PTA makes a business case for 3G spectrum in Pakistan

Regulator backs up arguments with data amidst several international players backing out of auction.

KARACHI:

As some of the world’s leading telecom operators showed lack of interest in the upcoming auction of cellular licence in 3G spectrum, the industry experts raised a question: is it even viable to run 3G networks in Pakistan? The Pakistan Telecommunication Authority argues that it is and backs up their claims with data and case studies.

Questions were raised when earlier this month, Vodaphone and Orange Mobile confirmed they were not interested in the auction. Qatar Telecom (Qtel) also hinted they were not interested in 3G.

An official from Qtel’s local subsidiary Wi-tribe confirmed on the condition of anonymity that Qtel is not interested in 3G at this time. “Most people do not even use 2G. Why would they need 3G spectrum for e-mails, browsing and chatting?” he said.

“3G is all about data service and content,” an industry expert said. requesting not to be named. “One needs this high speed data service to run rich applications, streaming videos for example. Some 65% of Pakistan’s population lives in rural areas and can’t speak English. The country needs to develop local content that can be consumed using 3G service. Unless people have content in local languages, it doesn’t make a business case for any new player.”

While the expert stressed on developing content for 3G, PTA argued launching the spectrum will automatically lead to content development.

“Demand for data is increasing and the availability of infrastructure (3G) will enhance usage of data services and improve the content development, which will make business case for a new player,” PTA’s chairman Mohammed Yaseen said.

The PTA chief also said it was a misconception that the average revenue per user (ARPU) is low in Pakistan. “The ARPU of voice services for 2G should be relevant to economies of scale,” he said, adding, “3G enhances ARPU in any case.  There are case studies of developing countries where introduction of 3G increases the ARPUs of operators like in Egypt.”

Pakistanis, Yaseen said, are already using 17 million smart phones. The import and adoption of smart phones is very high and is increasing every year while more people are using tablets, he said. The use of these devices is not expected to decrease by any chance, which means appetite for “wireless high speed internet on move” will also increase; he said.

Additionally, Yaseen said, there are consumers who want to use data services on their handsets. However, they have either not subscribed to it or subscribed to it but don’t use it because of low speed and freezing of the operating system – Last year’s BBM outages frustrated the users for example.

Personal Computer (PC) internet usage is stagnant for the last three years due to cost of PC, he said. However, the internet usage by mobile phones is increasing exponentially, he said, presently 13 million people are using mobile internet.  “It shows the growth potential of mobile phone internet usage,” he added.

Presently the data contributions to the ARPU range from 12% to 17% as calculated by PTA, he said.

The experts have also argued the base price – $210 million – is high. The base price, PTA chief said, was calculated keeping in view various factors and international best practices and was smaller than some markets of smaller economies where 3G was auctioned.

Whether or not a new player should enter the market is debatable. The existing players, however, seem to be gearing up for the much delayed auction. Mobilink, Ufone and Zong have confirmed their participation and even upgraded their telecom hardware to 3G.

Despite the global economic recession, there is an enabling environment for cellular business in Pakistan; Mobilink president Rashid Khan said. Referring to the base price for 3G auction, he added, it was reasonable and determined on the basis of telecom policy.

Ufone will be the first to compete for a 3G license in Pakistan; said Walid Irshaid who is the CEO and President of PTCL – parent company of Ufone. “We have no option but to succeed,” he said. It is going to be really difficult for the 2G “leftover” operators in the post-3G environment, Irshad said, because high revenue-generating subscribers would switch over to 3G networks.

Published in The Express Tribune, March 21^st, 2012.