Perfect Competition in Telecommunication Industry in Pakistan

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Perfect Competition in Telecommunication Industry in Pakistan Powered By Docstoc
					      Pakistan

  Opportunities in
Telecommunications

Pakistan Telecommunications
          Authority

       September 2007




                              1
                                       Come aboard!

      Pakistan: the fastest growing market in Telecommunications

4 AM, Islamabad: Construction site of the 45 storey Grand Hyatt Hotel. The cell phone glows
dimly as the laborer speaks to his wife hundreds of miles away, just before the work starts.

10 AM, Islamabad: The Mercedes of the
Chairman glides on to the ramp
                                                                      GDP Growt h
overseeing the massive excavation of this
hotel as the concrete pours. His
Blackberry chirps with the e-mail about the    9.00%

paintings being procured for the Grand         8.00%

Ballroom.                                      7.00%

                                               6.00%
11 AM, a small village, a hundred and fifty
                                               5.00%
kilometers from Lahore: the small girl sits
fascinated watching the pictures on the        4.00%

PC screen installed in the Telecenter,         3.00%
linked on Broadband via WiMAX to a site        2.00%
halfway across the world.
                                                1.00%

4 PM, Karachi: The frenetic construction       0.00%
                                                        0   1   2     3         4         5      6   7   8
activity outside the broadband Video
Conferencing Room nearly drowns out the                             Ye a r s 2 0 0 0 - 2 0 0 8

sound on the presence based conference
linking Karachi, Hong Kong, Dubai and the
software developers at MIT in Boston.

10 PM, Faisalabad: The cut and sew manager of a leading Textile mill, is uploading images of the
new patterns of the curtains to Macy’s as he views the hurricane Dean rip across Jamaica on his
converged platform of TV, WiFi , Telephones and Broadband just installed via optical fibre to the
Gigabit Ethernet WAN of his company.

12 AM, Peshawar: the giggling young teens upload the pictures on Flickr via their EDGE enabled
cell phones and await the responses from their sister in London.

1 AM: Quetta: the sisters never had it better. Speaking to each other across thousands of miles at
less than 6 cents per hour on their Cell phones.

2 AM: Jacobabad: Finally the father reaches his son in Germany. At less than 2.5 cents a minute
a call to Europe (or US) has never been so affordable.

This is just a real life snippet of where Pakistan has come in Telecommunications in a very short
time. It has changed the way communications is perceived and used: business, social,
entertainment, education, governance, security. Its impact on the economy is considerable and
the developments mirror the rapid economic growth of the country in the last few years.




                                                                                                             2
                                1
Pakistan and its economy

Pakistan is the gateway to the energy rich Central Asian States, the financially liquid Gulf States
and the economically advanced Far Eastern tigers. This strategic advantage alone makes
Pakistan a marketplace teeming with possibilities. With three major international airports and
thirty-eight domestic airports, Pakistan is accessible via fifty international airlines. Pakistan's
geographical location, a rapidly expanding transportation and communications infrastructure and
an environment conducive to business makes it an attractive destination for investors.

With a predominantly young population of 160 million, a large portion speaks several Regional
languages and English.

The Central Board of Revenue has facilitated structural reform in tax and tariffs and the State
Bank of Pakistan has invigorated the banking sector into high returns on investment. Pakistan
                                                                        th
provides relatively strong protection for foreign investors, it ranks 19 worldwide on protecting
                                                  investors, according to World Bank report Doing
                                                  Business in South Asia 2007. The capital
          Stock Exchange Index                    markets are being modernized, and reforms
                                                  have resulted in development of infrastructure in
   16000
                                                  the stock exchanges of the country.
   14000

   12000                                                            The Securities and Exchange Commission has
   10000                                                            improved the regulatory environment of the
    8000                                                            stock exchanges, corporate bond market and
    6000                                                            the leasing sector.
    4000

    2000
                                                                  Current investment policies have been tailor
                                                                  made to suit investor needs. A concerted Policy
     0
        2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07   and planning have been consistent, with
                                                                  liberalization, de-regulation, Privatization, and
                                             Stock Exchange Index facilitation being its foremost cornerstones. With
                                                                  a consistent growth in GDP and a supportive
Fiscal and Regulatory infrastructure the growth in investments has been quite rapid in the last few
years.

The net impact of this has been a major surge in investments and growth of the telecom sector
                                            2
which constituted the major recipient of FDI in the last two years and is set to maintain this
position in the foreseeable future. It is
relatively easy to set up a company in                         Investments
Pakistan, be able to freely repatriate
foreign exchange (profits, equity) by          16000
following easy processes. Foreign              14000
companies can own 100% equity with             12000
                                                      Million US$




out any need for taking on local               10000
shareholders.                                   8000
                                                                    6000
Security concerns and Investment                                    4000
protection                                                          2000
                                                                       0
While it is a fact that Pakistan has got                               2000-   2001-   2002-    2003-   2004-     2005-    2006-
some bad press related to security                                       01     02      03       04      05        06       07
issues, but this has been blown out of
                                                        FDI (Million $)        Foreign Investment   (FDI+Public&Private Portfolio)
1 Data in Annex
2 Foreign Direct Investment




                                                                                                                                     3
proportion by the media. Ask the companies who do their own clear headed due diligence and
are consistently investing in Pakistan.

