Guest Post by Babar Bhatti

The overall consensus of industry analysts is that Pakistan is one of the countries with a huge untapped potential for telcom growth and an attractive investment environment. Recently Business Monitor International (BMI) ranked Pakistan as a key destination for telecom growth. The BMI rankings take into account a number of factors including industry situation, growth potential, competitive landscape and economy and political risks etc.

The sudden growth in subscriber base in Pakistan has caused network congestion and service quality problems. The major operators are responding to this problem by upgrading their networks. These multibillion dollar improvements, along with a regulatory effort to introduce Mobile Number Portability (MNP) next year, should maintain the stiff competition in PakistanÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s mobile market.

Pakistan is still an unsaturated market and with the falling cost of handsets there are plenty of new subscribers to compete for, especially in the rural areas. But eventually, as in saturated markets, if mobile operators want to avoid simply competing on price, they will have to compete on superior service, innovative features and ease-of-use. As an example of new trends there were so many text messages (SMS) sent on this Eid that the networks of all 6 companies were kept extremely busy!

Pakistan has also had some strategic wins in the international telecommunication scene. This month Pakistan won the council seat of International Telecommunication Union (ITU) and Chairman Pakistan Telecommunication Authority (PTA) was elected as member of Radio Regulation Board of ITU. Pakistan also holds the office of President in Asia Pacific Telecommunity. ITU has also announced that it will setup a Center of Excellence in Pakistan for telecommunication regulation and policy.

There is still a long way to go for PakistanÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s telecom industry. Pakistan needs to increase telecom research and development work within the country. China and India are in the process of becoming worldÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s major R&D centers for technology and telecommunication. Two top Chinese telecom equipment firms have announced their plans to collaborate with Pakistan: Huawei is working with UET Lahore and ZTE will setup R&D center in Islamabad. The goal of the policy makers should be to increase the rate of transfer of technology from abroad, broaden the pool of local skilled workforce and accelerate the local production of telecom equipment and handset parts etc.

At the top of the list of Pakistani mobile companies is Mobilink, the Pakistani unit of Egypt-based telecom company Orascom. It has been in Pakistan since 1994. With 20 million subscribers it has the largest market share. Its shares are listed on the Egyptian and London stock markets (OTLD).

Ufone, a wholly owned subsidiary of Pakistan Telecommunication Co. Ltd (PTCL), is now under the control of Etisalat group of UAE. With 8.8 million subscribers it is the runner up. For those in Pakistan it is the one company where they can easily invest locally.

In third place is Warid, owned by the Abu Dhabi group of the United Arab Emirates and sister of Wateen group. With 5.9 million subscribers it controls 14% market of subscribers.

NorwayÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s Telenor, a recent entrant with about a billion US dollar invesment in Pakistan has been doing well, based on its recent earning report. It has about 4.6 million subscribers or 11% of the market. Telenor stock is listed in the Oslo stock market (TEL) and Nasdaq NY (TELN).

Paktel and Instaphone are owned by Luxembourg based Millicom International Cellular (listed in Nasdaq as MIC). It is down to 1% of the subscriber share in Pakistan and according to recent news it is on its way out of Pakistan.

One sign of the growth burst of the sector in Pakistan and its self-confidence are the media ads of the various companies. As they fight for market share, that battle is being conducted over the airwaves and newsprint. It is hard not to notice the mobile phone advertising campaigns in Pakistan. The mobile phone and services advertisements are in the media, on billboards and everywhere else imaginable.

The quality and aggressiveness of the advertising campaigns indicates the level of effort to gain market share. According to studies Pakistan has been adding 2 million subscribers each month in 2006. The market segments mobile companies are targeting include:

tech-savvy youth

business users (due to the their higher average revenue per user)

first-time subscribers in remote and rural areas

previously ignored segments, for instance housewives and women

The ads are vibrant and colorful, conveying a sense of excitement and empowerment – but I did not find them very creative. The pretty picture these ads paint is separated from the real world where poor cellular service has led to PTA to announce that punitive action will be taken if problems persist.

Take a look at some of the recent advertisements and enjoy. The following four videos are of ads from Mobilink (Focus: Ringtones); Warid (Focus: 30-second Billing); Telenor (Focus: TalkShawk Package); and Ufone (Focus: General).

WPvideo 1.10 Ufone Ad (2006)

Babar Bhatti is a Telecom professional based in Dallas, Texas. See more at Babar’s blog: State of Telecom Industry in Pakistan