Asian FocusAll articles

Last Train to Pakistan: Pakistan Telecom Sector Still Offers Unique Opportunities to Foreign Investors ("Standard" Magazine) [11.05.07]

By Leonid Konik, Editor-in-Chief, "Standard"

In liberalization of its telecom market Pakistan is ahead of many other world countries, let alone their regional neighbors. However, the lack of full and objective information about this country led to cautious behavior by foreign investors, who appeared only recently on the local telecom market, and rather in single cases. At the same time, the country’s economy is growing; its large territory and population makes investment in the telecom infrastructure very effective. With a population of 164 million (which is 1.12 times larger than Russia’s) the territory of Pakistan is only 796,000 sq km (which is 21 times smaller than the Russian territory).

There are very few fixed phones in Pakistan, only 5.18 million, which means that the telecom penetration is slightly over 3.1%. Therefore, there is a high demand in mobile communication. The mobile penetration currently surpasses 30% (Pakistan’s six mobile operators together provide services to over 50 million subscribers). The trend is also interesting: during the past two years the mobile subscriber base grew almost 300%, while the number of fixed service subscribers during the same period fell by 2%.

The liberalization of the Pakistan telecom market may be seen by the number of licenses for services, which usually has a limited number of owners. Besides six mobile operators, there are four other Pakistan companies that utilize CDMA WLL networks. In addition to the former telecom monopoly, there are 14 licensed alternative telecom carriers providing long distance and international services (including mobile operators). 

There are also other multiple signs of the telecom market liberalization. Effective March 26, 2007, there is Mobile Number Portability (MNP) throughout Pakistan, which allows subscribers to move from one mobile operator to another using the same phone number.   Thanks to the de-monopolization of the long distance communication market, the cost of a call from Pakistan to any point worldwide, either from fixed line or mobile, fell to USD 0.03-0.05 per minute. The world’s largest mobile WiMAX network was also built in Pakistan and since March 2006 has been working in test regime (its commercial launch is planned for May 2007).

And finally, the long awaited entry of the Chinese operators to the foreign markets also happened in Pakistan in February 2007. The lack of information about the country and a negative image created by Western media resulted in the fact that only one representative of the Old or New Continent, Norway’s Telenor, decided to invest in Pakistan’s telecom market. The rest of foreign investors in Pakistan’s telecom sector are its regional neighbors, including U.A.E., Qatar, Egypt, China and Malaysia. All these resulted in low valuation of assets and consequently multiple opportunities for foreign telecom players, including Russian, to invest in Pakistan. However, the attractive situation for foreign investors will not remain there permanently: there is a growing consolidation on Pakistan’s telecom market, and right after Telenor and Asian investors, many world telecom giants like Vodafone set their sights on Pakistan. It can be expected that in a year or year and a half the value of telecom assets in Pakistan will grow significantly, equaling the prices that are set by international investors in neighboring India. Therefore, the winner will be that company which gets to Pakistan’s telecom market within 2007, right before the market overheats.

Chinese Attack

The latest public transaction once again demonstrated that the Pakistan telecom market has room to grow. In February 2007, 88.86% of shares of Paktel Limited, the fifth largest cellular provider, was purchased by China Mobile Communications Corporation for USD 460 million. The seller was an American holding, Millicom International Cellular, which received some USD 284 million from that transaction, while the remaining USD 176 million were put towards debt payments.

At the same time 67% of the fourth largest Indian operator Hutchison Essar was bought by the British Vodafone for USD 11.1 billion, also taking on USD 2 billion of debts.  While Hutchison serves over 18 million subscribers, and Paktel only 1.3 million subscribers, Vodafone paid for each subscriber 2.7 times more than China Mobile (each Hutchison Essar’s subscriber was valuated at USD 1,032, while Paktel’s subscriber was valued at USD 381.)  China Mobile’s entry to Pakistan sets quite a precedent: analysts had predicted that Chinese companies were ready to jump into global markets, but couldn’t figured out where to. Suddenly Pakistan became their first market.

