Staying on Top

Pakistan mobile operator Mobilink enjoys a market share of over 50% despite the presence of five other mobile operators in the country. The rapid acceleration in subscriber numbers currently being experienced will not last forever, and Mobilink president and CEO Zouhar Khaliq is already preparing for what he believes is the inevitable consolidation set to take place in the Pakistani mobile market.

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By  Administrator Published  March 1, 2007

The growth in mobile phone subscriptions in Pakistan over the last three years has been nothing short of breathtaking. The industry currently adds approximately 2.1 million subscribers every month and now stands at around 47 million users, representing a mobile penetration rate of just over 30%. Industry analysts have forecast the number of mobile users in the country could touch 110 million by 2011.

Two new operators were ushered into the market in 2005, bringing the total number of players to six; a fiercely competitive landscape even for a country supporting a population of 150 million. Against this backdrop, Mobilink (PCML), which launched services in 1994 and is a subsidiary of Egypt's Orascom Telecom Holding, has maintained its market share at around 50%, counting 24 million subscribers at the beginning of February.

"We have grown from 1 million subscribers at the end of 2002 to 24 million currently," stated Zouhar Khaliq, president and CEO of Mobilink since 2003. "Such is the growth of our business that we have been adding 1,000 members of staff a year for each of the last three years," he added.

Mobilink is now one of the top three companies in Pakistan in terms of total revenues and given its size and market influence, is an obvious target for the competitive efforts of the other players in the market. Operators such as Telenor and Warid Telecom, which entered the market in 2005, have been strong new entrants, utilising technology and strong branding in order to attract new subscribers.

Most operators in the country have moved to incorporate EDGE in their networks, though Khaliq believes the introduction of WCDMA in Pakistan is still some way away - perhaps two or three years. A process to refarm spectrum will likely be required though operators such as Warid are utilising alternative technologies in order to bring broadband to the mass market much sooner than the deployment of 3G networks.

Last May, Warid Telecom affiliate Wateen Telecom announced plans to deploy a nationwide WiMAX network across Pakistan, using 802.16d equipment that would be upgraded to 802.16e in the future. Last month the operator announced that the network had been deployed to 17 major cities across the country, including Islamabad, Karachi and Lahore. Wateen is using the technology to provide fixed wireless broadband data services for residential use, and through its 5,500 kilometre long haul optical fibre, metro optical fibre rings and FTTx, the company offers total communication solutions including domestic and international voice services, video conferencing, broadband internet and quality TV viewing.

Khaliq confirmed that Mobilink had trialled WiMAX in the past but said that no trials were currently underway. "Our main aim is to continue to be the dominant cellular and telecoms player in Pakistan, offering services beyond the cellular space," Khaliq added.

Despite the large number of players in Pakistan's mobile market there are no network sharing programmes currently in place in the country, though site sharing has been encouraged. From his perspective, Khaliq sees no advantage to sharing sites as Mobilink counts more than three times the number of sites than its nearest competitor Ufone.

Mobile number portability (MNP) is another policy that is being actively encouraged by the regulator and was in fact meant to have been introduced at the end of 2005. A series of bureaucratic delays have meant at the beginning of 2007 the regime had still not yet been implemented, and on the latest timescale is now meant to be introduced this month. As the operator with the largest number of subscribers, Mobilink has potentially the most to lose as a result of the active introduction of MNP, Khaliq believes this will have a limited impact on Mobilink's business given its strong branding and the quality of the operator's service and network.

Given that the Pakistan Telecommunication Authority (PTA) sets a cap on the tariff levels the operators can charge the public, service differentiation through bundling and branding is one of the most dynamic areas of competition in Pakistan's cellular market. "Operators that have a market share of above 25% are deemed to possess significant market power and as such are required to notify the regulator before any changes to pricing," explained Khaliq. "In the case of a price war, the regulator would in all likelihood object to a strategy of significant price cutting on the part of Mobilink, for example," he added.

While significant subscriber growth potential still exists in the Pakistani mobile market, Khaliq believes that long-term, the existence of six operators is not sustainable and he envisages a period of market consolidation. It is a predictable standpoint from the head of a strong market leader, though his comments do appear to be supported by what is happening on the ground. Two operators already lag behind in the Pakistan market. Paktel, with just over 1 million subscribers at the end of January 2007 was sold by Millicom International Cellular (MIC), which owned an 88.86% stake, to China Mobile Communications earlier this year for US$284 million. This amount includes the repayment of inter-company debt.

The PTA also announced that it may resolve a frequency issue with China Mobile, as this was one of the main reasons for MIC's withdrawal from the market. The Luxembourg-based MIC is also the owner of Pakistan's smallest mobile operator Instaphone, which counted just over 320,000 subscribers at the end of January. MIC is also likely to exit this operation as it has publicly stated that its strategic intention is to exit Pakistan.

"I think the optimum number of operators in Pakistan is between 3-3 and-a-half," Khaliq quipped. "Seriously though, four is probably the best number for Pakistan and I do not see six players surviving over time," he added. It appears it may not be too long to wait before this scenario comes to pass.

“We have grown from 1 million subscribers at the end of 2002 to 24 million currently. Such is the growth of our business that we have been adding 1,000 members of staff a year for each of the last three years”

“I think the optimum number of operators in Pakistan is between 3-3 and-a-half. Seriously though, four is probably the best number for Pakistan and I do not see six players surviving over time”

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