About US$ 2 Billion has been invested yearly in Telecom alone in the last couple of years and
this trend is growing as the networks expand the opportunities grow. In all the reported „turmoil‟
one shop front of one the companies was damaged in a country where there are over 60 Million
                                                                             3
Cell phones, 6 cell phone companies, 16 LDIs, many LL and WLL operators and investors from
Europe, Middle and Far East.

The Telecom Roadmap

A coherent and forward looking Telecommunications Deregulation policy was created with the
help of the World Bank and comprehensive consultations with all stake holders and announced
on July 13, 2003. This covered Long Distance and International (LDI), Local Loop (LL, including
Wireless Local Loop WLL). The other licenses which are issued are DNOP (Data Network
Operator), ISP and other Value Added Licence (see www.pta.gov.pk for details).

A transparent process for award of licenses and frequencies was adopted which resulted in two
new Cellular companies as well as a number of LDI, WLL and LL licenses being issued. Most
companies rolled out in an environment of perfect competition. A few key enablers made sure
that not only a smooth roll out be effected but also least bureaucratic or regulatory hurdles got in
the way. A light touch Regulatory régime is in effect, which facilitates not only the efficient growth
but also protects the citizens their right to best services.

This was done by enabling elements like CPP (Calling Party Pay), MNP (Mobile Number
Portability), dynamic interconnect, reducing interconnection costs from the SMPs (Significant
Market Powers). In order to enable development in un- and underserved areas, a USF (Universal
Service Fund – www.usf.org.pk) has been formed which is funded by regulatory fees paid by the
Operators as well as injections by the World Bank. This which would support the growth of local
loops and rural voice and broadband communications.

The Regulatory Environment

The PTA (www.pta.gov.pk) has been tasked to set up a fair regulatory regime to promote
investment, encourage competition, protect consumer interest and ensure high quality telecom
services. It does so by adopting a light touch regulatory approach and in doing so tries to ensure
a level playing field for large and small Operators by being even handed and transparent in its
determinations, arbitration and push for Quality of Services.

The major result of this strategy has been a controversy free, transparent, rapid deregulation of
the sector in the last 24 months. Two key principles have guided the process: being supportive to
the new entrants and letting the market forces drive the sector. In order to enable this to happen
the PTA is structured in a way that enables efficient internal and external operations to take place.
The structure to enable a smooth flow to happen is facilitated by various divisions of the PTA.

            Law & Regulations
            Coordination
            Licensing
            Enforcement
            Industry Development
            Finance
            Commercial Affairs
            Economic Affairs


3
    LDI: Long Distance and International; LL: Local Loop; WLL: Wireless Local Loop




                                                                                                    4
                       Regulatory Studies
                       Frequency Allocation Board
                       Administration Directorate

The Frequency Allocation Board (FAB) has been integrated into the PTA infrastructure so that the
Licencing process is seamless.

The PTA not only regulates the sector but also creates an environment which facilitates the
induction of new technologies as well as development of direct and indirect industries and
markets.


The State of Telecommunications today

Subsequent to the Policy declaration, the PTA set up a Transparent and open process for license
acquisition and frequency auctions. The
process was completed in a short time                       Telephone Telephony
                                                            Total Voice Line Penetration
and within 3 months of licenses being
issued,     the    companies     started       70,000,000
                                                                                               70%
operations.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         60,000,000                                                                                               60%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  50%
In the last two years, a massive                                                                                                                                                                                                                                                                                                                                                                                                                                                         50,000,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  40%
transformation     of    the     Telecom                                                                                                                                                                                                                                                                                                                                                                                                                                                 40,000,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                         Users




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  30%
landscape has taken place in Pakistan.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         30,000,000                                                                                               20%
In this short span of time the cellular
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         20,000,000                                                                                               10%
connections have gone from less then
12 Million to over 60 Million. This                                                                                                                                                                                                                                                                                                                                                                                                                                                      10,000,000                                                   2004     2005            2006       2007
coupled with the increase in WLL lines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 -
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Teledensity
has rocketed the Tele-density from 2.2%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                2,004   2,005           2,006      2,007
to over 45% in this period. This is of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Years
considerable    significance    for   the
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Telephone lines (including WLL)      Mobile phones   Total
development of the market.

As the short story line in the beginning of this document indicated (these are real scenarios) the
segments being addressed will force the penetration to over 100 Million in a few years. What is
significant is the large and diverse user base which will support the launch of Value Added
Services, new operations as well as delivery of total solutions in the market – addressing different
segments at the same time.

