Just two weeks ago, we witnessed a groundbreaking milestone for Digital Pakistan. After years of effort, the country's largest mobile network operator (MNO) successfully cleared all regulatory hurdles to transfer ownership of its mobile towers to a specialised tower company.
Traditionally, MNOs worldwide built and owned their own towers, which they did not share with their competitors. However, around two decades ago, MNOs began to realise that the capital expenditure required to develop proprietary tower infrastructure was both substantial and largely unnecessary.
At the same time, as many mobile towers sprouted all over the place, the competitive edge of owning towers receded. All this prompted MNOs to spin off their tower assets to independent entities known as "TowerCos," who specialise in the operation and management of telecom towers.
In China, there are three MNOs, but only one TowerCo, which owns over two million towers. In India, of the approximately 800,000 towers, the TowerCos own more than 500,000. In Indonesia, various TowerCos collectively own nearly all of the country's over 122,000 towers. In Malaysia, TowerCos hold ownership of about 62% of all towers. In Myanmar, Bangladesh and the Philippines, TowerCos own more than half of the existing tower infrastructure. And so on.
TowerCos allow multiple MNOs to share a single tower, for which MNOs just pay a "rent". It increases asset utilisation, lowers the cost of operations and reduces environmental impact.
With streamlined processes and dedicated resources for rapid tower deployment, TowerCos help MNOs roll out technology upgrades much faster. As the industry prepares for 5G, which requires a significantly higher density of cell sites, this trend has accelerated.
Story of Pakistan
When MNOs established their presence in Pakistan, each MNO outspent the other, investing billions in setting up towers across the country. It became common to see four to five towers standing next to each other, which not only looked ugly but also represented a colossal national waste.
However, around a decade back, this mindset began to shift. New towers started to be built exclusively by TowerCos. Slowly TowerCos' ownership of towers in Pakistan went up to about 20%. Unfortunately, 80% still remained with MNOs.
Jazz (then Mobilink) first attempted to divest its tower assets in 2017 by creating a subsidiary, Deodar, which took over ownership of Jazz's entire tower infrastructure. Soon after, in 2018, Jazz reached an agreement with Edotco, a leading Malaysian TowerCo and one of the largest in Asia, for a proposed deal valued at $940 million.
However, the transaction faced a setback when regulatory approval was not granted. The reasons behind the denial remain unclear, giving rise to various conspiracy theories about the real cause of the decision.
Subsequently, in 2022, Jazz and its owner Veon worked out a conditional agreement with a consortium comprising TPL REIT Management Company and UAE-based TASC Towers Holding. This deal, too, failed to materialise, reportedly due to complexities in deal structuring and consequent delays in getting regulatory approvals.
In December 2024, Jazz owner Veon and Engro Corp announced a strategic partnership for telecom infrastructure. A press release announced the agreement for the sale of Jazz's 10,500 towers – managed by Deodar – to Engro Corporation's subsidiary, Engro Connect, for $563 million.
Over the past weeks, the Competition Commission of Pakistan (CCP) and the sector regulator, Pakistan Telecommunication Authority (PTA), approved this deal. The sanctioning of "The Scheme of Arrangement" by Islamabad High Court cleared the final obstacle two weeks ago.
It is a matter of concern that the country's largest MNO had to make three separate attempts over eight years to adopt a globally recognised best practice – ironically, a practice that the country should be encouraging as a policy.
Telenor Pakistan also attempted to sell its towers in 2023, by first transferring them to its subsidiary, Orion Towers (Private) Limited. However, the sale was unsuccessful. Frustrated Telenor Group CEO Sigve Brekke publicly stated, "It's very challenging to do business in Pakistan right now. That's one of the reasons why we have decided to exit." Based on recent accounts, even exiting is proving to be a challenge.
Optic fibre networks
Just as MNOs once built separate towers in the same locations, fixed-line internet service providers (ISPs) in Pakistan lay individual fibre cables along the same streets. The data-carrying capacity of optic fibres is virtually limitless and a single fibre cable can easily serve the entire locality.
However, for understandable reasons, the ISPs are reluctant to share fibres with their competitors. This leads to an unnecessary multiplicity of fibres in affluent neighbourhoods and a near-complete absence in less privileged ones. This imbalance is a key factor behind Pakistan's low fibre penetration.
When a service provider invests in a specific locality, a local monopoly gets created, which the ISP likes to keep. All the new ISPs who want to enter the market must lay their own fibres. This acts as an entry barrier for newcomers, especially for smaller ones.
A more efficient approach would be to have neutral telecom infrastructure providers (TIPs) own the fibre networks, which many ISPs could use by paying rent – similar to how TowerCos operate mobile infrastructure. The business model of TIPs relies on fibre sharing among multiple ISPs – the more ISPs that share a TIP's infrastructure, the more TIP's business thrives.
Many countries like Singapore, Sweden and New Zealand follow this model. Pakistan too has a licensing category for TIPs – although work needs to be done on a comprehensive regulatory framework that facilitates both the ISPs and the TIPs and hinders any unfair use of the TIP licence.
The Universal Service Fund (USF) should also shift its focus from subsidising ISPs to neutral TIPs. This shift would enhance the utilisation of deployed fibres.
Concluding
Global benchmarks show that Pakistan's telecom sector has been falling behind. To catch up – even leapfrog ahead – the country must focus on developing its digital infrastructure through policy-backed, neutral infrastructure providers.
Whether for mobile or fixed networks, every policy and regulatory lever should be used to encourage and incentivise (even entice) neutral parties to invest in this critical area. Without a robust, ubiquitous and affordable digital infrastructure, the dream of inclusive Digital Pakistan will remain just that – a dream.
The writer is the former CEO of the Universal Service Fund and is providing telecom (policy and regulation) consultancy services in several countries in Africa and Asia
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