Mobile Industry Overview & Average Revenue Per (Mobile) User in

Pakistan

Pakistan, like many other developing countries, has seen an explosion in its mobile
communications market in recent years; from 2004 to 2007, the number of subscribers
in the country more than doubled annually. By 2008, according to the Pakistan
Telecommunication Authority (PTA), there were some 94.3 million subscribers,
compared to only 5 million at the beginning of 2004. [1]
Pakistan has also become a regional leader in the mobile communications market.
Pakistan overtook India in 2005 and Sri Lanka in 2007 in the rate of mobile SIM card
subscriptions per 100 residents. This is despite the fact that Pakistan is less densely
populated than either country.
During the 2008-09 financial year mobile access growth seems to have plateau
compared to previous years. The PTA has attributed this to the saturation of many
urban markets have become saturated. However, the overall mobile communications
subscribership did grow at an estimated 6 percent. The PTA estimates that 58.2 percent
of the population are subscribers. In the 2008 national survey, some 63 percent of
respondents said they have household access to a mobile phone, while about 75 percent
said that they have a mobile phone available to them somewhere-at home or elsewhere.

Here are the results shown in the survey done by the Pakistan Telecommunications
Authority recently.

CELLULAR SUBSCRIBERS
Growth
Mobilink Ufone Zong Instaphone Telenor Warid Total
Rate %

2000 114,272 80,221 112,000 306,493 15.39

2001 309,272 116,711 96,623 220,000 742,606 142.29

2002 800,000 350,000 218,536 330,000 1,698,536 128.73

2003 1,115,000 550,000 319,400 420,000 2,404,400 41.56

2004 3,215,989 801,160 470,021 535,738 5,022,908 108.90

2005 7,469,085 2,579,103 924,486 454,147 835,727 508,655 12,771,203 154.26

2006 17,205,555 7,487,005 1,040,503 336,696 3,573,660 4,863,138 34,506,557 170.2

2007 26,466,451 14,014,044 1,024,563 333,081 10,701,332 10,620,386 63,159,857 80.70

2008 32,032,363 18,100,440 3,950,758 351,135 18,125,189 15,489,858 88,019,812 39.4

2009 29,136,839 20,004,707 6,386,571 34,048 20,893,129 17,886,736 94,342,030 1.30

 July-09 29,551,075 20,057,079 6,486,338 11,917 21,299,334 18,141,542 95,547,285 1.28

Aug-09 29,840,415 19,607,299 6,556,697 3,575 21,428,286 18,347,366 95,783,638 0.25

Sep-09 30,046,050 19,104,594 6,629,761 1,073 21,658,592 18,468,208 95,908,277 0.13

Oct-09 30,275,979 18,329,967 6,752,031 1,073 21,975,271 18,584,409 95,918,729 0.01

Nov-09 30,480,398 18,361,072 6,869,174 1,073 22,279,449 18,718,419 96,709,585 0.83

Dec-09 30,800,354 18,510,175 6,920,234 1,073 22,500,789 18,847,315 97,579,940 0.93

Jan-10 31,063,901 18,577,750 6,933,634 1,073 22,640,060 16,192,927 95,409,354 -2.22

Feb-10 31,300,892 18,789,447 6,965,758 1,073 22,950,858 16,223,201 96,231,229 0.86

SCO Cellular Subscribers are 285,072

Note: Including AJK & NAs

CELLULAR MOBILE DENSITY

Year Mobile Density

2000 0.22
2001 0.52
2002 1.16
2003 1.61
2004 3.29
2005 8.30
2006 22.21
2007 39.94
2008 54.60
2009 58.20
July - 2009 58.50
Aug - 2009 58.50
Sep - 2009 58.60
Oct - 2009 58.60
Nov - 2009 59.03
Dec - 2009 59.60
Jan - 2010 58.20
Feb - 2010 58.70
Note: Including AJK & NAs

Table1: Mobile Cellular Services Survey PTA [1]

House-hold Mobile Phone access in Urban & Rural areas:

Fifty-nine percent of rural survey respondents said they have household access to a
mobile phone, versus 82 percent of urban respondents. Working to bridge this gap is
Pakistan's Universal Service Fund (USF), which was established in 2006 and is funded
by a 1.5 percent levy on telecommunications operators adjusted revenues. Subsidies
provided by the USF go toward extending basic telephony and data services
(http://www.usf.org.pk/Rural-Telecom-Programme.aspx). Despite the slowdown in
mobile access growth, the telecoms industry, with the help of the USF, has continued to
expand its service coverage areas. In fact, the number of cell tower sites in the country
increased 31 percent from 2008 to 2009 from 21,518 to 28,124.