                                                                                                                                                                                                                                                                                                                                                                                 GILGIT
                                                                                                                                                                                                                                                                                                                                                                                 AGENCY
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 In parallel the growth of
                                                                                                                                                                   Kabul
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Broadband            has
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         JAMMU & KASHMIR
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 increased considerably.
                                                                                                                                                                                                                                                                                                            Mardan                                  Noshera
                                                                                                                                                                                                                                          Landi                                                                                        25 Km

                                                                                                                                                                                                                                          Kotal                                              50
                                                                                                                                                                                                                                                                                                     Km
                                                                                                                                                                                                                                                                                                                                                                                                                                               Abbottabad
                                                                                                                                                                                                                                                                                                                                                                            79
                                                                                                                                                                                                                                                                                                                                                                                 Km
                                                                                                                                                                                                                                          Peshawar
                                                                                                                                                                                                                                                                                                                                                                                                                         Km
                                                                                                                                                                                                                                                                                                                                                                                                                    78




                                                                                                                                                                                                                                                                                                                                                                                                                               Islamabad
                                                                                                                                                                                                                                                                              60 Km




                                                                                                                                                                                                                                                                                                                                                                                                               41 Km
                                                                                                                                                                                                                                                                                                                                                                                                                                 25 Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 The bandwidth required
                                                                                                                                                                                                                                               Kohat                                                                                                                                  Taxila
                                                                                                                                                                                                                                                                                                                                                                                                                                               59
                                                                                                                                                                                                                                                                          58 Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                    Km


                                                                                                                                                                                                                                          Ahmadi                                                                              RING-03                                                                                                                           Gujar Khan
                                                                                                                                                                                                                                          Banda
                                                                                                                                                                                                                                                                                                                                                                                                                                                           58
                                                                                                                                                                                                                                                                                                                                                                                                                                                            Km




                                                                                  AN
                                                                                                                                                                                                                                                        Km
                                                                                                                                                                                                                                                   80
                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Jhelum

                                                                      ST
                                                                                                                                                                                                             Bannu                                                                                        Kalabagh                                                                                        Khewra
                                                                                                                                                                                                                                                                                                                                                                                                                                                            23




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 by the Cellular and
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Kharian
                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Km




                                                                 NI
                                                                                                                                                                                                                                                                                                                                                                                                                                                55 Km                   35 Km
                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Gujrat                            Sialkot
                                                                                                                                                                                                                                           71 Km




                                                        HA
                                                                                                                                                                                                                                                                                                          Mianwali                                      Khushab                                                                   Mandi                                             70 Km


                                                G
                                                                                                                                                                                                                                                                                                                                                                                                               Km




                                                                                                                                                                                                              Karak                                                                                                                                                                                                              Bhauddin
                                             AF
                                                                                                                                                                                                                                                                                                                                         95 Km
                                                                                                                                                                                                                                                                                                                                                                                                           0
                                                                                                                                                                                                                                                                                                                                                                                                          10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Km
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 64
                                                                                                                                                                                                                                                                                                                                                                           45
                                                                                                                                                                                                                                                         72 Km




                                                                                                                                                                                                                                                                                                                                                                                Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Gujranwala



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 other           operators
                                                                                                                                                                                                                                                                                                                                                   Sargodha
                                                                                                                                                                                                                                                                                                             Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                                 4




                                                                                                                                                                                                                                                                                             AN
                                                                                                                                                                                                                 D. I. Khan                                                                                                                                                                                                                               G-0
                                                                                                                                                                                                                                                                                                            140




                                                                                                                                                                                                                                                                                                                                                                                                79




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 76 Km




                                                                                                                                                                                                                                                                                  40
                                                                                                                                                                                                                                                                                                                                                                                                 Km




                                                                                                                                                                                                                                                                                       Km

                                                                                                                                                                                                                                                                                                                                                                                                                                                    RIN
                                                                                                                                                                                                                                                                                                                                                                           Chiniot                                                                                                                                                 Amritsar
                                                                                                                                                                                                                                                                                                                                                                                                                     33




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Lahore
                                                                                                                                                                                                                                                                                                                                                                                                                         Km




                              Kandahar                                                                                                                                                                                                                  Bhakkar
                                                                                                                                                                                                                                                                                                                                                                      Faisalabad
                                                                                                                                                            Fort Sandeman
                                                                                                                                                                                                                                                                              I                                                                Jhang
                                                                                                                                                                                                                                                                                                  75 Km




                                                                                                                                                                                                                                                                              N

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 additionally is driving
                                                                                                                                                                                                                                                                                                                                                                                                     Km




                                                                                                                                                                                                                                                                                                                         RING-02
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         25 Km
                                                                                                                                                                                                                                                                                                                                                                                                50
                                                                                                                                                                                                                                                                                                                                                              35 Km




                                                                                                                                                                                                                                                                                                                                                                                                                                     95
                                                                                                                                                                                                                                                                                                                                                                                                                                          Km




                                                                                                                                                                                                                                                                              D                                                                                                             Gojra
                                                                                                                                                                                                                                              Layyah                                                                           T. T. Singh                                  33 Km
                                                                                                                                                                                                                                                                                                                                                                                                                                               Okara
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           25
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Km   Kasur
                                         Chaman




                                                                                                                                                                                              ST
                                                                                                                                                                                                                                                                              U                                                                                       Sahiwal                                                        Km
                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Pattoki
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Raiwind
                                                                                                                                                                                                                                                                                                                                                                                                                                41
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Ferozpur
                                                                                                                                                                                                                                                                              S                                                                              Chicha Watni
                                                                                                                                                                                                                                                                                             60 Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                     Pakpattan
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               A
                                                                                                                                                                                                                                                                                                                                                                                                                Km
                                                                                                                                                                                                                                                                                                                                                                                                           46




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          DI
                                                                                                                                                                                                                                   Kot Addu

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 the market. Three new
                                                                                                                                                                                                                                                                                                                                                                                 Km
                                                        Quetta                                                                                                                                                                                                                                                                         Khanewal                             80




