Arrival of 3G, 4G: Date revenue for mobile operators increases threefold in last five years

Reached Rs115b or 25.6% of total revenues in FY15, up over 100%

KARACHI:

Data revenue of all cellular mobile operators (CMOs) has increased by more than three times during the last five years and now constitute a quarter of the sector’s total turnover, Pakistan Telecommunication Authority (PTA) revealed in its annual report for fiscal year that ended June 30, 2015.

Released on Monday, the PTA’s annual report says telecom operators faced stiff competition from over-the-top (OTT) services, such as Skype, Viber and WhatsApp, which ate up a significant chunk of their voice revenues during the year under review.



“During the last two years, cellular mobile internet and broadband usage has had a significant impact on data revenue streams of mobile sector,” the report said, adding that these changing dynamics are closely reflected by the trends in voice and data revenues.

The telecom sector’s regulatory body noted that data revenues reached Rs115 billion or 25.6% of the total telecom revenues in FY2015, up by more than 100% compared to 12.4% in FY10.



The sector-wise break down of statistics shows that revenues of cellular segment increased more than three-folds during the same period (FY10-FY15) to Rs78 billion, which is 25% of CMO’s total (FY15) revenue.

The PTA said it expected the trend to continue in the coming years as subscription to data connections was increasing and data usage was expanding in the country.



The cellular segment’s average revenue per user (ARPU) - based on 2.17 SIMs per user - increased to Rs440 at the end of FY2015, up by nearly 2% compared to Rs432 of FY14. However, ARPU per SIM remained at Rs203 in FY15, data showed.

The cellular segment’s ARPU is expected to rise in coming months as operators add more subscribers to 3G and 4G networks, the regulator said. The rising share of data revenue in the overall revenue also points towards the fact that data will be the new cash cow for the cellular industry, it said.

The smartphone influx

Highlighting another important trend, the report said availability of next-generation mobile services - 3G and 4G technology - has rapidly increased the adoption of smartphones, which account for 31% of the country’s overall market.

In 2015, Pakistan remained one of the fastest growing markets in the Middle East and Africa region for smartphone shipments, according to International Data Corporation (IDC).

Pakistan’s smartphone shipments increased by 123% between March 2014 and March 2015 as the country imported $1.2 billion worth of telecom equipment - imports of cellular mobile handsets constitute more than half of this amount.

“Smartphone adoption in Pakistan is expected to grow due to expanding 3G and 4G networks,” the PTA said, adding smartphones are expected to cross 55% of mobile phone imports in the next two years - a significant jump from 2012 when smartphone penetration was only 7%.



The report further said more affordable smartphones are available in the market while 3G services have reached in more than 200 cities and towns.

Quoting a July-2014 research from ‘Grappetite’, “77% of the smartphone users are between the ages of 21 and 30 years, which is the most adaptive segment for the use of smartphones.”

While both data services and smartphones showed significant growth, the telecom sector’s revenues remained under pressure during FY15.

Telecom sector’s revenues clocked in at Rs449.5 billion in FY15, down 3% compared to Rs463.5 billion of FY14 - it was for the first time in the sector’s history that revenues declined compared to the previous year.

Explaining the slump, the PTA said the wireless local loop (WLL) segment, particularly small players, was hit hard, witnessing a 40% decline in its revenues during FY15.

The cellular segment, too, saw its revenues decline by 2% on account of biometric verification drive and the resultant loss in subscriptions, the PTA said.

The sale of new connections also remained suspended at retailers and temporary outlets during the drive for 91 days.

Published in The Express Tribune, January 27^th, 2016.

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