Pakistan’s Telecom Industry: Is the Honeymoon Over?

Posted on May 9, 2008
Filed Under >Babar Bhatti, Economy & Development, Science and Technology
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Babar Bhatti

The telecom honeymoon in Pakistan which lasted about 5 years (2002-2007) allowed Pakistani consumers to leapfrog over older landline based infrastructure and get cheap and quick access to modern telecommunication technology. The investors, telecom businesses and Pakistani treasury – all made good money and it was a win-win situation. It seems that the golden period for Pakistan telecom is over. The spike in teledensity and corresponding load on the new infrastructure is causing a number of service issues. To add fuel to fire the telecom rates for calls to Pakistan and within Pakistan have started rising, causing a lot of concerns. Consider the following points from the last few months:

Deceptive advertisements by Mobile Companies
Rise in local call charges by PTCL
Calls to Pakistan made more expensive

PTCL forces Pakistan package on its customers
Customer service calls are not free any more
Telecom consumer protection laws still in draft
Other emerging cosumer gripes

Some people hold the view that given the tremendous progress made, complaining about telecom situation in Pakistan is not justified. Yes, there have been great advances made but if we do not fix the structural issues early on, we will lose much of that progress. Left unchecked we may even regress to a point where there’s plenty of competition but consumers end up without the services they deserve at a fair price. Broadband is an appropriate example. Pakistani public has been tormented with poor service and caps on the usage.

I believe that with the right regulatory measures, consumer protection laws and a code of ethics we can keep the telecom sector on the right track.

15 Comments on “Pakistan’s Telecom Industry: Is the Honeymoon Over?”

  1. sidhas says:
    May 9th, 2008 10:49 am

    I can not agree/disagree with the premise that the honey moon is over due to lack of information. I hope it is something the Telecom Industry anticipated and is ready to overcome the challenge associated to growth and maturity.

    When I was in Pakistan – 2006 and tried to see if I can work from Pakistan just as my Indian buddies.

    Found out the cost of getting 1MB (uplin/downlink) was 2.5 lakh. One line was shared by many. Now I hear that with recent PTCL fiber optic network installation in many of the cities (unfortunately not all), the cost has dramatically declined. Now you can get 128KB (which is decent if you wanted to work from Pakistan).

    I remember paying for a crapy service for 12000 ruppees which provided me the same or little better service then 56kb provided.

    I hope Pakistani Telecom Industry leadership can overcome this issue.
    Thanks for the post.

  2. Qudsia says:
    May 9th, 2008 12:04 pm

    I think the market is now getting saturated so we will see some of the good offers disappearing

    In some ways things had become TOO GOOD for consumers and artificially cheap

  3. Daktar says:
    May 9th, 2008 12:57 pm

    I agree that the “honeymoon” was unnatural and the costs had actually come down so much that companies could not just survive this way. So as you move away from the cut throat competition the prices will have to stabilize at a more reasonable place. The costs are still VERY low in Pakistan compared to international standards I think.

  4. Aman Malik says:
    May 9th, 2008 3:01 pm

    It amazes me that your call rates are going up, because here in India we enjoy the lowest call rates anywhere in the world and it looks like they’re only going down further!

  5. Eidee Man says:
    May 9th, 2008 4:50 pm

    Regardless, the Pakistani market for consumer telecommunications remains excellent when you compare it to highly developed infrastructures and “free-markets” like the U.S. I pay an absurd amount for cell phone service that I barely use; you basically cannot buy a plan for less than $30 a month…and by the time they finish taxing you and charging fees for this and that, it comes around to more like $38 per month.

    Also, “texting” is not nearly as popular amongst 22+ adults in the U.S. as it is in Pakistan (the last time I sent a text message in the U.S. was probably a year ago). Texting is needlessly expensive–usually around 10 cents per message sent or received…T-mobile even charges me for the stupid spam they send me every now and then!! Don’t even ask about the mess one has to deal with when buying a simple handset.

