REPORT

ON

PAKISTAN
TELECOMMUNICATION

BY

SHAHID ALI
MBA (BANKING & FINNACE)

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1. Introduction

1.1 The Islamic Republic of Pakistan was founded on the 14 th August

1947. It is a land of snow-covered peaks and burning deserts, of fertile
mountain valleys and irrigated plains. It is peopled by some 149.03 million
inhabitants representing an array of ethnic groups but united by the Islamic
faith. Pakistan is strategically placed at the crossroads of Asia, where the
road from China to the Mediterranean meets the route from India to Central
Asia. For thousands of years, this junction has been a melting pot of diverse
cultures, attracting traders and adventures, pilgrims and holy men.

1.2 Located in South Asia, Pakistan is bordered by India on the

east, China on the north east, Afghanistan on the north west while Iran
shares its border in the south west and Arabian Sea in the south. The borders
of Pakistan encompass a total area of 796,096 square kilometers.

1.3 Climatically, Pakistan enjoys a considerable measure of variety.

North and northwestern high mountain ranges are extremely cold in winter
while the summer months from April to September are very pleasant. The
vast plains of the Indus Valley are extremely hot in summer and have cold
weather in winter. The coastal strip in the south has a temperate climate.
There is general deficiency in the rainfall. Average rainfall is 762
millimeters per annum.

1.4 Pakistan’s 4000-years history is richly illustrated by

archaeological sites and imposing monuments scattered the length and
breadth of the country. Brick cities from the Indus Civilization, which
flourished around 2000 BC, stand beside Buddhist ruins contemporaneous
with the birth of Christianity. Magnificent Muslim tombs from the 12th
century vie with the palaces, mosques and forts of the Moghul Emperors of
the 16th and 17th centuries.

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2. Pakistan Telecommunication Authority (PTA)

The Pakistan Telecommunication Authority was established in

January 1996 under the Pakistan Telecommunication (Re-organization) Act,
1996. It consists of a chairman and two members, Member (Technical) and
Member (Finance). The overall working force of PTA exceeds 200. PTA
regulates the establishment, operation and maintenance of
telecommunication services in Pakistan.

3 AN OVERVIEW OF PAKISTAN ECONOMY

3.1 Since late 2000, the world economy has been witnessing
harmonized downturn and for the first time the world’s potent economies
faced deceleration in tandem. The 11th September event and their aftermath
further worsen the already difficult situation on the global economic scene.
This year several countries experienced a fall in output on per capita basis.
This reversal compounds problems for the developing countries to emerge
from poverty in 2003. Instead million of people added to the list of poor
living below the poverty line.

3.2 Notwithstanding with the downturn in many countries,

Pakistan’s economy has demonstrated greater resilience and improvement in
overall macro economic fundamentals of the economy. However, the events
of September 11, and continuation of the catastrophic drought conditions
adversely affected the pace of economic recovery. Despite these external
shocks, performance of Pakistan’s economic was quite encouraging in fiscal
year 2001-2002. Particularly, the most impressive gain during the year
appeared to be the tremendous improvement in Pakistan’s external sector.
Main factors strengthening the external sector were improvement in trade
balance, sharp increase in the inflow of workers remittances and substantial
increase in the official transfer.

3.3 Present government has placed special emphasis to information

technology and communication sector, as it has been identified as the one of
the major drivers of the growth. Vision of the government is to harness the
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potentials of IT & Telecom as a key contributor towards Pakistan sustainable
development. In this regard Rs. 3.5 billion has been allocated to IT &
Telecom Sector in fiscal year 2002-2003.

4 AN OVERVIEW OF THE TELECOM SECTOR

4.1 The current global telecom industry, is going through a phase of

turbulence after years of stability, the situation is changing radically. The
industry is facing number of challenges; the most pressing one is opening of
the telecommunication sector. It has led to evolve genuine competition in
many markets; the introduction of mobile, Internet together with other value
added services is rapidly creating new segments of market with very few
similarities with the traditional marketplace. Moreover, with the
convergence of services and technologies in the developed economics is
resulting in a totally different set of issues to be addressed.

4.2 In line with these global trends the telecom sector of Pakistan is
also being completely deregulated and necessary preparations by all
stakeholders are underway. In this regard PTA has been working exclusively
to address all anticipated issues for evolving a comprehensive deregulation
framework. Consultations with internationally renowned telecom
consultants have been carried out to chalk out a strategy for implementing
deregulation.

4.3 Pakistan telecommunication and IT sector despite going

through a major structural shift, has grown and developed in the last few
years. To highlight a few,
• PTCL earned a record profit of Rs. 19 billion while preparing
for a deregulated scenario.
• Internet access expanded to 850 cities.
• PAKSAT-I Pakistan’s own satellite has been launched and positioned
at 38* e orbital slot.
• Cellular penetration is now 1.3 million and is expected to grow to 3
million by next year.
• Cost of making domestic and international calls dropped between 40
and 60 percent.
• Internet bandwidth rates slashed down from US$ 90,000 to US$3,800
per month.
• Internet bandwidth capacity availability has increased to 400 Mb/s
and 250 cities are connected through optic fiber.
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5. TELEPHONE ACCESSIBILITY

5.1 Communication and information technologies are the

foundation of the new global information-based economy Advanced
telecommunications networks and related systems, increasingly permeate
every economic sector and help business of all kinds. It enhances their
organizational efficiency and competitiveness while providing customers
better goods and services at lower prices. However, at a time when
communications technology is rapidly transforming, many countries remain
unprivileged where millions of their citizens still do not have access to the
most basic tool of the information age: a telephone. According to European
Commission Report (June 2002), one third of the world population has never
made a call. This fact amounts to evidence of what has become known as the
digital divide—the gap between people with access to technology, and those
without.
5.2 Pakistan Telecommunication network is expanding each year,
thus providing telephone access to rural and urban communities in record
time. Total lines installed by May 2003 are 4.446 million, out of which 3.747
million are in service as against 3.655 million last year. This resulted in
corresponding increase in teledensity from 2.27 to 2.50 during this year.
However, the teledensity equal to is still lower than many other developing
countries. In Table 1 teledensity for the last five years is given:-