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     IN
                                                                                                                                                                                                                                                                      45 Km




                                                                                                                                                                                                                                                                                                                                                                                                                    Km




                                                                                                                                                                                                                                                                                                                                                                                      5                                         Arifwala
                                                                                                                                                                                                                                                                                                                                                                                                               52




                                                                                                                                                                                                                                     Qureshi




                                                                                                                                                     KI
                                                                                                                                                                                                                                                                                                                                                                            G-0
                                                         65 Km




                                                                                                                                                                                                                                     Chowk                                                                 Multan                                  Km
                                                                                                                                                                                                                                                                                                                                                                 RIN                       Km
                                                                 Mach                                                                                                                                                                     Km            36                              36
                                                                                                                                                                                                                                                                                                                                              46                                      42
                                                                                                                                                                                                                                                                                                                                                                                                      Burewala
                                                                                                                                                                                                                D. G.                                                                        Km
                                                                                                                                                                                                                                                                                                            33 Km                                                     Km
                                                                                                                                                                                                                                                                                                                                                              44
                                                                                                                                                                                                                KHAN                                                                                                                                                       Vehari
                                                                        10




                                                                                                                                                                                                                                                                                                                              98 Km




 Zahidan
                                                                         6




                                                                                                                                                                                                                                  94 Km




                                                                                                                                                                                                                                                                                                                                                        Km
                                                                             Km




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Nationwide optical fibre
                                                                                                                                                                                                                                                                                                                                                   60
                                                                                        Sibbi                                                                                                                                                                                          Muzaffar
                                                                                                                                                                                                                                                                                                                                            Mailsi
                                                                                                                                                                                                                                                                                        Garh
                                                                                                                                                                                                                                                                                                                                         Lodhran
                                                                                                                                                                                                                                                                                                                                      20 Km

                                                                                                                                                                                                            Fazilpur
                                                                                                                                                                                                                                                                                                                                       Bahawalpur
                                                                                         65
                                                                                              Km




                                                                                                                                                                                                                          90 Km




                                                                                                                                                                                                                                                                                                                                                                                                                              Fort Abbas




                                                          PA
                                                                                  DMJ
                                                                                                                                                                                                                                                                                                                         Km
                                                                                                                                                                                                                                                                                                                     2
                                                                                                                                                                                                                                                                                                                    11




                                                                                                                                                                                                    Rojhan

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 systems have been
                                                                                                              110




                                                                                                                                                                                                                                                                                                      Liaquatpur
                                                                                                                    Km




                                                                                                                                                                                                                                                                      Km
                                                                                                                                                                                                                                                                 92
                                                                                                                                                                                                   Km




                                                                                                                                                                                                               -01
                                                                                                                                                                                              99




                                                                                        Jacobabad
                                                                                                                                                                            Kand Kot
                                                                                                                                                                                                        R   ING                           Rahim Yar Khan
                                                                                                                                      46
                                                                                                                                          Km




                                                                                                                                                                                                                     Km
                                                                                                                                                                                                                84




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 deployed having an
                                                                                                                                                                        67 Km



 IRAN                                                                                                     Shikarpur
                                                                                                                                                                                               Dherki
                                                                                                                                 Km




                                              Khuzdar                                                                                                                                    Km
                                                                                                                                80




                                                                                                                                                                                   117


                                                                                                     Larkana
                                                                                                                                                                       Sukkur
                                                                                                         Km
                                                                                                                                                                  Km




                                                                                                   128
                                                                                                                                                             0




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 aggregated capacity of
                                                                                                                                                            12




                                                                                                                                                           Amirabad
                                                                                       Dadu
                                                                                                                                                     125




                                                                                                                                                                                                                                                                                                                                                    Domestic Optical fibre Backbone
                                                                                                                                                      Km
                                                                                                               100
                                                                                                                     Km




                                                                                                                                                                  Nawab Shah



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 over     4.5     Terabit/s
                                                                                                                                                            118




                                                                                                   Kalari
                                                                                                                                                             Km




                                                                                                                                                                                                                                                                                                                                                    Network
                                                                                                                                90
                                                                                                                                     Km




                                                                                                              Jamshoro                                                                                                        Khokhropar
                                                                                                                           Km
                                                                                                                                                                       Hyderabad
                                                                                                                     104
                                                                             Nooriabad

           Gawadar
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 expandable to over 45
                                                                                   Km




                                                                                                                                                Km
                                                                                                                                          104
                                                                                  90




                                                                                          109 Km
                                                                             Karachi                                       Thatta




                     ARABIAN SEA
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Terabit/s (on 10 GigE).




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                5
                                                                     The actual fibre penetration is much
                                                                     deeper and over 550 locations have
                                                                     fibre access on the PTCL fibre a
                                                                     section of which is shown the
                                                                     diagram. The services now on offer
                                                                                                4
                                                                     include dark fibre, MPLS , Gigabit
                                                                     Ethernet and other Value added
                                                                     services.




These new systems (in addition to the older PTCL
system connect over 100 cities. Metro-rings in over
20 cities are being deployed by different operators                                                                                         CPE




                                                                                                                    e
                                                                                                                on
                                                                                                                b
(Islamabad has the first FTTH- (Fibre To The Home




                                                                                                             ck
                                                                                                                               WiMAX        CPE




                                                                                                           Ba
                                                                                                                               Access
– system) where corporate and cellular back haul




                                                                                                         S
                                                                                                      PL
                                                                                                    /M
                                                                                                    ul
requirements are also being met.