Figure1: Income Level with Mobile Phone Access in Pakistan [2]

Recent Market Developments:

Despite the sectors overall growth, profitability has been difficult to come by for many
of Pakistans service operators. In recent years, operators have been burdened by falling
ARPUs (monthly average revenue per user), which decreased from an industry-wide
$9.00 in the 2003-04 financial year to $2.50 in 2009, as a majority of new mobile
subscribers are using prepaid SIM cards and are low-income users. They tend to be
heavy users of voice services instead of data services, which are generally more
profitable.
In response, providers have begun to offer more non-voice value-added services such as
mobile banking, mobile music and cultural services like Quranic recitation, Branchless
Banking, Mobile Internet, Mobile TV, Mobile Kiosk Services and many more.

Operators also have adapted their pricing schemes, as mentioned above. The
government responded by the tougher market conditions by lowering certain tariffs.
For example, in 2009, the PTA cut the industrys activation tax by 50 percent and
reduced the import duty and regulatory charges on mobile handsets by 67 percent.

Pakistan is the worlds third fastest growing telecommunications market,1 adding on an

average two million cellular subscribers per month, following India which is the worlds
fastest growing mobile services market, adding on an average more than 8 million
subscribers per month. However, Pakistan as of June 2008 had a total of 58.9% access
paths/ 100 people compared to 29.08 in India. The South Asian region as whole offers a
fertile ground for the growth of telecommunications. [3]

Figure2: Growth of Subscriber-base, Key Market/Regulatory Event, and Reduction in Tariff -Pakistan [3]
Telecomm Revenues:

The telecom sector revenue showed a 19.8% growth during 2008-09 compared to 18.2% in
previous year. During the year 2008-09, the telecom sector generated revenue to the tune of
PKR. 333.9 billion, as compared to the last year's Rs. 278.5 billion. The cellular mobile sector
continued to be the leader in telecom revenue, whose share came out to be 64% in the total
telecom revenues. The cellular mobile sector showed about 17% positive growth during the
fiscal year 2008-09.

Figure3: Telecommunication Revenue statistics - Pakistan [4]

Cellular Mobile is the only segment that showed an encouraging growth pattern during
a tough year [2008-09] for Pakistan telecom sector.

Pakistan mobile market hosts some of the worlds largest and most experienced telecom
companies including Orascom, Telenor (Norway), Warid Telecom (Abu Dhabi Group),
China Mobile and Etisalat, a UAE based company. These companies have heavily
invested in Pakistan to lay down the infrastructure and take mobile services to every
nook and corner of the country. With the encouragement of Government of Pakistan and
best efforts by the regulator as well as the determined mobile operators, the sector has
recovered from slow growth of past few months. Nonetheless, there is escalation in
mobile penetration up to 7.4%, as the total mobile subscribers have reached to 94.3
million, with more than 90% of the country having mobile service access.

As for competitive environment in the sector, there is intense competition among all 5
operators. Since the market shares of all the operators have marginal difference and the
gap between the market leader (Mobilink) and the rest of the operators is rapidly
narrowing, the companies are now getting into a price war, whereby undercutting each
other for Voice and SMS services is resulting into higher financial burden on the
companies. The operators have come to launch a range of value added services like Mobile
banking, Mobile Internet, Music Library, Utility Bills Payment, Stock Market Updates, Voice
Messaging, GPRS services, etc. that would help industry to improve ARPUs.

