Cellular sector in Pakistan:

Achievements, challenges &the road ahead

Contents

Mobile Sector: a History

Contributions by Mobile Sector: Achievements

Challenges: More to come?

What lies ahead …

Background: the road to subscriber growth

‘90 ‘92 ‘98 ‘06‘05‘04‘03

Decision to convert erstwhile T&T to corporation (PTC)

Award of licenses to 2 Cellular Mobile operators

Granting of another GSM based Cellular Mobile license

Conversion of PTC into PTCL, creation of government operator NTC, Regulator PTA, Frequency Allocation Board (FAB)

Licenses granted to two new subsidiaries of PTCL namely PTML (4th Cellular Mobile Operator) and Paknet (ISP)

PTCL privatization process restarted

PTCL exclusivity for fixed line telecom sector terminated

Approval of Cellular Mobile Policy

Issuance of licenses to 2 new Cellular Mobile, 12 LDI, and more than 76 LL operators through open auction

Privatization of PTCL through selling of 26% strategic shares to Etisalat

Mobile Cellular Policy - 2004

Deregulation Policy – July ‘03

Key Highlights

Building communication infrastructure

91% of total population covered Cell sites: 26,300 (<2,000 in ‘04)

Amongst the fastest growing telecom markets

>90million subscribers (5m in ’04)

Cellular Tele-density: approaching 60% (3.29% in

’04)

Unprecedented Investment

Over $9b in FDI and continuing …

Highest by any sector

>30% of all total FDI in the past 5 year

Contributions to the Customer Accessibility

Widespread reach across Pakistan

Multiple Distribution Channels

Affordability

Handsets < Rs.1,000

One of lowest calling rates in the world

Connectivity & Convenience

24x7 support

99% on prepaid

…Contributions to the Customer

Product innovation

SMS, MMS, ring back tones, Information portal, call blocker, e-load,

Photo Express, Music services, Mobile TV, GPS tracking services, etc

Serving the underserved: USF Fund and roll outs …

Contributions to the Consumers

Contributions to the Economy

Spurring employment

Total eco-system provides employment to over 1m people

200K of them highly skilled

12K of them directly with CMTO’s

Part time students (Call Centers)

Increase in productivity

Communication infrastructure

Secondary growth effect on other industries

Banking, media, construction

Efficient Tax Collector

More than Rs. 120b annually

6% of total taxes collected by FBR

GST, withholding tax, income tax

Universal Service Fund Contribution:

Approximately PKR. 11 billion

R&D Fund Contributions:

Approximately PKR. 4 billion

Contributions to the National Exchequer

Contribution to the Community

Considerations for social, ethical & environmental

impact of products

Exemplary leadership and response to national challenges

2005 Earth quake relief

IDP Support

Khuddar Pakistan

all inclusive work environment

DUA Project

Donate Blood – Save A Life

Unprecedented Challenges since 2008...

Economic

• Exorbitant Inflation (30% in ‘08)• Rising Fuel Costs (80% since Jan 08) • shortages (Tariff Hike by 31%) • Devaluation 34% since ‘08• Increased Cost of borrowing

Political & Governmental• Deteriorating law and order• cumbersome / multiple approvals for cell sites required• Load shedding (12 Hours / day)• Luxury tax

Unprecedented Challenges since 2008...

Regulatory• Taxation

• discriminatory GST, dual taxation on SIM Activation Tax, Import duty on handsets

• 3G Auction/licensing process• Costs of compliance (NADRA)

Competitive• 5 competitors

• analyst are of the view that this market warrants 3- 4 cellular operators

• Tariff war• whilst there are no lowered QoS relaxation

• Increasing media spending / clutter

Going Beyond Consumer Expectations

Delighting the Consumer

Broadband & 3G

• PTA has set a throughput of 128kbps as the required speeds to qualify as being categorized as Broadband

• The United Kingdom has set this as 2Mbps• 3G offered by PTCL as Evo product, offering ~3Mbps

• based on CDMA IS-95 evolution

• The conventional evolution of GSM systems to broadband with mobility is via the UMTS standard

• Today, almost all operators with a 3G spectrum opt for HSPA as the preferred technology

• The GoP is due to give formal approval for PTA to formally auction the UMTS specturm

GoP’s R & D fundThe industry-academia link

• As per license conditions, cellular operators put aside 0.5% of revenue to the National ICT R&D fund

• …

Thank you