“The relations between our two countries are very close. In addition, Pakistan has a common border with China, and due to our geographic proximity we can receive assistance from our headquarters”, says Guo Yonghong, the China Mobile executive who was assigned as Paktel Limited CEO.

“Pakistan is our first entry away from China, but China Mobile’s foreign expansion is not done here,” says Guo. Guo also told ComNews that during the next three years China Mobile is planning to invest over USD 1 billion into the development of a GSM network for Paktel (exclusively from its own funds). USD 700 million have been already transferred into Pakistan accounts. “We are planning to annually install 2,500 base stations, over the next four years,” says the general director of Paktel.

Major General (Retd) Shahzada Alam Malik, Chairman of the Pakistan Telecommunication Authority (PTA) says “we are expecting that by June 2007 the number of mobile subscribers in Pakistan will reach 60 million. We are not looking into issuing new licenses for mobile services, but are planning to issue 3G licenses among six existing operators, most probably this year”.

So far the Paktel network is working on ZTE equipment but the operator recently announced a tender for the network expansion. Guo says that tender participants included Huawei, ZTE, Ericsson and Alcatel-Lucent, while the tender winner was to be announced in April.

Paktel’s new owners plan to expand the company’s staff, which now accounts for 400 people. Currently all top manager slots are occupied by China Mobile personnel. In addition, China Mobile temporarily sent its specialists (planning and optimization of network) to Pakistan.

In the near future the new shareholder will change the brand of its Pakistan subsidiary to China Mobile Pakistan, as the Paktel brand did not have a very positive impression.

In 1991 Paktel became the first mobile operator in Pakistan to work in analog AMPS standard for a long period. In 2003 the company obtained GSM 900/1800 frequencies and in 2004 launched its digital network under the trademark Paktel GSM.

However, the policy of its major shareholder Millicom was not to invest another dollar into the company, thus making Paktel an outsider, despite the fact that this in fact was the third largest GSM operator in Pakistan. The operators that followed, the fourth and fifth largest, Telenor and Warid Telecom, invested much larger amounts, basically forcing Milicom out of the market. In fact, the very same reasons forced Millicom out of the Russian market in 2001, selling 13 AMPS operators in Russia to Swedish Tele2.

Russian Trace

According to market participants, Millicom had been looking for buyers in Pakistan for quite a while. Among others, the Russian financial group Alfa Group was interested: in 2004 its representative Anton Osipchuk (Alfa Telecom Director for Strategic Development) visited Islamabad to conduct negotiations. Yet in the final round of negotiations the representative of Alfa Telecom did not show up.  The second Russian giant – AFK Sistema – also declared its interest in foreign markets, but did not show any interest in this purchase. 

However, Sistema showed great interest in another Pakistani cellular asset – Great Bear Company International Services (Pvt) Limited – which worked under DIALLOG brand. In April 2006 at the Caspian Telecom Conference in Istanbul, Sistema’s representative Vladislav Vasin announced its interest in purchasing this asset. DIALLOG is operating in CDMA-450 (as well as Sistema’s Sky Link operator) and has frequencies in 5 out of 14 licensed regions of Pakistan.

Currently, DIALLOG is working in Islamabad and Ravalpindi, a city-satellite, providing services to some 45,000 subscribers. Recently the company began working in Lahore. DIALLOG is interested in expansion to other regions and ultimately to all Pakistan territory. It plans to either acquire more assets or actively participate in license tenders.

Thus, in 2007 there will be more tenders in CDMA-frequencies in the Pakistan sector of Kashmir as well as in the northern territories.

“The realization of these development plans requires significant investments. Therefore, we are ready to conduct negotiations with potential partners, including Sistema,” says DIALLOG’s Director of Regulatory, Corporate & Public Affairs, Major (Retd) Muhammad Kamil Khan.

In the summer of 2006, a Sistema Telecom delegation came to Pakistan and visited DIALLOG’s office in Islamabad. This was followed by the Pakistani side visit to Moscow.  However, due to unknown reasons the negotiations stopped. Sistema Telecom officially does not comment on its plans on Pakistan development.

