A Ring for the Jumping Jacks

By Khurram Baig – 

Consumers can expect call rates to go up as the telecom industry may be forced to move out of its comfort zone

It was one of the fastest growing industries in Pakistan and still is a very fast growing industry. If we look at tele-density with regards to cellular connections, Pakistan ranks among the highest in the region, and as a representative of one leading player in the local market said — and others agreed — it is not an industry that expands linearly, so growth can never be capped and there really is no saturation point.

In other words, growth in the telecom sector is not restricted to just the number of users or the number of SIMs issued. New products, new services and new technologies create parallel and alterative growth avenues.

In short, just the number of telecom subscribers or the provision of cellular service is no longer the sales target. What is striking about the telecom industry is that a telecom network is always live — the more it is used the more the profitability at very little extra overhead cost. That is why it is in the interest of the provider that the network is always being used: for calls, texts and data services.

This is why there are so many different packages encouraging customers to call on the weekends, late at night, early morning, etc. The network and the number of sales is just the base medium. Real growth is achieved through the quality of service, the value addition of products, offers of free minutes or texts and the diversity of options that cellular companies can come up with.

Making a call, sending a text message or even browsing the web using GPRS, or — hopefully soon enough — 3G are no longer considered the primary uses of as cell phone.

The use of a cell phone or a cellular connection has moved into the domain of mobile banking, cash transfers, retail payments and the spread of information. They are now tools that can be used to perform a number of functions and are no longer just communication devices.

With the advent of 3G, this will expand manifold. 3G will not just mean lightning fast downloads and web browsing on handhelds but will open up a window of opportunity for content developers and a window of options for consumers.

The spate of recent measures like the ban on mobile number portability (later reversed), the ban on sales of SIMs from retail outlets and then the frequent shutdown of cellular services any time the government feels there is a terrorist threat — which it seems will now be the norm — have definitely hit the optimism that always seems to be in the air whenever this industry was discussed.

The inability of the government to successfully hold the auction to sell 3G licences has also caused many to think about what the future for the industry holds.

However, despite all this negativity and these measures which many think will stunt the growth of the industry, or the commitment of the industry to the local market, things are not all that bad.

Data released by the Pakistan Telecom Authority indicates that after a minor blip in the third quarter of 2012, all the major players in the local market like Mobilink, Telenor, Ufone, Zong and Warid have shown growth in their subscriber base in October 2012.

The representatives of Wateen, Warid and Mobilink one spoke to are all still upbeat about the industry. Wateen is taking big steps in the widespread availability of WIMAX hotspots.

Zong has publicly declared that it is hoping to become number two in the industry as early as next year and Mobilink has committed to the government that it plans substantial investment in the country in the short and medium-term.

However, the measures have left their mark and an educated guess would be that the joy-ride with regards to continuously cheaper call-rates and free minutes is about to come to an end.

Now sales will no longer depend on volumes but on margins. The average revenue per user in Pakistan is already lower than the global average. Hence, there is room for an increase and the Zong CEO has also predicted this.

The ban on sales of SIMs from retail outlets has hit sales and growth is not expected to be the same that it was over the last decade. When 3G does come, hopefully by the end of 2013, it will not be cheap.

These hiccups may however, prove to be a blessing. So far the industry has been able to function primarily the way the banking sector does. Banks in Pakistan enjoy a very large spread and are able to survive on just their interest income from loans made to the government.

They do not feel the need to offer any innovative products or services to survive. The government’s appetite for liquidity is big enough to ensure that the banks can literally sit back and watch interest incomes roll in.

In the same way, telecoms for the most part have had to do little more than offer the ‘cheapest’ call rates in a market where most users do not look at the hidden cost. Sure, competition is harsh, and consumers jump ship from one provider to the next at the drop of a hat — rather, the drop of a rate — but the explosive growth of the industry which touched 120 million subscribers has been enough to ensure that the going was good and customer service took a back seat.

Now, maybe that will change. But one thing is certain. Chances are that if the current regime comes back to power, little would change for the better as far as the industry is concerned or the success of 3G Spectrum auction.

The writer is a print and broadcast journalist with IT expertise based in Karachi