Pakistan IT sectors

COMMENT: Pakistan Telecom and IT sectors —Muhammad Aftab

The IT sector has become one of the most innovative and vibrant industries, advancing at a pace of 30 to 50 percent a year. The IT firms serve the financial, textile and telecom sectors and government departments

Pakistan will maintain “a steady, progressing, profitable and high quality telecom market, where consumers interest is given the top priority, while keeping in view the business profitability”. This is the latest projection for the telecom industry that has recorded the highest growth in whole of the economy. Pakistan Telecom Authority (PTA), the industry regulator, in its report on FY 2010, just unveiled says: “Cellular phone growth was five percent during the year. It raised the number of mobile phones in Pakistan to 99.2 million. At the same time, the Information Technology (IT) industry is witnessing a growth of more than 30 percent a year. The projections for telecom are based on business results for FY 2010, but looking beyond FY 2011.” It says that despite a difficult economic situation in the last two years, Pakistan telecom sector has been “a true exception, recording higher Foreign Direct Investment (FDI) inflows, tariffs for customers continued to decline and the subscription base went on enlarging with a reasonable growth.”

The growth in the private sector followed deregulation of the telecom sector in FY 2005, despite competition slashing cellular tariffs for customers. Cellular coverage was enlarged and high quality mobile services were provided across the country. Pakistan, with a population of over 170 million, now has 63.1 percent teledensity, the highest in the region. The growth potential to attract the remaining population is huge. More than 59 percent of the population belongs to 15-64 year age group to which most of the cellular phone users belong. Comparing Pakistan’s 63.1 percent teledensity with the potential cellular users works out to nearly one-to-one ratio of telecom users and the target consumers, PTA says.

Starting with 1.7 million cellular subscribers in 2002, the number rapidly rose to 99.2 million at the end of FY 2010. The teledensity rose from 0.17 percent in FY 2005 to 63.1 percent. Compared with 1,920 cell sites in FY 2004, it now has 28,916 sites. Besides the mobile phones, local loop services, in the form of Fixed Local Loop (FLL) and Wireless Local Loop (WLL) are also available. FLL has 3.4 million and WLL 2.6 million subscribers. The broadband services have seen a 150 percent growth over the last two years, with 0.8 million subscribers. These services use the latest technology including WiMax, EvDo, DSL, FTTH and HFC. Broadband subscribers will total 4.35 million by 2013.

Telecom companies have invested more than $ 6.5 billion since 2004. The share of telecom in the total FDI inflow went up to 54 percent in FY 2006. A good deal of investment in the earlier years went into infrastructure development, roll out of networks in unserved areas and to slash tariffs to attract new customers in millions.

After mergers and acquisitions (M and A), the top mobile companies are: Egypt-based Mobilink has 32 percent market share with 32.3 million subscribers. Norway-based Telenor has 24 percent market share with 20.893 million users. Ufone, associated with the Pakistan Telecom Company Ltd (PTCL), managed and partly owned by UAE-based Etisalat, has 19.5 million users. UAE-based Al-Warid has 16.9 million users. China-based Zong has 6.7 million users.

Telecom revenues almost tripled from Rs 116 billion in FY 2004 to Rs 334 billion in FY 2010. Taxes contributed by telecom sector have grown from Rs 67 billion in FY 2005 to Rs 112 billion at end-2009, which is 7.0 percent of the total federal tax collection. IT sector, along with telecom, is also showing significant growth. Pakistan has nearly 500 significant IT companies, employing some 400,000 graduates. IT output is “more than $ 2.0 billion and yearly exports of around $ 1.0 billion,” Yusuf Jan, chairman Pakistan Software Houses Association (PASHA) says.

Ms Jehan Ara, president of PASHA says, “The IT sector has become one of the most innovative and vibrant industries, advancing at a pace of 30 to 50 percent a year.” The IT firms serve the financial, textile and telecom sectors and government departments. Telecom and IT industry now project a fairly high growth rate, as the economy is looking up, both in the domestic and the export markets, and there are good prospects for foreign investors.

The writer is an Islamabad-based journalist and former Director General of APP

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