Yet we may imagine that the lion’s share of its time was tied up by the recent purchase of 25% of Svyazinvest shares. Sistema’s top management is still expressing interest in South East Asian telecom assets, however in its strategy these countries fall to the third place. 

“From the investment stand-point Russia is our first priority,” explains Sistema’s General Director Sergey Schebetov. CIS is number two, while Asian markets come third, followed by EU markets.  In the meantime, as was the case with investments into DIALLOG, the hesitation may cost the loss of this potential account. Direct and indirect competitors are increasing their push to get to DIALLOG. 

Limited Mobility

CDMA operators appeared in Pakistan in mid-2004. Then within the market deregulation campaign, the Pakistan national telecom regulator PTA auctioned four frequency spectrum ranges – 450 MHz, 479 MHz, 1900 MHz, and 3.5 GHz for each of the 14 of licensed regions of the country.

All frequencies were given without any technology boundaries, but with the necessity of providing services in Wireless Local Loop (WLL) standard. The winners of the frequency auction are 17 companies that receive various licenses in the regions.  For example, Worldcall Telecom Ltd. won frequencies in all 14 regions, but in Karachi it received the frequencies only in 450 MHz, in 10 regions only in 479 MHz, in 10 other regions only in 1900 MHz, and in 9 regions only in 3.5 GHz.

Currently a number of operators offer WLL services, including Great Bear (DIALLOG), Worldcall Telecom, TeleCard (GO CDMA), as well as former Pakistan telecom monopoly, Pakistan Telecommunication Company Ltd, that works on the market under the trademark PTCL V. According to PTA, by the beginning of 2007 these companies combined provided services to over 1 million users, however the growth of the subscriber base was about 287%.

Similar to the Russian situation with CDMA-800 operators, all CDMA-operators in Pakistan have limitations on their services.  Mr. Mudassar Hussain, Pakistan Ministry of Information Technology, Director Telecom (Wireless), says that “these licenses were given with the aim of increasing the level of telecom penetration in the fixed sector, i.e. represented an alternative to copper lines.”

Nevertheless, Pakistani CDMA-operators sold not only fixed but also mobile phones. The regulator limited the subscriber mobility by the zone of operation of one BTS. Yet CDMA operators explained that CDMA technology works as such that several BTSs lead one subscriber. 

This did not fit the plans of GSM operators that did not want to have additional competition. In December 2006 four GSM operators (Paktel, Telenor, Warid, Mobilink) sent a complaint to the PTA that WLL service providers infringe on the use of their licenses. 

Mr. Hamid Farooq, Warid Telecom, Chief Executive Officer, says that “it has been over one year now since PTA clearly defined limited mobility. However, WLL operators continue to infringe on these rules. We are expecting stricter measures from PTA.”

Dr. Muhammad Yaseen, Pakistan Telecommunication Authority (PTA), Member Technical, admits “WLL operators paid much less for licenses, than GSM operators, therefore I fully understand the protests of the latter. Hence, we decided to limit these operators to one BTS zone.”

“The regulator gave a deadline of August 31, 2006, to limit the mobility. After that all infringers should have been sanctioned,” says Dr. Yaseen.

CDMA operators affirm that if compared correctly, they paid similar amounts for licenses as GSM operators. “GSM operators paid each USD 291 million for 13.6 MHz with full mobility nation-wide, while WLL operators received only 20 MHz of spectrum, and paid USD 241 million,” says Mr. Artem Orange, CEO of DIALLOG.

At the same time CDMA operators say they don’t pretend to have full mobility Pakistan wide. One of the reasons is that none of them really has one frequency range for the whole country, but rather have a bouquet of frequencies, such as 479MHz, 450 MHz and 1900 MHz. They are fine with mobility within one region or large city, while some are happy to be limited by fixed or home phones or wireless payphones.

“There are slightly over 5 million fixed lines in Pakistan, and WLL replaces fixed communication and opens additional opportunities on data transfer.   There is also an opinion that each respectable household must have a stationary phone. Therefore, we position ourselves as family phone/ business phone business”, says Artem Orange.