Table –1
Growth Trend of Teledensity in Pakistan
Years ALIS Population Teledensity
1998 2.660 133.61 1.99
1999 2.874 136.69 2.10
2000 3.053 139.76 2.18
2001 3.252 142.86 2.27
2002 3.655 145.96 2.50

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This growth trend of teledensity is shown in Figure-1.
Figure–1
Growth Trend of Teledensity in Pakistan
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2.5
2.5 2.27
2.1 2.18
1.99
2

1.5

0.5

0
1998 1999 2000 2001 2002

6. Cellular Mobile
6.1 Mobile telephones have become an integral part of the growth,
success and efficiency of any business economy. Recent years have
witnessed an explosion of new operators and users of cellular mobile
communications. The importance of mobile communications in today’s
telecommunication industry has therefore become indisputable.

6.2 The Cellular Mobile Industry of Pakistan

Cellular industry of Pakistan comprises of four companies namely

Instaphone, Paktel, Mobilink and U-fone. The industry has shown
tremendous growth in the year 2001-2002 as the subscriber base increased
from 0.7 million to 1.2 million (70 percent increase). However, this growth
rate is lower than the previous years growth rate.

Mobilink and U-phone are using digital technology (GSM) for its
cellular service. Lately Instaphone introduced digital version of the analogue
technology, D-amps, (Digital Analogue Mobile Phone System). Table2 gives
a bird’s eye view of the situation of cellular market in Pakistan from 1999 to
2002.

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 Table–2
Cellular Subscribers in Pakistan

Year Instaphone Mobilink Paktel PTML Total Growth rate

(U-fone) percent

1995-96 20,950 16,385 30,703 -- 68,038 --

1996-97 43,029 52,600 39,398 -- 135,027 98.4
1997-98 53,184 82,912 6,000 -- 196,096 45.2
1998-99 108,058 87,556 70,000 -- 265,612 35.4
1999-2000 112,000 114,272 80,221 -- 306,493 15.4
2000-2001 220,000 309,272 96,623 116,711 742,606 142.0
2001-2002 319,926 570,888 206,109 141,679 1238,602 66.79
2002-2003 581404 1014710 340947 511337 2448398 --

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 Figure–2
Cellular Subscribers in Pakistan
1238602

742606

306493
265612
196096
135027
68038

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-2002

Fig-3 shows the market shareof cellular operators with respect to the number
of subscribers.

Figure-3
Subscriber – Wise
Market share of Cellular Operators in Pakistan
PTML
Instaphone 11%
26%

Mobilink
Paktel 46%
17%

Source: Pakistan Telecommunication Authority

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6.3 PTA played a major role in increasing the growth rate of the industry.
A transition from MPP (Mobile Party Pay) to CPP (Calling Party Pay) made
incoming calls free. Moreover, PTA gave incentive to the operator by
reducing royalty, reduction in interconnection charges and airtime tariff. All
these factors made mobile phone affordable for a common man.

6.4 Pakistan mobile industry at the moment is experiencing growth

explosion. Though the existing players are trying hard to meet the growing
demand still there is a huge amount of unmet demand in the country as
against the supply of connection by the operating mobile companies. Recent
example of this potential demand can be seen in the prepaid mobile
connections by U-Fone, which claims that they have sold 100,000 in just
100 hours. Major reason for the unfulfilled demand is lack of investment on
the part existing players to increase their network capacity and use of
obsolete technology that is AMPS instead of moving to GMPCS/GPRS.
More over, no fresh foreign investment is coming up in the form of new
players in local market. It is desirable that the existing operators should
upgrade the technology and to meet the demand more licenses should be
issued for GSM.

7. E-Commerce & PAKISTAN

Over the last two years, considerable work has gone into laying the
basis for the E-commerce in Pakistan. The Cabinet has approved the IT law
and regulations have been issued. Joint work with the Ministry of
Commerce, State Bank of Pakistan and other related entities is underway
and there are plans to set up a Trusted Authority, which will issue digital
Certificates as well as authenticate the Digital signatures via a Public Key
Infrastructure (PKI). The World Bank and UNIDO are involved in putting
the process reengineering and form design in place and a ‘Trade Point’ is
scheduled to be established. A few studies has been commissioned on
different aspects of the introduction of E-commerce and some new ones are
in the pipeline. It is also expected that the next Asia Pacific Council for
Trade Facilitation and E-business (AFACT) conference will be held in
Pakistan. Key policy decisions are underway a series of projects are
expected to be launched in this area. The core infrastructure will be used by
the E-Government initiative as well.

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8. Card Payphone Industry of Pakistan

Across the global, rapid technological changes took place in the field
of telecommunications. Pakistan has also been experiencing tremendous
technological developments in the recent years. However, telephone
coverage in cities and particularly in the rural areas is still highly inadequate.
Thus creating a need to set up Card Payphone facilities all over the country
for ensuring universal access.

The first step in this direction was the installation of card payphone in 1992. The
growth was not substantial till 1998 when the PCOs were installed as outdoor booth.
Later on card payphone started as franchises as indoor booth. Since then a significant
growth was seen in card payphone industry.

Figure-4
Total Number of PCO’s In Pakistan
(1999–2001)
98759
100000
90000
80000
70000 57446
60000
50000
40000 27710
30000
20000
10000
0
1999-2000 2000-2001 Jul-02

Source: PTC

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