    As far as rates are concerned, I bet they’re going up because the market is starting to stabilize; it’s perhaps surprising that most telecoms are actually not profitable. So I wouldn’t be surprised if India sees the same increases as well, as soon as the acquisition and merger hype starts to cool and businesses actually start thinking about earning money.

    Just look at Sprint….despite its astronomical charges..it’s still not profitable.

  6. Eidee Man says:
    May 9th, 2008 4:53 pm

    Also, deceptive advertising is a worldwide problem. Look no further than the housing crisis in the U.S.; even with a 99% literacy rate, people STILL signed up for loans they could not afford…simply because a lot of them just didn’t fully grasp what they were committing to!

  7. K.A. says:
    May 9th, 2008 5:03 pm

    I agree with Eidee Man, even with the changes you mention, telecommunication costs in Pakistan remain amongst the cheapest in the world. Maybe even too cheap because of the fierce competition between providers.

  8. Phoneuser says:
    May 9th, 2008 6:14 pm

    Good post. Yes, the honeymoon is over, because it was just a honeymoon.

    I do think that this is just about consolidation mostly. However, you are right some of the structural issues also need to be resolved.

    But I really think that there are also too many companies in Pakistan. The market is just not that large. So, some of them will have to fall off or get merged because the market is probably likely to keep only about 3 or so, the others will just disappear and then we will have more stability in price as well as service.

  9. Babar says:
    May 9th, 2008 11:16 pm

    There are many aspects in which Pakistani telecom consumers enjoy great deals – SMS is one. The source of many problems is PTCL as it struggles with the competition. Overall situation with voice is not too bad. If broadband problems are addressed then we will be in much better shape.

  10. zaheer says:
    May 10th, 2008 3:18 am

    well the problem is in our infrastructure due to which these issues arise. PTCl not giving proper internet speed telecommunications rising prices. But we can not deny the fact it was due to this huge comeptition in telecomunication world of pakistan due to which this progress has been made and people are enjoying benifits which were un imaganable before like free sms, free talk time and plus extra balance. Ithink this rise in prices will be temporary because the new companies will come in pakistan market becauses of huge margin of profit and competation will increase ultimately lowering prices but the consumer problem will remain due to lake of proper planing to attract consumers and the loyality of the consumers will also effect due to lake of planing.

  11. Tariq Sayeed Khan says:
    May 10th, 2008 7:57 am

    Very surprising that a same headline was used in AURORA magazine’s Nov-Dec 2007 issue, to describe the Television industry. Althoiugh a very common line I am sure, but nonetheless the writer could have shown some originality instead of coping other people’s work.

  12. Sabir says:
    May 11th, 2008 12:13 pm

    Next step will be that companies will merge and consolidate.

  13. Sabir says:
    May 11th, 2008 12:15 pm

    growth through new users is reaching its limits now it will ne more growth through new services and revenue centers.

  14. Riaz Haq says:
    May 11th, 2008 10:03 pm

    I hope that the wireless carriers will now work on finding ways to offer more services, particularly data and location services, to augment their ARPU. For example, new data services services could improve the Internet penetration in Pakistan using the most ubiquitous device, the cell phone.
    Pakistan could lead the way to mobile Internet. Farmers could benefit by accessing market prices and weather reports via SMS. Instead of just signing up more voice users, the carriers need to think more creatively by offering more, better service to improve their top and bottom lines. There are myriad ways to keep the telecom/information revolution going in Pakistan. We have only just begun.

  15. Arif Hussain Nomani says:
    April 4th, 2009 1:51 am

    I must say that the article was written by a myopic writer with little or no hindsight of the telecom industry. The last five years were of course the honey moon period for the PTA and the consumer that saw the rates plummet due to intense competituion within the five operators.
    However it was by no means the honeymoon for the parent companies because the massive investments in the infrastructures(Building/Fixtures), Networks across a geographically huge country, Human Resource acquistion in a talent scarce market, huge marketing budget costs & of course the license fees to PTA.

    I m sure that since now all the initial investments in to the infrastructure has been done and the massive CAPEX expenditure is out of the way the telecom companies honeymoon period will start now.

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