Mobile slowdown

After a period of intensive growth, mobile subscriber rates in Pakistan have started to decline, and broadband looks set to replace mobile as the growth sector in the country’s telecoms industry.

During the last two months of 2008 mobile operators in Pakistan lost a combined total of almost 620,000 customers. The reason for the decline has, in part, been attributed to the actions of Pakistan's regulator, the PTA, which recently cracked down on "unverified mobile connections".

The PTA was concerned about "anti-social activities", and as a result of its clean up operation to "reduce and ultimately eliminate" unregistered users, as many as 10.5 million Sim cards had been blocked by the end of last year.

After experiencing growth of 170% in 2006, such a decline seems almost inevitable, particularly when the economic crisis and Sim card clean up operation are both taken into account.

Babar Bhatti, one of Pakistan's leading telecoms commentators and founder of industry website Telecompk.net, says that the state of the economy in Pakistan has been a "major driver" in the decline of mobile subscriber rates.

"The slump has maybe come much faster than people may have anticipated, however now the market will need to move in a different direction," says Nokia Siemens Networks' head of Gulf and Pakistan sub region, Veqar Islam.

"I don't think the market will continue to stay in customer acquisition mode. Instead, the market will get into a lot more quality, more value added stuff and a lot more data will come into play. It will be about getting more out of the existing customers rather than getting new customers," he says.

Pakistan's population of 172 million is served by a total of seven operators, and foreign investment in the sector has been high. Mobilink, the largest mobile operator by subscriber numbers is a subsidiary of Egypt's Orascom, and Telenor Pakistan is a subsidiary of Norway's Telenor.

Warid is 70% owned by the Abu Dhabi group's Warid Telecom, with the remaining 30% owned by the SingTel group, while Zong is China Mobile's first overseas subsidiary.

Mobilink appears to have borne the brunt of last year's decline in subscriber numbers as the next four largest operators all recorded month-on-month gains, according to data from Pakistan's telecoms regulator.

Mobilink had 28.4 million users in December which was down from 30 million the month before. The next largest operator by subscribers is Telenor with 19.4 million, followed by Ufone with 19.3 million, Warid with 16.9 million Zong with 5.5 million.

Bhatti says that Zong has been the main beneficiary of Mobilink's declining subscriber base. "[Mobilink] lost touch with the public, and customer service and pricing had a lot to do with it. It needs to listen carefully to the market, and perhaps use new tools to engage its customers. Putting a stop to charges for help calls will be useful too," he adds.

Mobilink has a well established position as the leading mobile operator; not only does it have a third more subscribers than its next nearest rival, it also  claims to have the largest mobile network in Pakistan, with coverage of what it ambiguously describes as "10,000 locations".

NSN's Veqar Islam says that total geographic coverage of Pakistan is in the region of 60% to 65%, with all of the major centres of population covered by at least one of the mobile operators.

Fixed-line and internet coverage is nowhere near as comprehensive, with less than 3% of the population of Pakistan connected to a fixed-line, a figure that has declined steadily since 2005, with further decline of just under 5% predicted by analysts at Business Monitor International.

According to the PTA, in 2008, fixed-line subscribers numbered 4.5 million, with the vast majority - some 4.4 million - with incumbent fixed-line provider PTCL.

Internet usage is more pervasive, and figures from the International Telecommunications Union state that there were 17.5 million internet users as of March last year, with only 128,000 broadband users.

Lack of infrastructure has inhibited growth, particularly in areas outside the large urban areas, which makes it an ideal environment for wireless solutions such as WiMAX.

The first such service was launched in February 2008 by the Abu Dhabi group's Wateen, and it is the most established service in operation in the country.

In October Mobilink's ‘Infinity' WiMAX service launched in Karachi, and Mobilink set itself the target of signing up 50,000 subscribers by the end of last year.

Alcatel-Lucent's country manager for Pakistan and Afghanistan, Olivier Lauras, says that broadband is one of the most under-developed infrastructure areas in Pakistan.

"It is only logical that these broadband services, both fixed and mobile, will be in high demand over the years to come. Current broadband penetration in the country is extremely low, which could be addressed through multiple channels including WiMAX, DSL and FTTx," he says.

"WiMAX is an attractive technology for rapid extension of broadband services in Pakistan particularly in areas with strong demand where end-user appetite for fixed and nomadic services is growing. However, developing a nationwide contiguous coverage which is highly capital intensive at a time of credit crunch is very unlikely to happen in Pakistan. This is one of the reasons why we believe that there is no room in Pakistan to use WiMAX for mobility broadband," he says.

Motorola's country manager for Pakistan, Amir Rao, says that he expects to see "huge" growth of broadband, with 3-4 million subscribers in the next three years. But understanding will be key to the success of any broadband projects, Rao says.

"At the moment, I just don't see a strong enough broadband marketing campaign," he says.

Lauras adds that very little content on the internet is in Urdu, which he says is a considerable barrier considering that it is the primary language for a large section of the population in Pakistan.

"The biggest inhibitor for mobile market growth is the lack of high end content and applications," he says. "In order to offer high quality value added services, the mobile operators will require better content that can command a pull from the subscribers."