Managerial Economics

Telecom Sector of
Pakistan and
Perfect Competition

Submitted to: Professor Dr Bushra Hamid

Submitted By: Shahzad Khan

MBA (Finance)
Morning
Class no: 08

2010

INSTITUTE OF MANAGEMENT STUDIES

UNIVERSITY OF PESHAWAR
01: Introduction:
telecom in Pakistan is only sector that is having very strong competition, and that is the reason
that now a days this sector is showing very high growth as compare to other sectors.

Studying this sector of Pakistan, it is very easy to understand that in this sector, perfect
competition exists. Now I will relate this sector with the characteristics of perfect competition,
and what are the advantages and disadvantages of perfect competition.

1.1: Characteristic of Perfect competition – with reference to

telecom sector of Pakistan:

In perfect competition there is always cut throat situation. Here is the some
example from telecom sector of Pakistan.

2: Basic assumptions required for conditions of pure competition

to exist
2.1: Large number of buyers and sellers:
In Pakistan there are seven different cellular and two other companies with
name of World Call and Watin are operating., each of whom produces an
insignificant percentage of total market output and thus exercises no control
over the ruling market price.

these companies and their share of market is given below:

Mobilink.

Mobilink GSM (PMCL), a subsidiary of Orascom Telecom,

started its operations in 1994, and has become the market
leader both in terms of growth as well as having the largest customer subscriber base in
Pakistan – a base of over 20 million and growing
 Ufone
PTML, a 100% owned subsidiary of PTCL was established to
operate cellular GSM 900 services. The company commenced
its operations, under the brand name of Ufone, from Islamabad on January 29, 2001. Ufone
expanded its coverage and has added new cities and highways to its coverage network.
Ufone now covers over 100 key cities and prominent highways across Pakistan providing
the customers best quality service and value for money.

Telenor
Telenor acquired the license for providing GSM services in
Pakistan in April 2004, and has launched its services
commercially in Islamabad, Rawalpindi and Karachi on March 15, 2005. The official
opening was held in Islamabad with the President of Pakistan General Pervez Musharraf as
the guest of honor and a Telenor delegation headed by CEO Telenor Jon Fredrik Baksaas.
On March 23, 2005 Telenor started its services in Lahore, Faisalabad and Hyderabad.
Telenor has become the second largest cellular network in Pakistan by launching over 500
destinations in just over a year.

Paktel is the company that launched cellular technology and

introduced mobile telephony in Pakistan. Since then both our
customers and Paktel have come a long way in terms of the
way Pakistanis communicate. From the basic one-to-one voice communication, customers
can now enjoy short messaging(SMS), picture messages, polyphonic ring-tones,
conference calling, call forwarding and a host of other fabulous services.
 Warid Telecom

Warid Telecom takes pride in being backed by the Abu Dhabi Group, one
of the largest groups in the Middle East and the single largest foreign
investor group in Pakistan. It has a diversified business interest in the
institutions that have enjoyed commercial success as a result of its strong financial resources
and extensive management expertise. The Abu Dhabi Group’s major investments are in the
following sectors:

Vfone is the country’s largest WLL network. So whether its

unparallel voice quality, network reliability, affordability or
unsurpassed presence; the answer will always be Vfone---No one
Else!!

DIALLOG offers a vast variety of unique and innovative Network

Services aiming at ensuring that you get the best of wireless
communication, bundled up with maximum value and utility. You can
activate any or all of these services for FREE or for very little charges
in some cases and enjoy extra convenience with your DIALLOG
subscription. These services are easily available to all DIALLOG subscribers.

And for the second part of the first condition that there are large number of
buyer, so the whole population of Pakistan is in buyers category. And they
are buying the products of these companies.

2.2: Perfect freedom of entry and exit from the industry.

There is no hurdles in entering and leaving the industry. Recently in this

sector Paktel and Instaone has left this and Zong entered in to this industry.
Firms face no sunk costs - entry and exit from the market is feasible in the
long run. This assumption ensures all firms make normal profits in the long
run.
 As per the normal profit in long run is concern, the call rates in 1991 was
about 70 PKR, and was 20 PKR in 2000. But now it decreased to even .
90PKR per mint. This is because of perfect competition and free entry exit.

2.3: Homogeneous products:

All these firms are in the telecom industry, and they provide almost same
services. Like :

1. Call services

2. SMS service

3. International roaming

4. Internet connectivity

5. Call waiting

6. CLI etc

services supplied to the markets that are perfect substitutes. This leads to
each firms being passive “price takers” and facing a perfectly elastic.

2.4: Perfect knowledge –

consumers have readily available information about prices and products

from competing suppliers and can access this at zero cost, due to the
bombastic advertisement and fast franchising customer are having very easy
and no cost approach to these products. Almost every one having cell phone
is having the complete information about the packages affered by all these
companies. And the reaction is very abrupt and fast, if any one change its
price people shift to other net work with out missing anytime.

3: Advantages of perfect competition:

From customer point of view it has following advantages:

• Prices get lower and lower:

Like in telecom industry the prices are continuously decreasing due to cut throat
competition. That is the reason that now a days call and SMS are very cheap, upto 50 paisa
per mint.

• Invocation in product or services:

In this industry there are so many addition to services are seen in last few years, i-e

• friend and family numbers

• happy hours

• favorite numbers

• MMS

• GPRS

• And free convertibility with free minutes and massages etc

• More reseach and customer oriented policies etc

4: Disadvantages:

1. Cut throat competition some time let other company to leave the industry
because they can’t cope with competition. They can’t bear looses for long time.

2. This time according to Ufone chief executive four out of five cellular
companies are going in looses.
3. New firms hardly take market share from existing firm of the same industry.
Like it is very challenging job for ZONG to get customer from market as there is high
degree of competition.

4. Some time quality is compromised due to lowering price. Call are not
connected at first dial, voice quality is disturbed.

5. People make wrong use of call and SMS, just because of low prices.

References:

http://www.infiniti.com.pk/services/
http://www.ptcl.com.pk/contentp.php?NID=64

http://www.ufone.com/

http://www.mobilinkgsm.com/jazz/index.php

http://www.paktel.com

http://www.telenor.com.pk/

http://www.zong.com.pk/

http://www.waridtel.com