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“Spectrum should not be seen as something that the government must use to squeeze money out of private capital”
“It appears that the intention of Pakistani government is to fill its pockets with much needed dollars to address the country’s economic challenges following India’s entire licensing process but the market in Pakistan shows different statistics than India as Pakistan is currently not a profitable mobile market. India has been able attract large investments because of the sheer size of its population and the potential it represents for mobile broadband services”
Through 3G licensing, we will generate good revenues for Pakistan, these are the words of Advisor to Prime Minister on Information Technology Latif Khosa.
The government in its 2010/11 Budget proposals has revealed non-tax revenue target for Pakistan Telecom Authority (PTA) at Rs. 51 billion compared with just Rs1 billion in FY10. Whether 3G will change the way we communicate but it certainly has become a tool to fulfill government’s appetite that is growing to ease its budget deficit. Governments, particularly third world countries around the world are looking forward to earn something good by awarding these high tech lucrative licenses.
On the other side, the existing operators are still reluctant to pay the hefty price for licensing. A senior official from the second leading cellular company recently talked about the inability of Pakistani operators to run successfully if government asks for too much money. Another official from a leading telecom company told that government should have introduced 3G much earlier, as we are too late, government is all set to earn something extra out of this.
At a telecom event recently held in Islamabad, Mr. Khosa, highlighted the bullish mood of investors in the neighboring country, India, where 3G and broadband licensing has fetched multibillion dollars to the government. In fact, this entire process has earned government of India some 22 billion dollars, far more than the expected revenue.
It appears that the intention of Pakistani government is to fill its pockets with much needed dollars to address the country’s economic challenges following India’s entire licensing process but the market in Pakistan shows different statistics than India as Pakistan is currently not a profitable mobile market. India has been able attract large investments because of the sheer size of its population and the potential it represents for mobile broadband services.
Talking about India, the telecom sector is on a high surge. According to Gartner, Indian mobile subscriber base will cross 771 million by 2013. In fact, the total telecom subscriber base for India has already reached 638.05 million subscribers with a tele-density of 54.10 adding 16 to 20 million subscribers every month.
After the launch of 3G services by all the operators, it is expected that graph will further rise drastically. The market will definitely heat up with innovative products and services which would be beneficial for the customers as well for the service providers. And in this rapidly expanding market, companies with new and unique solutions will emerge as the leaders.
But it is not at all rosy for the Indian market itself. Things are getting difficult there. Companies, MTNL and BSNL, who had started 3G services months ago, have already asked for a refund from the government that amounts to some 290 billion.
MTNL has once again gone through another year of loss making. The operator’s revenue dipped 18.7%, totaling at Rs 3.6 billion. The downfall in FY 2009-10 was more than the previous fiscal’s 5% decline. The revenue from wireless services depleted by 6.3% in 2009-10. The operator failed to get any mileage from the advantage of having launched 3G services before the private players. Till date, MTNL has about 5 lakh 3G subscribers combined in Delhi and Mumbai. The operator tried lower-pricing strategies selling its 3G SIMs for the cost of GSM services. It came up with a plethora of offers for its brand 3G Jadoo, but they failed to spell any magic. The operator’s endeavors to pull 3G subscribers could hardly be transformed into tangible results. It bundled its 3G wireless solutions with Dell laptops just like Wateen in Pakistan did to sell its WiMax connections by offering notebooks for Rs. 2000 per month.
The entire process of 3G licensing has been criticized by market leader, Bharti. Company says, “The auction format and severe spectrum shortage along with ensuing policy uncertainty drove the prices beyond reasonable levels,” said Bharti. “As a result, we could not achieve our objective of a pan-India 3G footprint in this round.”
From the hue and cry, it is obvious that Manmohan Singh’s government used the 3G auction to tackle India’s ballooning budget deficit, it also comes as his government faces growing criticism for its regulation of the sector.
Analysts say, “Spectrum should not be seen as something that the government must use to squeeze money out of private capital.”
After this battle of viability, Airtel’s chairman has announced that we are not going to offer anything that doesn’t cover the cost. In other words, be prepared to shell out more than 1000 rupees per month for basic packages for 3G. There might be no unlimited packages at all if we are to look at their wired broadband packages. 3G spectrum has been sold at obscene prices in India. Companies who have bid on them would have to recover all of it in stages before they can even think about making profits on 3G.
Mittal has been quoted as saying several times now that cheap broadband is going to remain a dream for Indian consumers in the near future.
When the head of world’s fifth largest company is talking to his countrymen in such a manner, then why we have to follow the same dark aspect of the entire process.
There is more to 3G than the faster internet access and downloads, excess data limit, and better video and picture quality. The technology and the capital involved in providing 3G services to the customers is complex. In fact, 3G operations require large scale investment and are highly risky due to increasingly diversified and segmented requirements. Additionally, the investment patterns will lead to more diversification in the market. There would be more direct investment from stakeholder and strategic investor, borrowing from local and international financial market, vendor financing from suppliers and revenue generation from current asset like tower.
In addition, it would be necessary for the service providers to have a robust network to roll out the 3G services where the scalability of the network would become extremely important. So as to provide seamless services to its customers, it would become increasingly more critical for the service providers to have the correct infrastructure and network, and the appropriate amount of capital.