Mr. Sardar Ali Wattoo, Worldcall, Group Director Finance, agrees: “We are not planning to pursue full mobility and fight for it. In Pakistan only 10%-15% of the population moves between cities, therefore we are happy with a mobility within one city.” 

Having started with the WLL project in June 2005 in Lahore by April 2007, Worldcall covered 37 cities with CDMA networks, installing 185 BTSs made by Samsung (1900 MHz).

The company plans to increase the number of cities covered by CDMA networks to 57, and further to 76. According to Mr. Sardar Ali Wattoo, by April 2007 Worldcall served 270,000 CDMA operators, including their own radio-payphones (they own 25000 payphones). ARPU from one radio-payphone exceeds ARPU of a private subscriber by three times. Besides radio-payphones, Worldcall owns fixed payphones. By the end of 2007 Worldcall will install 76,000 payphones (43,000 are wireless), and by 2009 it plans to have installed 122,000 payphones (10,000 of which are wireless).

All in all, there are some 400,000 payphones in Pakistan and this business is actively growing, as many Pakistanis cannot afford a real phone. In Pakistan they are called “public call office.” Mr. Sardar Ali Wattoo explains that “there is a large chunk of people who have low income and can’t afford to buy a mobile phone, nor even a payphone card. There are also illiterate people. Therefore, we are installing payphones in the stores and other retail spots where there is a possibility to pay for just one call. This also helps us to fight vandalism.”

The largest wireless fixed operator in Pakistan is PTCL V, which serves almost 700,000 subscribers in its CDMA-450 and CDMA-1900 networks. By the beginning of 2007 this operator installed 696 base stations (Huawei-made). All CDMA operators had built by that time 1,079 base stations.

Mobile-non-mobile

There is a chance that CDMA networks will get full mobility in Pakistan. One of the drivers of this process has been Pakcom Ltd. (trademark Instaphone). Historically it was the second mobile operator in Pakistan. Similar to Paktel, it started providing its services in 1991. Instaphone and Paktel also had other similarities, like both worked in AMPS standard and belonged to American shareholder Millicom. Later Instaphone shifted to D-AMPS standard, which it supports now, providing services to about 500,000 subscribers.

In June 2006 Millicom sold its share in Instaphone to a local partner and now all 100% of the company belongs to the Pakistan holding Arfeen Group. This holding also owns the rest of Paktel’s shares (11.14%). It also controls TeleCard (GO CDMA), a WLL operator, as well as Supernet, an ISP. All telecom assets of this holding are managed by the management company Total Telecom.

In 1991 Arfeen Group was co-founder of the Uzbek mobile operator – Uzdunrobita – and owned 51% of Uzdunrobita’s shares via its 100% subsidiary International Communication Group (ICG). Later on ICG, due to internal pressure from the Uzbek government, Arfeen Group abandoned this project, and in July 2004 the controlling stake was bought by the Russian MTS.

Mr. Javaid Firoz, Pakcom Limited (Instaphone trade mark), Chief Executive Officer, told ComNews that when its APMS license expired in 2005, it received a new license for 850 MHz. “The D-AMPS network doesn’t fit our plans any more.  New phones and applications for this standard are absent, while the equipment has huge power consumption, just like an old American automobile,” says Firoz.

“Therefore, we will build a new network based on W-CDMA or CDMA-2000.”  According to Mr. Firoz, some USD 300 million will be necessary for the first phase of construction alone, while Instaphone intends to install the sixth digital mobile network in Pakistan.

According to PTA, Instaphone is planning to build CDMA-2000 network, this is exactly the standard that has been used by all WLL operators in Pakistan. The competitors believe that if Instaphone will launch the network in CDMA standard, all other CDMA may start building their networks as well.

Yet another opportunity lies in Pakistan’s legislation. Currently the market is regulated by the “Policy of De-Regulation of Telecommunication” and “Mobile Cellular Policy,” documents which the Pakistan Ministry of Information Technologies adopted in 2003 and 2004 respectively.

As Mr. Mohammad Kamil Khan from DIALLOG noted, these documents may be re-considered in 2008-2009 respectively, while new regulating documents may cancel the limitation on mobility for CDMA networks.

