Big data theory: Making a case for 3G in a low ARPU market
Data is the next big thing and the Pakistan market is at the right stage of maturity.
It is believed that a significant number of broadband users will eventually shift to 3G and subsequently 4G as a more reliable way to stay connected. PHOTO: FILE
KARACHI:
The bulk of the Pakistan cellular market comprises prepaid users and as such Average Revenue Per User (ARPU) for the local industry is not very high. In most cases monthly data packages, which currently are limited to painfully slow GPRS are utilised mostly by post-paid users and very rarely by pre-paid.
Smartphone penetration is rising but is still a small chunk of the market with feature phones still the first choice for the majority of the consumers whose main mode of communication is voice and text.
So will 3G even be able to get a foothold in the market? A lot of nay-sayers are still convinced that the service will be way too expensive and will not be able to garner a significant chunk of the local market.
The case against 3G
Looked at from a very simplistic point of view, there is limited scope for 3G growth in Pakistan. The market is still young compared to the developed world and as we already mentioned the low industry ARPU – ranging from a low of Rs151 for Zong to about Rs179 for Warid – does not indicate that there will be many takers for a technology that is not going to be cheap.
Globally the next big thing in telecom, as far as future earnings is concerned is going to be data and so far that is not even a market segment in Pakistan. The earnings can pretty much be divided into two segments, voice and text. Text has already started to take a hit with the rise in free messaging apps like Whatsapp, Viber, etc.
The lack of any active flow of services that are eager to make use of 3G is also a concern. So far there is no indication that any work is being done that will produce a demand for this technology. Just faster browsing alone will not be able to sustain the amount of investment that 3G will absorb
With the steady increase in smartphone penetration, the use of these free messaging apps is also going to increase. So on the one hand SMS revenues will drop and the size of the 3G-ready platform will continue to increase. But the fact that there is a platform does not indicate that there will be returns, not yet anyway.
The case for 3G
But if we take another look at the industry, then Pakistan seems to be a market that could gain a lot from 3G and might also be good for 3G and telecoms that bid for, and succeed in getting a licence.
Broadband usage in Pakistan has been increasing at a steady pace over the past five years and it is expected that this will be one the growth drivers for 3G once the service of becomes commercially available. The number of subscribers has tripled in the last four years and this growth is expected to pick up pace as technology leads to falling costs and better products.
It is believed that a significant number of broadband users will eventually shift to 3G and subsequently 4G as a more reliable way to stay connected, and give up on the low quality copper infrastructure that still makes up the bulk of the local telecom backbone.
The other reason one feels 3G will work is the fact that many telecom players will start to offer bundled services. They all know that there is only so much more growth in earnings from voice and text. So they will start offering data packages bundled with free voice and text airtime.
The fact that Pakistan is largely a rural country also indicates that there is great scope for 3G and its utility in mobile health, mobile education and mobile government. Many industry players believe that once 3G is available, services and products that can make use of the service will also start to crop up.
Pent-up demand is a term that is being thrown around a lot, and it could very well be the case.
Published in The Express Tribune, October 14th, 2013.
The bulk of the Pakistan cellular market comprises prepaid users and as such Average Revenue Per User (ARPU) for the local industry is not very high. In most cases monthly data packages, which currently are limited to painfully slow GPRS are utilised mostly by post-paid users and very rarely by pre-paid.
Smartphone penetration is rising but is still a small chunk of the market with feature phones still the first choice for the majority of the consumers whose main mode of communication is voice and text.
So will 3G even be able to get a foothold in the market? A lot of nay-sayers are still convinced that the service will be way too expensive and will not be able to garner a significant chunk of the local market.
The case against 3G
Looked at from a very simplistic point of view, there is limited scope for 3G growth in Pakistan. The market is still young compared to the developed world and as we already mentioned the low industry ARPU – ranging from a low of Rs151 for Zong to about Rs179 for Warid – does not indicate that there will be many takers for a technology that is not going to be cheap.
Globally the next big thing in telecom, as far as future earnings is concerned is going to be data and so far that is not even a market segment in Pakistan. The earnings can pretty much be divided into two segments, voice and text. Text has already started to take a hit with the rise in free messaging apps like Whatsapp, Viber, etc.
The lack of any active flow of services that are eager to make use of 3G is also a concern. So far there is no indication that any work is being done that will produce a demand for this technology. Just faster browsing alone will not be able to sustain the amount of investment that 3G will absorb
With the steady increase in smartphone penetration, the use of these free messaging apps is also going to increase. So on the one hand SMS revenues will drop and the size of the 3G-ready platform will continue to increase. But the fact that there is a platform does not indicate that there will be returns, not yet anyway.
The case for 3G
But if we take another look at the industry, then Pakistan seems to be a market that could gain a lot from 3G and might also be good for 3G and telecoms that bid for, and succeed in getting a licence.
Broadband usage in Pakistan has been increasing at a steady pace over the past five years and it is expected that this will be one the growth drivers for 3G once the service of becomes commercially available. The number of subscribers has tripled in the last four years and this growth is expected to pick up pace as technology leads to falling costs and better products.
It is believed that a significant number of broadband users will eventually shift to 3G and subsequently 4G as a more reliable way to stay connected, and give up on the low quality copper infrastructure that still makes up the bulk of the local telecom backbone.
The other reason one feels 3G will work is the fact that many telecom players will start to offer bundled services. They all know that there is only so much more growth in earnings from voice and text. So they will start offering data packages bundled with free voice and text airtime.
The fact that Pakistan is largely a rural country also indicates that there is great scope for 3G and its utility in mobile health, mobile education and mobile government. Many industry players believe that once 3G is available, services and products that can make use of the service will also start to crop up.
Pent-up demand is a term that is being thrown around a lot, and it could very well be the case.
Published in The Express Tribune, October 14th, 2013.