                                                                                                   Ha
                                                                                Central POP




                                                                                               ng
                                                                                              Lo
                                                                                                                Metro Ring

Companies like Wateen are creating triple play
opportunities by deploying lanighaul and metro fibre      Internet




systems and creating access via WiMAX.                                 Legacy Circuit
                                                                      Switched Network                                       Virtual
                                                                                                                              Hub



Others like Niyatel have deployed Pakistan‟s first
       5
FTTH network in Islamabad and are planning                                                                          Wateen Telecom
expansions to other cities. These operators are
                                          6
offering services ranging from Triple Play to Dark                         SMW 4
Fibres to a whole range of end users. The access                           Internation
                                                                           al optical
                                                                           fibre links
pricing has dropped to less than US$ 12/month for a
                                                       512 Kb/s connection. A triple play bundle
                                                       costs less than US$ 40/month. With the
                                                       possibility of utilizing the 5 M land line
                                                       network of the PTCL for DSL, new
                                                       operators are driving the Broadband
                                                       penetration quite aggressively.
                                                              7
                                                       HFC Cable operators are now upgrading
                                                       their networks in order to offer triple play
                                                       services after acquiring requisite licenses
                                                       from the PTA or entering into franchising
                                                       relationships with existing operators.


                                            Niyatel




4 Multiple Protocol Label Switching
5 FTTH: Fibre To The Home
6 Triple Play: Voice, Video and Data
7 HFC: Hybrid Fibre Coax




                                                                                                                                        6
         Broadband

         The demand for Internet and Broadband has been no less phenomenal. The growth over a 5 year
                                                                         8
         period has been over 7,700% with over 10.5 Million active users

         In recent months the Broadband sector on DSL has started expanding with the facilitatory régime
         in place for reduction in bandwidth prices, fair interconnect with the PTCL landline network and
         the issuance of licences for WiMAX in the 3.5 GHz band. The numbers of DSL users stands at
         over 100,000 with a target to hit 1.6 Million by 2009.

         This will be achieved by support from the Universal Service Fund for expansion of Broadband
         users, farming new frequencies in the 2.3, 2.5, 3.5 and other bands for WiMAX and other new
         wireless technologies. As mentioned earlier, the private sector licensees are laying metro fibre for
         HFC, Fibre access (FTTC, FTTH) in over 20 cities. The PTCL optical fibre reaches into the
         heartlands at over 550 locations. This will help open the rural markets as the new private sector
         owners expand and utilize the installed infrastructure.

         New access media are growing – EDGE, EVDO, WiFi Mesh, WiMAX, Optical Fibre, DSL and
         HFC are being deployed in different networks to capture this growing segment. In fact Pakistan is
         leading the international deployment of WiMAX across the country. Three operators (Mobilink,
         Wateen and Burraq) are deploying nationwide systems on the 802.16d/e standards. All this has
         resulted in a huge growth of international connected bandwidth as well as rapidly dropping prices.
         An E1 (2Mb/s) is available at US$1500/month and with competition heating up; it is expected to
         drop further to sub US$ 1000 levels.

              Total connected International Bandwidth
                                                                         Multiple paths
       9000                                                              undersea
       8000
       7000
       6000
       5000
Mb/s




       4000
       3000
       2000
       1000
                                                          Voice+Data
          0
                2003        2004        2005     2006         2007

                               PTCL        TW1    Total




         New Undersea (and planned overland transnational Fibre systems) have ensured a degree of
         redundancy and reliability which was not present earlier.




         8http://www.internetworldstats.com/




                                                                                                           7
The Deregulation and Privatisation

Liberalisation of the Fixed Line Sector

Pakistan inherited parts of Indian Telephone and Telegraph Department at the time of
independence in 1947. Since then, it functioned as a government department for providing
telecom services in Pakistan. In 1994, the government decided to transform it into public
corporation and then in 1996 it was further restructured into public limited company under the title
of Pakistan Telecommunication Company Limited (PTCL). The Pakistan Telecommunication
Ordinance 1994 provided a 25-year license for incumbent operator, Pakistan Telecommunication
Company Ltd (PTCL), to provide domestic and international telephone services.


Keeping in view the inefficiencies of the basic telecom sector Government of Pakistan decided to
move away from monopolized market structure to more deregulated and liberalized one.
Government of Pakistan and Pakistan Telecommunication Authority, along with World Bank
Consultants made concerted efforts to facilitate this process. Pakistan Telecommunication
Authority (PTA) received applications from 95 companies for the grant of Local Loop (LL) and
Long Distance International (LDI) licenses from the prospective investors. Out of these 39
companies opted for LL licenses while 23 opted for the award of LDI licenses.

The PTCL was recently privatized and 26% shares with management rights sold to Etisalat at
US$ 2.6 Bln.