WiMax-race

Apart from CDMA networks, WLL providers are actively interested in WiMax technology (in 3.5 GHz range). The first player to start a WiMax project was Wateen Telecom, which as Warid Telecom (GSM) fully belongs to Abu Dhabi Group from UAE. 

Wateen owns the 3.5 GHz frequency spectrum in all 14 regions of the country. In the middle of 2006 it acquired equipment for the 802.11e standard from Motorola company. And by the spring of 2007 it deployed the world’s largest WiMax network.

Mr. Fawad Haider, Wateen Telecom, Product Head, told to ComNews that the test exploitation of the WiMax network began in March, while its commercial deployment is planned for May 2007.

Currently the network covers 22 cities of Pakistan, and at the second stage Wateen is planning to cover 20-25 more cities. However, the company cannot use the 802.11e standard, as its WLL license has limitations on mobility. Wateen has not yet pursued mobile voice services, but wants to get a permit from PTA to provide mobile data transfer services. “We are asking permission from the regulator to provide mobile data transfer, so that our subscribers can move around the country with a laptop and have ubiquitous access to Internet and e-mail,” says Mr. Fawad Haider.

“We are even ready to deal with handover, so that subscribers would manually register in the zone of operation of each base station.”

Mr. Fawad Haider said that during the first year Wateen would emphasize the corporate sector, and during the second year move to the mass sector.

“During the next two years we are planning to get about 1 million subscribers with ARPU of USD 12-15 per month,” says Haider.  First of all, Wateen sees 2.5 million dial-up users as its potential clients. Dial-up Internet service providers are mainly small companies that cannot really compete with larger players.  Yet Wateen is not alone in its interest in the broadband service market. WorldCall company also sees a great prospect in broadband services.

“We are offering CDMA EV-DO services and our own fiber-coaxial network spanning some 425 km, which covers 265,000 houses in Lahore and Karachi,” says Sardar Ali Wattoo. “And Worldcall sees its future in the broadband market segment.”

Worldcall intends to build its WiMax network in all 76 cities, located in nine licensed zones, where the company owns the 3.5 GHz frequency range. Based on Worldcall estimates, for this purpose it needs 355 base stations and at least 16 million USD. 

“Voice services in Pakistan for the past two years critically dropped in price, and now the profitability of voice services is five times less than data transmission services,” says the finance director of Worldcall.

Some heavy hitters also moved to the WiMax sector. In March 2007 two owners of the 3.5 GHz frequency spectrum changed. According to “Standard”, ACT consortium that was created by Qatar Telecom (the Qatar’s national operator), ATCO, a diversified concern group from Saudi Arabia and Clearwire Corporation, an American operator providing WiMax services in 10 countries, bought Burraq Telecom Ltd., the company involved in card telephony, also an owner of 3.5 GHz spectrum.

“Pakistan is one of the strategic markets for ACT. Moreover, we currently are in the process of obtaining licenses or acquisitions of companies in Jordan, Bahrain, Saudi Arabia, Egypt, Algeria, Morocco and other Asian countries. In the next three years we are planning to invest over USD 600 million into WiMax projects,” an ACT representative, who wanted to stay anonymous, told “Standard”.

In November 2006 Burraq signed an agreement with Siemens to create a WiMax testing zone in Lahore, but, that was about it. After the tests nothing happened.

The largest Pakistani GSM operator Mobilink completed its purchase of WiMax assets from Dancom Pakistan (Pvt) Ltd, that like Burraq Telecom is dealing with card telephony and payphone business, but also owns the 3.5 GHz spectrum. The seller is a Malaysian company – Dancom Telecommunication (M) Sdh Bhd Malaysia. In June 2006 Dancom Pakistan announced its plans to create the national WiMax network within months. It also concluded an agreement with Redline Communications for equipment supply. Yet the project failed and the Malaysian shareholders decided to get rid of their WiMax assets, and set them aside in a separate structure – Dancom Online. Together with Dancom, Mobilink bought the frequency of 3.5GHz from another card telephony operator – DV Com (also in the form of subsidiary).

