Nokia has remained the significant player in Pakistans mobile handsets market, contributing approximately 55% to 58% of the

total handset shipments during the year 2006-07. Rest of the market has been covered by vendors like Sony Ericsson, Motorola, and LG & Samsung. At present 1,000,000 Mobile pieces are imported on average monthly basis (present average market size of the market) which covers all mobile distributors share and is inclusive of purchases made through letter of credits and direct off shore purchases (gray market). Present monthly market estimates of sales for the brand and the quantity are; Market Size- Mobile Imports Nokia LG Samsung Sony Ericsson Motorola China Copied Others (I-Mate, HTC, Bird, Benq etc) Average Total Market Imports per month Quantity in Piece 580,000 120,000 80,000 70,000 15,000 80,000 55,000 1,000,000

Pakistan Market Size- Mobile Imports (in %)

6% 8% 2% 7% 8% 58% 12%
Motorola China Copied Others (I-Mate, Trend, Bird, Benq etc) Nokia LG Samsung Sony Ericsson

Source: GALAXY Internal Report

Previously a large portion of handsets were brought in the Pakistan market via smuggling, individual carriers of new/used furbished sets etc., from European and Middle Eastern markets, however, recently the import of mobile phones through transparent channels via authorized dealers/distributors has increased because of gradual decrease in the duty structure. This fact coupled with aggressive marketing by local dealers /distributors, quality after sales services, insurance on handset etc. reduced significantly the smuggling /gray market purchases. A snap shot of Mobile Phone Distributors in Pakistan is as follows; Handsets Distributor GALAXY Market Share 35% Agreement with Mobile Manufacturers Nokia Sony Ericsson Motorola I-Mate Sony Ericsson Samsung HTC , O2 Nokia LG N/A Deals in other Brands Samsung LG Nokia, ,Motorola,

Mobile Zone Advance Telecom New Allied Electronics Others

25%

20% 10% 10%

Sony Ericsson, Samsung, Motorola None Includes small handset distributors which deal in all branded and non branded products. Mostly procured through gray market. Major revenue comes from Chinese brands.

Source: Telecom Digest -2007 & GALAXY Internal Management Report

Market Share- Handsets Distributors

Unicorn

10%

10% 35%

M obile Zone Advance Telecom New Allied Electronics Others

20% 25%

3.4

Mobile Cellular Companies

Latest figures compiled by the PTA reflect cellular phone connections reached 72.89million mark by September 2007. Within a period of one month, September 2007, Pakistans fast growing telecom industry managed to add 4.89 million subscribers. According to a PTA official, since January 2007 more than 22.21 million new connections have been sold on the back of comparatively cheaper tariff offers due to the rising competition among the cellular service providers. Mobilink continues to remain the leading operator in the sector with maximum market share both in terms of subscribers and revenues. The figures gathered by the telecom watchdog exhibit that by September 2007 Mobilink led the market with 28.57 million subscribers followed by Telenor, which was serving 15.46 million people across the country. Ufone now holds the third position 15.42 million subscribers and Warid is at the fourth position with 11.86 million subscribers. Meanwhile, the aggressively marketed Paktel has managed to grab 1.23 million subscribers.

Among all the new entrants, Telenor has shown its strength by capturing a good market and has left behind its closest competitor Warid within one months time to claim the second position. While Paktel, now owned by China Mobile Pakistan, is still been unable to add fuel to the current mobile operators battle. Pakistan Mobile Industry is witnessing increasing net addition to total subscriber base for last five years. In 2007, the net addition was more than 27 million increasing average to 2.3 million per month. Following table and chart shows the growing trend of Mobile subscribers.
Years 2002-03 2002-04 2004-05 2005-06 2006-07 Total Net Increase in Mobile Subscribers 705,864 2,618,508 7,748,295 21,735,354 27,846,131 60,654,152

Net Addition in Total Mobile Subscribers

(2003-07)
30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2002-03 2002-04 2004-05 2005-06 2006-07
Net Increase

Mobile Subscribers by Company

Million s Instaphone Total 0.3 0.3 0.5 0.5 62.1 34.5 12.8 5.0 3.2 0.8 0.0 0.0 0.5