The regulator, operators and the Government, in their own respective spheres, have
been taking care of the mobile subscribers in Pakistan. The steps taken by these three
are bringing value added services, increased accessibility; better quality, lower tariffs
and better value for money. PTA has estimated that cellular mobile subscribers would
cross 102 million by 2011 in Pakistan.

In 2008-09, the cellular mobile companies in Pakistan added over 6.3 million
subscribers, while the previous year, the addition was about 25 million, suggesting that
the subscription grew by 7% this year, but it was over 39% in 2007-08. Saturation in
the market, Economic slowdown and heavy taxes could be major reason for this slow
growth which the added mobile acquisition costs.

Figure3: Mobile Subscription statistics of Mobile Networks in Pakistan [4]

ARPU of Mobile Network Operators:

Until recently, the mobile operators in Pakistan enjoyed handsome ARPUs; however, for
the last couple of years especially after the global trend, the domestic ARPUs have been
falling sharply. Today, the industry's ARPU stands at 2.48 US$ per month. Majority of
the prepaid connection holders are low-income users.

Figure3: ARPU of Mobile Network Companies in Pakistan [4]

They tend to be heavy users of voice rather than data services, thus resulting into
low ARPUs to the operators. As the operators have heavily invested on networks in
Pakistan and higher voice usage is not sufficient for improving ARPUs, the operators
have to focus more on value added services for better returns.

Unfortunately, Pakistani mobile users generally use basic non-voice, SMS service,
which is not a major revenue generation activity. With the introduction of more non-
voice services like mobile banking, mobile music and culture- based services like
Quran recitation, the ARPU can be increased. The non-voice ARPU would hopefully
show positive signs in the future, which would help improve the industry's ARPU.
Mobilink has the highest ARPUs of US$ 3.04, followed by Telenor with US$ 2.85 and
Ufone with US$ 2.20. As for Data ARPU, Mobilink and Ufone have maximum data
ARPUs, whereas Warid and Zong stand at number two with US$ 0.17. These
companies are believed to be providing more value added services and better SMS
packages. [4]

Conclusion:

Pakistan's mobile cellular segment had been growing at a very fast pace; however, recently,
the signs of slow down have indicated slow growth in subscriber base, penetration and
revenues. The international research companies still consider Pakistan to be a lucrative
market as there still remains a portion of unmet demand in certain areas. Sector has already
shown signs of recovery. Pakistan would hopefully cross the number of 102 million
subscribers by the next two year. However, in order to address low ARPUs, the need to
boost data usage has increased. The operators are putting in their best efforts to introduce
data service, but the low local content availability and high low income prepaid base is not
allowing them to grow on data services. Hopefully, once 3G licensing is completed, the
subscribers would be in better position to use enhanced data service on better speed, and the
business community will be benefited largely from it.

References:
[1]. Indicators: Mobile Cellular Services. Pakistan Telecommunication Authority. Updated
11 March 2010. Accessed March 2010.
http://www.pta.gov.pk/index.php?option=com_content&task=view&id=650&Itemid=6
03.
[2]. http://www.audiencescapes.org/country-profiles-pakistan-country-overview-mobile-
communications
[3]. http://lirneasia.net/wp-content/uploads/2009/07/TRE_Pakistan-
Final_2009Jan22.pdf
[4]. PTA Annual Report 2009

Links:

http://www.audiencescapes.org/country-profiles-pakistan-country-overview-mobile-communications
http://www.usf.org.pk/Rural-Telecom-Programme.aspx
http://www.usf.org.pk/newsdescription.aspx?77
lirneasia.net/search/?cx=005600070838260215994%3Azquvduehpzm&cof=FORID%3A11&ie=UTF-
8&q=pakistan+mobile&sa=Search&siteurl=lirneasia.net%2Fsearch%2F&siteurl=lirneasia.net%2Fsearch
%2F#1184
http://telecompk.net/tag/arpu/

http://portal.acm.org/citation.cfm?id=1539818 (The transformation of the mobile

telecommunications industry in Pakistan: A developing country perspective Source
((downloaded)
http://www.docstoc.com/

http://www.pakboi.gov.pk/eletter/News%20&%20Reports/PTA%20Industry%
20Analysis%20Report%202007.pdf (downloaded)