Cable Set to Grow

The competition in the broadband sphere is active everywhere, in wireless and wired modes. Nayatel (Pvt) Ltd., which is owned by three private persons, is among the first ADSL operators in Pakistan. The company serves a few thousand customers, and has recently launched fiber-to-the-user (FTTU) project. Wahaj us Siraj, Nayatel, Chief Executive Officer, told ComNews that their FTTU network was built only in Islamabad. Its fiber length exceeds 100,000 km. On the basis of this network Nayatel pushes triple play services, including telephony, broadband Internet access and analog cable TV. In April-May the company plans to add digital TV channels.

True, currently the competition on the Pakistan broadband market is limited by the lack of ILD channels, as most of the time PTCL has been a monopoly in the international communication services niche. In particular, international networks were accessed via two undersea cable systems – SEA-ME-WE 3 and SEA-ME-WE 4 (South East Asia-Middle East – West Europe), which included one spot in Pakistan, which was the port city of Karachi.

The situation when there was a lack of capacity and monopolistic high prices for channel lease, as well as limited back-up (only via satellite), invited new players to join the game. That’s what happened in autumn 2006, when Transworld Associates (Pvt) Ltd. launched its undersea cable TW1 between Karachi, Fujaira (UAE) and Al-Sib (Oman). This alternative operator is a consortium between Egypt telecom holding Orascom Telecom (50% of shares), Saif Group from Pakistan (40%) and Oman fund – Omzest Group (10%). 

Mr. Kamran Yusuf Shami, who is in charge of TW1 project in Saif Group, told ComNews that the new cable system has the length of 1,250 km and is laid on the bottom of the Arabian Sea and equipped with DWDM system with the capacity of 1.28 TB/s.

In 2006 the construction of the terrestrial fiber optic communication networks began in Pakistan. Currently there are three alternative FO cable systems that more or less belong to major cellular operators. One of the large international networks is being built by LinkDirect, which is supported by Orascom Telecom, that owns 88.69% of shares of Pakistan Mobile Communications (Pvt.) Limited.

The second network is being built by Wateen Telecom, which owns Warid Telecom, its subsidiary, the third largest mobile operator. It has already reached 6,000 km and has five rings. 

Finally, another nation-wide telecom network is being built by Multinet Pakistan (Pvt) Ltd., that belongs to Telekom Malaysia, a national Malaysian operator. The latter does not have a business in Pakistan but it cooperates with Telenor Pakistan (Pvt) Ltd – the fourth largest GSM operator in Pakistan, which is fully owned by Telenor.

Worldcall also agreed to partner with Multinet Pakistan, which will be buying non-lit fibers from Worldcall around the country.  The second largest GSM operator in Pakistan, Pakistan Telecommunications Mobile Ltd. (Ufone trademark), is a 100% subsidiary of the former monopoly PTCL and uses its cable infrastructure.

Free Subscriber

Despite the availability of six mobile operators in Pakistan, and four CDMA WLL networks, the telecom regulator foresees the issuance of 3G licenses in the near future.  “We have already announced the possibility of issuing 2.1 GHz frequencies for the construction of the W-CDMA and UMTS networks,” said to ComNews Noor-ud-Din Baqai, Ministry og Information Technology, Member (Telecom). “We plan to prepare these frequencies this year, but when they will be issued is not clear yet.”

The last time PTA auctioned nationwide frequencies was back in 2004. At that time two mobile GSM licenses were issued for 15 years.  The two winners of these licenses were Space Telecom, registered in the Netherlands, and whose main shareholder was Syrian operator Syria Telecom; and Telenor of Norway that offered the second biggest bid – USD 291 million. 

However, due to circumstances, Space Telecom refused to pay the announced price, and therefore the regulator offered the third runner, Warid Telecom, the chance to up its bid to USD 291 million, which it agreed to do, and received the license.

Once the telecom regulator sets the price for a license, it keeps it as a standard price. For example, this year when the GSM license date for Mobilink expires, the operator will have to pay USD 291 million to extend it for 15 more years.