Year 2006-07 2005-06 2004-05 200304

Mobilink 26.2 17.2 7.5

Ufone 13.9 7.5 2.6

Telenor 10.4 3.6 0.8

Warid 10.3 4.9 0.5

Paktel 1.0 1.0 0.9

2002-03

1.1

0.6

0.0

0.0

0.3

0.4

2.4

Source Pakistan Telecommunication Authority Annual Report-2007

3.5

Telecom Future Outlook

Pakistan telecom sector is all set to attract Rs.393 billion investment by 2010 as more international players in Wimax Broadband Market would replace small internet service providers(ISPs) and local Wimax operators Pakistan Telecommunication Authority (PTA) has disclosed this in its quarterly report saying that vision 2010 has already been presented to further develop the sector. It says that the vision 2010 presented in March 2007 had estimated that the investment would grow to Rs.393 billion whereas total revenue of the telecom sector will reach Rs.387 billion by 2010. The PTA plans to further facilitate acquisition and mergers and make more spectrums available for wireless operations (Wimax).Huge price reduction, due to economy of scales and competition, are expected in the local telecom market as a consequence of changes in the international market. PTA therefore would be working on IP based Interconnection Mechanism, SLA among operators, and amendment in interconnection regulation to accommodate operators to interconnect at PTCL co-locations. Imax along with VOIP will be having potential to bring revolution in FLL and broadband markets which is an ideal combination to bridge digital divide. PTA therefore plans to rollout USF to expand fixed network in addition to lowering FWT taxes, which would increase the WLL teledensity. The mobile penetration is expected to grow up to 57 percent by 2010, in this regard activation charges and withholding tax levied on telecom services is required to be further reduced to increase the potential market. Similarly, there is a potential of 3 to 5 million broadband customers, therefore, framework for the mobile Wimax is needed to be well defined. Since Wimax and VOIP can create another revolution in Pakistan, legal framework of SIP/VOIP is required. Accordingly fixed number portability and symmetric termination rate framework should also be developed to increase the fixed (wire/wireless) density. (Business Recorder-2007 & PTA AR-2007) Telecom industry in Pakistan attracted $9 billion investment in the last three years, and other $4 billions are expected during next 3 to4 years. Around 1.5 million new subscribers are being added each month. (Source: Daily News-2007). Growth patterns achieved by Pakistan mobile industry crossed all the forecast made by the independent consultants. According to International research companies including both Business Monitor International (Pakistan Telecommunication Report Q2-2007) and Informa telecoms (Emerging Markets: Explaining Mobile Industry Growth In Asia Paciifc:InformaTelecom & Media), the mobile subscribers will cross 120 million mark by 2010.The growth suggested by these research firms on average between 20% to 25% per year. PTA estimates that the cellular subscribers would cross 77 million by the end of 2007-08 making above 2.0 million monthly average additions during the year. It is expected that most of the potential population would be covered by the next two -three years. Therefore, by the year 2009-10, the cellular subscribers would reach around 100 million making the cellular penetration up to 59%

Following Chart shows the Cellular Mobile Subscribers projections & its impact on Mobile density.

Source: Pakistan Telecommunication Authoritys Annual Report 2007

Merrill Lynch raised its forecast for 2007, stated global handset unit growth forecast from 10% to 13% with units up from 1,067 million to 1,106 million. Looking further ahead, 2008 unit growth is up from 4% to 8% with units up to 1196 million. They are also increasing unit estimates by 39 million in 2007, 86 million in 2008 and 111 million in 2009.The majority of the increase in 2007 (37mn) is coming from handsets purchased by new subscribers but in later years 2008-10 the increase in their forecasts is dominated by replacement units since the mobile subscriber base is now higher. Higher mobile subscriber penetration in their group of 8 emerging countries (E-8) that include India, China, Pakistan, Bangladesh, Indonesia, Vietnam, Nigeria, and Egypt are the principal drivers behind the higher handset shipment numbers. Merrill Lynch expects that net additions in the E-8 will peak in 2007 at 241 million subscribers and the E-8 will account for 40% of global subscribers in 2010 - 1.6 billion of 3.9billion global subscriber base.