pakistan
therefore it is expected to see an increase in the number of users to build a strong customer
base foundation in coming years. Telco’s are taking initiation in launching 3GDongles,
MiFi/Wi-Fi supporting internet devices at a fast rate. These advanced internet portable
devices will support 3G/4G services. All these factors indicate that Pakistan is going to
witness huge 3G/4G subscribers in coming years. (Anon., 2015)
MAJOR INVESTMENT IN TELECOM SECTOR OF PAKISTAN

Norway's group TELENOR attained fifth Mobile Cellular license in the country for
$290 million in 2004.

„ UAE group WARID acquired sixth Mobile Cellular license in the country for $290
million in 2004.

„ Emirates Telecommunication Corporation (ETISALAT) bought 26 per cent stake in
Pakistan Fixed Line incumbent Pakistan Telecommunication Company for $2.6
billion in 2005.
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
„China Mobile has acquired 100 percent stakes of one of the Cellular Mobile
Company - Paktel Limited. Initially China Mobile had acquired 88.86 percent share in
Paktel for $460 million.

„ Qatar Telecom has bought 75 percent stakes of BurraqTelecom for Nationwide and
International Telephony Networks.

„ Orascom Telecom of Egypt laid down first private sector undersea Fibre Optic cable
for $60 million.
BENEFITS OF 3G/4G TECHNOLOGY TO PAKISTAN:
1) Increase in Internet Speed: It will facilitate faster and easier Internet browsing,
increasing user demand, growing opportunities in Technical and Online Business
Sector. (Rasheed, 2014)
2) Increase In Employment: There is an increase in GDP with broadband penetration
into the market giving rise to enhanced economic activity providing more
employment opportunities. It is estimated that about 1 million job opportunities will
be created in Pakistan with the 3G and 4G launch.
3) Growth in Pakistan Government Revenue from that sale of Licence and increase in
Tax collection.
4) Increase in Foreign Direct Investment as a direct result of 3G/4G growth.
5) 3G could launch socially useful applications such as e-education, e-medicine and
electronic governance which will provide key services to both urban Pakistanis
and those living in inaccessible parts of the country (Ansari, 2014)
TELECOM INVESTMENT
With 188 million population and 128.93 million cellular mobile subscribers,
Pakistan's telecom sector provides enormous opportunities for foreign and local
investors. International telecom companies have significant presence in Pakistan.
These companies are successfully doing business in all over the country. Telecom
sector of Pakistan has attracted substantial foreign investment after the deregulation.
During FY 2005-2006 to FY 2011-2012, telecom sector attracted over US$ 12 billion of
investments including US$ 6 billion FDI.As telecom companies have already
established most of their networks, companies have reduced their investments in the
last two years. During FY 2012-13, a total of US$ 451.40 million investment
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FDI GROWTH IN PAKISTAN:
FDI is an immense source of investment in Pakistan telecom sector and increasing
progressively due to its potential market. In the shape of FDI, Multinational corporations are
getting an opportunity to deliver and countries both capital and new technology. As per
studies evidently present that FDI has been one of the effective means of transforming
technology and advance knowledge (Addison et al, 2004; UNCTAD, 2003; Dunning and
Hamdani, 1997).
In the year 2001-02, Pakistan witnessed low amount of FDI with a total 484.7 USD
million including 6.1 USD million in Telecom Sector which was only a 1.26% contribution in
Total FDI. This low Amount of FDI was a direct cause of internal disturbance in the country.
But FDI showed a continual increase in Pakistan by each passing year and reached to US$
5,124.9 million in 2006-07 as compare to US$ 484.7 million in2001-02. However, it declined
in 2007-08 i.e. US$ 3,038.8 million. Details of overall FDI and FDI in telecom sector of
Pakistan Results indicate that FDI flows in Pakistan have long run relationship with the
factors like market size, cost of capital, expenditures on transport and communication and
political stability. FDI in telecom sector of Pakistan has greatly boosted with the rise in
literacy rate and per capita income. With the escalation in Domestic and foreign trade
demand for telecom services have also amplified to minimize transaction cost and for quick
and inexpensive communication. Competition has further stimulated foreign investors to
make heavy investment to meet rising demand of the growing population. This is because of
the fact that they have heightened their investment in both rural and urban areas of the
country. So it is concluded that market size, competition, literacy rate, foreign trade and per
capita income, all have very strong impact and are playing inessential role in stimulating the
FDI in telecom sector of Pakistan. (Hashim, et al., n.d.)
The telecom sector is growing positively in terms of subscription, revenue,
Teledensity and FDI. The mobile phone subscription and Teledensity growth reached to
76.65% as per PTA (pak.gov.pk). The telecom sector also contributes total revenue of