Award of FLL and LDI Licences

So far PTA has issued 14 LDI
Licenses to various National and
Multinational Companies. PTA has
also issued 84 Fixed-line Local Loop
(FLL) Licenses to various companies
for 14 telecom regions of Pakistan.

        http://www.pta.gov.pk/index.p
hp?option=com_content&task=view&i
d=849&Itemid=625


Cellular Networks
                          9
Five GSM operators           and one
(deploying) WCDMA operator are driving the cellular market in market in Pakistan. This is one of
the fastest growing markets in the world and has brought about considerable social and economic
change in the country. With facilities like CPP, fair interconnect, clear frequency band availability,
trained manpower and financial and banking support, this sector has attracted the maximum
investments into Pakistan in the last 3 years.

Between the operators over 6000 cities, towns and villages are already covered and with the
continuing aggressive roll out, it is expected that most of Pakistan (including the rural areas) will
have cellular coverage in the next two to three years. The license fee determined by open auction
was US$ 291 M for each operator.



9 See Annex




                                                                                                    8
Investors

Telecommunications has attracted investment from a wide variety of players. These range from
Telenor Norway, Warid UAE, Etisalat UAE, Singtel Singapore, Orascom Egypt, QTel Qatar,
Diallog Uzbekistan, etc. These are serviced by a range of vendors from Europe, USA, China,
Canada, etc. The investment rules and regulations for FDI are very supportive and 100% foreign
ownership is permitted as is unhindered repatriation of profits and equity.

Key Players

Due to the successful market opening and open competition, the Telecom landscape has
changed dramatically. Over the last few years a few leaders have emerged and the dominance of
the state owned Operator (PTCL) has been diluted. In Mobile networks, Mobilink (Orascom) has
over 40% market share and has revenue streams in excess of US$ 1Bln. In the fixed line sector,
PTCL still dominates in the wired and wireless (WLL) domain.

However, the voice traffic (domestic and international) has migrated considerably to the private
sector operators. In a similar manner there is a considerable shift of traffic in the bandwidth arena
as well. With a new private sector (TWA1) undersea fibre in place, the PTCL has lost over 35% of
the market. It is also expected that the new nationwide and metro fibres will migrate to these from
the earlier monopoly.

This dynamic has been described to illustrate the highly conducive environment for the new
investors who can acquire a large market share with appropriate investments and a high quality
offering of services.

Mergers and Acquisitions

Market consolidation is taking place in the changing competitive environment. Mergers and
Acquisitions have been taken place which has created higher levels of competition. While this has
created price pressures on the operators, they are striving for higher levels of quality and bringing
in new services. This in turn has driven demand further, creating new ARPU opportunities.

                   Mergers in Telecom Sector

        Foreign Companies who          Local Companies       Share           Amount paid
        purchased shares               who sold shares       purchased       US$ Million
                                                             (%)
  1.    Orascom, Egypt                 Mobilink              11.31%          290
  2.    Qtel, Qatar                    Buraq                 75%             12.3
  3.    Singtel, Singapore             Warid                 30%             758
  4.    China Mobile, China            Paktel                100%            764
  5.    Oman Tel, Oman                 World Call            60%             220

In addition to the International acquisitions, local companies have consolidated their positions by
buying unused frequency spectrum (for WiMAX) from other operators and ISPs and Data
Operators being merged into traditional voice operators (like the acquisition of World On Line by
Orascom).




Opportunities


                                                                                                   9
While considerable licensing has been done for cellular, LL, WLL, LDI, ISP sectors, the
government has plans of opening up frequencies for WiMAX in different frequency bands as well
as issue new licenses for 3G cellular systems. Consultative processes are happening for setting
up large Voice and Data Peering Points, Converged Networks, MVNOs, LMDS networks, etc.

There is now a huge opportunity for operators or build on top of the competitive infrastructure
which has been installed (and is expanding by the day) to bring in high yield Value Added
Services. The next frontier is delivery of wired and wireless broadband services and the target is
to hit at least 3 Million users in the next few years (30% of the Internet user base) and innovative
solutions will be encouraged.

With market consolidation taking place, there are new opportunities for Mergers and Acquisitions
as has been evidenced in the last few months. Operators are diluting their equity in order to get
institutional investors and others are doing this to acquire the technical expertise to enable more
efficient operations.

Jump Aboard!

All this signals opportunities in the Traditional and Value Added sectors for not only creating new
businesses by riding on these systems but
also to be a part of new licenses which are                      Sector Revenue Growth
                                             10
being reviewed. These include MVNO ,
                                                       3.50
Regional Hosting, Call Centers, Telecenters,
Video Conferencing, Content aggregation,               3.00

Converged networks, etc. On another plane,             2.50
                                                  US$ Billion




the     Regulatory     environment      permits        2.00
spectrum trading, Mergers and Acquisitions
                                                       1.50
as well as entry via Private equity
                                                       1.00
arrangements. The market opening has
nearly doubled the sector revenues and this            0.50

trend is expected to grow.                              -
                                                                2004         2005                 2006
The laws of Pakistan tightly protect foreign
investment and in all the years since the                      Fixed Line Mobile Data, etc

market deregulation started: 1989 for
cellular and 1993 when the first Payphone, Data and ISP licenses were issued, there has not
been one instance which reflects anything contrary to this.

New Government initiatives in Public Private Partnerships which depend on ICT infrastructures,
not only create demand for these services but also create growth opportunities for new source of
Revenue streams.

New and growing rural markets are turning established conventional thought on its head and
have forced the new operators to open out new and virgin areas. Clearly validating Pralahad‟s
vision of “Fortune at the bottom of the Pyramid”

Welcome Aboard.