“We believe that any cellular operator that connects 10 million subscribers has the right to exist, and it is not a joke for a country with a population of 160 million,” says Baqai. “The regulator has issued six licenses for mobile communication and relies on the market to decide whether it needs to consolidate its mobile assets.”

So far all mobile operators compete separately. However, as noted by almost everyone, the competition of Pakistan’s cellular market is in just one sphere – in pricing. The real drop in prices on the mobile market began after the entry to the market of the fifth and sixth largest mobile players, Telenor and Warid.

“Two years ago, the average level of ARPU in the mobile market was about USD 18.00 per month, and now it has dropped to less than USD 4.5,” says Mr. Zarrar H. Khan, Pakistan Mobile Communications (Pvt) Limited /Mobilink trade mark/, Manager QoS.

In particular, the tariff war brought the market to the point when Telenor Pakistan introduced unified low tariff on calls across the nation, and not only within its own network, but also for the other mobile and fixed operator networks. Mobilink went even further: it cancelled all payments for international calls, making the price for any point of connection the same as a local call.

Starting in spring 2007 the competition among the local mobile operators reached a new level. After two years of preparation on March 26, 2007 the mobile number portability (MNP) service was launched. This means that any subscriber can move from operator to operator, keeping his or her number, including the network code.

The regulator initiated MNP, and to do so it created a non-commercial company, MNP Database (Guarantee) Ltd., which is operated by six mobile operators on equal shares. This company keeps a local database of all mobile numbers using the equipment of a US company, Telecordia.

Its CEO, Dr. Arshad Siddiqi, Pakistan Mobile Number Portability Database (Guarantee) Limited, told “Standard” that the capital expenditures for installation of MNP were USD 10 million, and paid equally by all six operators. The operational expenses are based on another principle: the more subscribers the operator has, the more it will pay for the operations of Pakistan MNP Database.

“We, along with the government, have decided that the subscriber will not pay for the change of the operator, and the move from one operator to another will be possible not more than once per 60 days,” says Arshad Siddiqi. “And the company which receives a new subscriber must pay to the donor-operator 500 rupias.” The same amount, 500 rupias (USD 8.3) is paid by each operator as a tax for each connected subscriber.

“MNP will bring a new impulse to the development of Pakistan’s mobile market,” Arshad Siddiqi confidently said. “To attract a new subscriber, as well as to retain him, the operators will have to constantly improve the quality of services.”

Manna for Investors

For investors there are some opportunities to enter the Pakistan telecom market. Apart from buying shares of DIALLOG Company, which is looking for financing sources for expansion throughout the country, other companies like Worldcall and Instaphone also are looking for partnerships.

“Worldcall needs about USD 16 million just for implementation of its WiMax project. And for implementation of all its development plans, including WLL network expansion, HFC and Metro Fiber network construction, we need around USD 50 million,” says Sardar Ali Wattoo.

“We are capable of borrowing this amount, but if Worldcall is of interest to some well-known partner, then the majority shareholders of the company, Lahore businessman Salman Tassir and Sheikh Sulaiman Hokani from Oman, are ready to share its shares in the charter capital.”

Instaphone is looking for partners for construction of its digital mobile network. “We are in the process of searching for an investor, as the first phase requires USD 300 million in investment capital. However, we are not taking a passive stance, and already have prepared 700 fields for installation of new base stations,” says head of the company Javaid Feroz.

The Pakistan telecom market is on the radar screen of major industry players. A source in Warid Telecom said that its shareholders, led by Sheikh Mubarak Al Nahaiyan, are in the process of negotiations with Vodafone for selling their share in Warid.

The gradual process of change in ownership of Pakistan telecom assets began last year, and no one is ready to evaluate the effectiveness of these investments.

The China Mobile, ACT consortium and Orascom deals all happened in 2007. The only large transaction that happened in 2006 has been the PTCL privatization. For example, National Telecommunication Corporation was formed out of PTCL and now is responsible for providing services to military and government structures.

In 2006 the government offered up for sale 26% of PTCL shares. In the auction the following companies took part:

China Mobile (interested in GSM operator Ufone)
SingTel (Singapore)
Etisalat (UAE)