465547 Million Rupees on the year 2013-2014 compared to 439521 Million Rupees in the
year 2012-2013. The telecom sector also remained the largest recipient Foreign Direct
investment in Pakistan Telecom Sector of FDI during the last couple of years.
FDI grew dramatically from 1970s and reached at highest level in 2000 which is
called the FDI boom year in the history of FDI flow. Pakistan telecom sector also had a
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remarkable growth over the last ten years and was ranked at top in recipient of FDI relative to
other prominent sectors of Pakistan. There is a Remarkable increase in FDI between last two
consecutive years. FDI of 1576 US Million Dollar was reported in 2012-13, and this figure
increased to 2640.88 US Million Dollar by the year 2013-14. Pakistan telecom sector is
emerging at a great pace and has left behind all sectors in the recipient of FDI.
FDI is the major source of economic growth in this new era of globalization. Pakistan
Telecom sector is undoubtedly provides a vital scope for the foreign investors to explore
opportunity where their investment could be lucrative and rewarding. (PTA 2008b, p.
05).According to PTA (www.pta.gov.pk), the telecom sector there was an increase of 68.53
% foreign investments from 2012-13 to 2013-14 which enhanced the economic growth in
Pakistan and made huge employment opportunities for its fellow citizens. (Pannu, 2010)
FDI In 1 yeqar there is increase of 1064.88 million dollar. 67% increase
FIGURE: FDI IN PAKISTAN FROM 2001 to 2008.
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FIGURE: FDI IN PAKISTAN IN THE YEAR 2012-13 AND 2013-14
FIGURE: TOTAL FDI vs. FDI IN TELECOM SECTOR FROM 2005 TO 2013
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The detail of Total FDI and FDI in Telecom sector with contribution in Total FDI is
presented in Table 4.3. This provides a clear picture of FDI in Pakistan during last couple of
years. In year 2001, FDI in Telecom sector was just 6.1 million US$ and the share in total
FDI was only 1.26%. In 2003-04, it increased massively and reached at 21.13 % of total FDI.
After this, it increased gradually every year and reached at 1.9 billion US$. Its share in total
investment was 54.11% in the year 2005-06, which was almost double as compared to the
previous year 2004-05. In the following years, this growth started towards a decline due to a
slowdown in economy but still remained positive. During the year 2007-08, 1.4 billion USD
was made in this sector which was approximately 27.92% of total FDI in the country. The
FDI in year 2008-09 was almost the same as previous year. This trend of investment is
growing positively (illustrate in figure 4.6) in telecom sector which indicates the confidence
of foreign investors and looks promising towards the potential investment opportunities in
this sector.
TOTAL REVENUES:
Top Market Players of Pakistan Telecom Sector are categorized according to the type of
licenses issued and companies that have expertise to provide the best services such as:
 Cellular mobile
 LDI (Long Distance and International)
 LL (Local Loop)
 WLL (Wireless Local Loop)
The telecom revenues have been reached an all-time high of Rs. 440.20 billion in the FY
2012-2013 with a growth of 7.0% achieved over the last fiscal year. The increasing revenues
from the Telecom sector indicate the strength and size of the market despite the economic
difficulties and tough competition, especially in the cellular sector. Telecom operators are
now exploring new avenues to earn from, reducing dependence on the voice channels
alone. It is expected that influx of3G technology into the telecom market will further boost
the revenues of the sector. (Saleem, 2013)
Telecom revenues of Cellular showed an increment of 322,683 Million Rs. in the year
2013-2014 from 322,145 Million Rs. in the year 2012-2013. Similarly there is growth in the
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Revenue structure of Local Loop, LDI, WLL, and VAS. Total Revenue witnessed a growth
of 26026 in these two consecutive years which boosted the Pakistan Telecom Industry to
reach new Horizons of Success. The per capita income increased from US$1,323 (FY2012)
to US$1,368 (FY2012-13) registering a growth of 3.4% during the last fiscal year. Although
total investment in the country decreased to 14.22% of the GDP, Foreign Direct Investment
(FDI) showed growth of 29.7% to reach US $853.5 million during July 2012 to April 2013.
Inflation rate by Consumer Price Index (CPI) stood at 7.8% during July 2012to April 2013 as
compared to 10.8% in the corresponding period last year. Inflation has been kept in check
by better supply of crops, decreasing prices of items in international market and effective
monitoring of prices locally. Trade Balance showed slight improvement in the FY2012-13
although the gap between exports and imports is still humongous. Rupee depreciated by
4% during April-June, 2013. State Bank of Pakistan adopted an expansionary Fiscal Policy
in the last two years.
FIGURE: TOTAL TELECOM REVENUES FOR TOP MARKET PLAYERS OF
PAKISTAN
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