10 MVNO: Mobile Virtual Network Operator




                                                                                                 10
Annex 1

AVAILABLE INTERNATIONAL CONNECTIVITY AND RATES

International Connectivity (Capacities)
     PTCL – SEMEWE - 3

                  Capacity: 3.98 Million MIUK Km (1 MIU=2Mbps)

       PTCL – SEMEWE - 4

                  Capacity: 404,764 MUI km (1 MIU = 1 STM)

       Transworld

                  2 fiber pairs, 32 Wavelengths, capable of 10 Gbit each

                  2 x 32 x 10 = 640 Gbit/s

       Multinet

                  Has started to offer IPLC & IP bandwidth in partnership with Telecom Malaysia
                   through IRU (Indefeasible Right of Use) on SMW-4

Planned Future Systems

       New operators e.g. Wateen who have laid nation wide optical fibre have requested to
        connect India, via Lahore and also set up new undersea optical fibre landing stations at
        Karachi

IPLC Tariff Ceilings
             These ceilings for price as well as price multiples are applicable to PTCL for
                 provision of IPLC, up to landing station i.e. Karachi as per PTA‟s determination.

                                                                                   US$ per month
Capacity                    Old Tariffs *                               Effective 1/1/07**

                            ISPs / DNOPs         LDI Operators          ISPs/            Voice
                                                                        DNOPS            Services

E-1 (2Mbps)                 3,000                2,852                  2,100            2,300

DS-3 (45Mbps)               48,000               -                      16,800           18,400

STM-1 (155Mbps)             112,500              -                      48,300           52,900

Price Multiples             1:16:38                                     1:8:23           1:8:23


* Distance agnostic
** Upto landing station
1US$ = Pakistani Rupees 60




                                                                                                  11
Annex 2

WLL Auctions

These auctions yielded over US$ 230 M in licensing fees for all the Regions.


S. #       Regions      1.9 GHz 450 MHz 479 MHz 3.5 GHz Total
                        US$ M   US$ M.  US$ M   US$ M
                                                        US$
1          Karachi         60.2     4.4     0.5     4.3     69.4
           (KTR)
2          Faisalabad      21.3         3.4         0.1        0.5       25.1
           (FTR)
3          Lahore          17.7         2.8         0.1        1.3       21.8
           (LTR)
4          Gujranwala      14.8         4.0         0.4        0.1       19.2
           (GTR)
5          Multan          14.3         3.5         0.3        0.1       18.2
           (MTR)
6          Islamabad       14.5         1.1         0.1        0.8       16.5
           (ITR)
7          Northern        10.1         3.1         0.3        0.5       14.0
           (NTR-I)
8          Rawalpindi      10.0         3.2         0.3        0.1       13.5
           (RTR)
9          Southern          6.7        2.0         0.1        0.1        8.9
           (STR-I)
10         Central           6.1        1.8         0.0        0.0        7.9
           (CTR)
11         Western           3.8        1.9         0.2        0.1        5.8
           (WTR)
12         Southern          4.0        1.6         0.2        0.1        5.8
           (STR-V)
13         Northern          2.8        1.3         0.1        0.1        4.2
           (NTR-II)
14         Haripur           1.7        2.0         0.2        0.1        3.9
           (HTR)
G.Total                   187.6        35.9         2.9        7.9      234.3




                                                                                12
Annex 3

WLL Spectrum ownership map

In the recent months this has undergone a consolidation with large portions of spectrum for
WiMAX being bought out by larger players from the smaller operators with fragmented markets.




                                                                                         13
Annex 4

Licenses issued to operators - pre and post deregulation




                                 Cellular Mobile Companies

                S. No.                        Company Name

                  1      M/s Pakcom Limited (Instaphone)
                         M/s Pakistan Mobile Company Limited
                  2      (Mobilink)

                  3      M/s Paktel Limited (Paktel)

                  4      M/s Telenor Pakistan Limited

                  5      M/s Warid Telecom Limited
                         M/s Pakistan Telecom Mobile Limited
                  6      (Ufone)

                          Long Distance & International (LDI)
                S. No.                          Company Name
                   1     World Call Telecom Ltd
                   2     Redtone Telecommunications Pakistan (Pvt.) Ltd
                   3     Link Direct International (Pvt.) Ltd
                   4     Callmate Telips Telecom (Pvt.) Ltd.
                   5     TeleCard Ltd.
                   6     DV Com Ltd
                   7     Wise Communication Systems (Pvt.) Ltd
                   8     Dancom Pakistan (Pvt.) Ltd
                   9     Burraq Telecom Ltd
                  10     Wateen Telcom (Pvt.) Ltd
                  11     Telenor Pakistan (Pvt.) Ltd
                  12     Circle Net Communications Pakistan (Pvt.) Ltd.