Even though 3G offers much higher bit rates as compared to 2G, there are other technologies that enable the service providers to cater to the ever-increasing demand for fast wireless broadband. These kinds of technically innovation can not only improved the ROI but can also cut down the costs of deploying mobile broadband networks. All these demands and economical sense have led the service providers to 4G technologies.
The possibility cannot be ruled out as Mobilink has already confirmed months ago that it is ready for a 4G operation and the statement from Mr. Latif Khosa further proves the business plan of market leader. He says, “There is a possibility that simultaneously with 3G licenses, Pakistan might also auction the license to operate the fourth generation mobile phone services (4G)”.
Statistic shows that India has some 480 million potential customers for 3G services whereas; Pakistan’s total population is not even half the size which is currently 180 million approximately. Though, both the countries have similar kind of obstacles and challenges to adopt the 3G services like low GDP per capita, intense price pressure in a dominant prepaid market, high import taxes on handsets and an often chaotic distribution network. Operators in Pakistan has been debating and arguing for years over PTA’s decision. According to them, Pakistan is not yet ready for anything like 3G keeping in view the existing operations and ever decreasing ARPU. According to them, by setting high 3G license fee, existing operators will struggle to cope with high cost of network deployment, consequently leading to inappropriate services and pricing in a highly price-sensitive market.
With a long term vision, Kenyan Government has recently reduced 3G’s licensing fee by 60% from US $25 million to US $ 10 million.
Pakistan is soon going to have its 100 millionth customer, however, despite a mobile penetration of just 54 percent, the market is fiercely competitive and operator ARPUs are among the lowest in the world.
In 2010, Mobilink’s first quarter ARPU was just US$ 2.8, falling from US$3 a year ago. Telenor was the best performing operator in the quarter in terms of connections, just surpassing Mobilink in terms of quarterly net additions and recording the highest year-on-year connections growth (16 percent). However, the unit continued to make an operating loss for its Norwegian parent, posting a US$1.4 million loss for the quarter compared to a US$ 14 million loss a year ago. Telenor’s monthly ARPU in the quarter was US$2.3.
Ufone saw its connections base drop 4 percent year-on-year in the first quarter. Warid Telecom’s connections base shrunk by 6 percent year-on-year in 1Q10 as it reined in operating expenditure. Warid also deactivated 2.7 million subscribers in the very same quarter.
Zong, the smallest one, launched in 2008 following China Mobile Communications Corporation’s (CMCC) acquisition of Paktel the previous year, the Chinese firm has invested over US$1.6 billion over the last few years building-out and marketing the network. However, it has admitted that it faces a long wait for its return on investment.
After so many achievements and landmarks, we are yet to see a mature usage pattern in Pakistani cellular market. As 3G and 4G is more concerned about the data and tons of VAS, our companies are still relying mostly on the SMS bundle packages, gift offers for those who activate their forgotten SIMs. It would be a wise strategy for all the operators to develop a customer base using VAS in their daily lives using GPRS/EDGE and get them ready for a next speedy ride. For example, a current TVC of Telenor Djuice only highlights the side effects of sending too many SMSes. Hardly, this package convinces the subscriber to use the mobile phone healthily.
Even after this long journey of years, operators and government have remained unsuccessful to ensure the privacy of a subscriber. Even today, mobile phone subscribers are experiencing the negative results of undocumented SIMs. The pond hasn’t been cleaned by the regulator; it’s full of unregistered SIMs.
Like India, mergers and buyouts are long due. In such an environment, it is the highest responsibility on Government’s shoulder, not to think about its budget deficit and short term revenue benefits only. Overall situation has to be made balanced and favorable for all the stakeholders.
MTNL is a sister concern company of BSNL and comes under Central Govt… The customer base of MTNL is nearly 5.92 million. And from past few years the graph is going down even if the Indian Govt. is spending too much of huge amount to uplift the customer base, but still the graph is going down and the main reason is their “GREAT SERVICES”. The MTNL lineman don’t have enough idea to configure even a modem and to solve a single complaint they take nearly 1 month or more because the don’t have enough workforce and the coverage area is very big. And when you see the MTNL exchange you become shocked to see their exchange, made of HUWIA equipments, and when you see the AIRTEL exchange you will find Ericson equipments just because the cost of HUWAI equipments are nearly half then Ericson.
Basically they have two type of exchange one is for 256 Kbps and one for above 256Kbps, if you buy plan for above 256 then you may get good response because for that only they use Ericson exchange.
I raised my voice at Consumer Court and submitted a online complaint and found that I am not one who is facing the problems with MTNL http://www.consumercourt.in/broadband/1-mtnl-broadband.html here you can check the details of complaints.
I don’t know why the Govt. change the plan to get more customer and spend a huge amount in ads, the salary of lineman is nearly 15000/-, I think this is a total waste. Customers are very much frustrated from MTNL. If you visit the MTNL exchange you will find many customers shouting on the Area Manager. MY personal experience with MTNL was pathetic and now I switched to another services provider and now I am very much satisfied.