                         M/s Multinet Pakistan (Pvt) Ltd
                 13
                 14      M/S 4B Gentel International (Pvt) Ltd
                               Wireless Local Loop (WLL)
                S. No.                          Company Name
                   1     Telecard Limited
                   2     Burraq Telecom Limited
                   3     DV Com Limited
                   4     Worldcall Telecom Limited
                   5     Wateen Telecom (Pvt.) Limited
                   6     Microtech Links (Pvt.) Limited
                   7     Great Bear International (Pvt.) Limited
                   8     Cyber Internet Services (Pvt.) Limited
                   9     Zarco Telecommunication (Pvt.) Ltd.
                  10     Super Dialogue (Pvt.) Ltd.
                  11     Reliance Telecom (Pvt.) Limited
                  12     Ertibatat (Pvt.) Limited
                                                                          14
Annex 5

Licenses issued to operators - pre and post deregulation (contd)


                              Fixed Local Loop (FLL)
            S. No.                          Company Name
               1      Dancom Pakistan (Pvt.) Ltd.
               2      Easy Phone (Pvt.) Ltd.
               3      Cyber-Soft Technologies (Pvt.) Ltd.
               4      NetSol Connect (Pvt.) Ltd.
               5      Air Track Telecommunication (Pvt.) Ltd.
               6      Call 2 Phone (Pvt.) Ltd.
               7      Web Concepts (Pvt.) Ltd.
               8      Zari Telecommunications (Pvt.) Ltd.
               9      Vision Telecom (Pvt.) Ltd.
              10      Metrotel (Pvt.) Ltd.
              11      Albadar Etisalat (Pvt.) Ltd.
              12      Brain Ltd.
              13      Hazara Communications (Pvt.) Ltd.
              14      ION (Pvt.) Ltd.
              15      Sohail & Inam (Pvt.) Ltd.
              16      Telenex (Pvt.) Ltd.
              17      Union Communications (Pvt.) Ltd.
              18      Unified Technologies (Pvt.) Ltd.
              19      Velocity (Pvt.) Ltd.
              20      WorldCall Broadband Ltd.
              21      WorldCall Multimedia Ltd.
              22      Z-Communication (Pvt.) Ltd. (CCZ)
              23      Eagle.Com (Pvt.) Ltd.
              24      Naya Tel(Pvt.) Ltd.
              25      City Links Communications Ltd.
              26      Cyber House (Pvt.) Ltd.
              27      Poleax Telecom (Pvt.) Ltd.
              28      Multinet Pakistan (Pvt.) Ltd.
              29      Whistler Telecom (Pvt.) Ltd.
              30      Global Touch (Pvt.) Ltd.
              31      Frontier Telecom (Pvt.) Ltd.
              32      Stanley Telecom (Pvt.) Ltd.
              33      Globecomm Wireless (Pvt.) Ltd.
              34      Satcomm (Pvt.) Ltd.

                      IBEX Telecommunication
              35       (Pvt.) Ltd.

                                   PTCL, NTC SCO
            S. No.                      Company Name
                      Pakistan Telecommunication Company Limited
               1      (PTCL)

               2      National Telecommunication Company (NTC)

               3      Special Communication Orginisation (SCO)
                                                                   15
Annex 6

Pakistan – some economic facts

Pakistan has an area of 796,096 square kilometers and population of 160 million. Strategically
located in South Asia, Pakistan is at the crossroads between Eastern and Western Asia. Pakistan
is the gateway to the energy rich Central Asian States, the financially liquid Gulf States and the
economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a
marketplace teeming with possibilities. With three major international airports and thirty-eight
domestic airports, Pakistan is accessible via fifty international airlines. Pakistan's geographical
location, a rapidly expanding transportation and communications infrastructure and an
environment conducive to business makes it an attractive destination for investors.

Pakistan Economic Facts 2007

Indicator                                      2002-03            2003-04          2004-05        2005-06          2006-07


Real GDP Growth (%)                            4.7                7.5              9.0            6.6              7.0

Foreign Exchange Reserves US Billion           10.7               12.3             12.6           12.8             15.1

Per Capita Income US$                          586                669              733            833              925

Population (Million)                           147                150              152            155              158




Economic Indicators (2006-2007)

Indicators                           2000-01   2001-02   2002-03         2003-04   2004-05   2005-06     2006-2007        + (-) %
Exports (Billion $)                  9.20      9.13      11.16           12.31     14.39     16.47       17.01            3
Imports (Billion $)                  10.72     10.34     12.22           15.59     20.60     28.58       30.54            9
Trade Balance (Billion $)            (1.52)    (1.20)    (1.06)          (3.28)    (6.21)    (12.11)     (13.53)          12
Net Revenue (Billion Rs.)            393.9     404.1     460.6           518.8     590.39    712.61      841.4            18
FDI (Million $)                      322.40    484.70    798.00          949.40    1524      3,521       5,125            46
Foreign              Investment
(Million                       $) 182.00       475.00    820.00          922.00    1677      3,872       8,417            88
(FDI+Public&Private Portfolio)
Workers                Remittances
                                     1.09      2.39      4.24            3.872     4.17      4.60        5.49             19
(Billion $)
Forex Reserves (Billion $)           3.22      6.43      10.72           12.33     12.61     13.14       15.18            16
Exchange Rate (Rs./ US$)             58.4      61.0      57.7            57.92     59.66     60.16       60.5             1
Stock Exchange Index                 1300      1520      3402            5279      7450      9,989       13,772           38
GDP Growth                           2.6%      3.6%      5.1%            6.4%      8.4%      6.6%        7.0%
Inflation                            4.4%      3.4%      3.3%            3.9%      9.3%      8%          7.9%




                                                                                                                                    16

				
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