Pakistan and India's Telecommunication Industry: A Critical Analysis

Pakistan and India Telecommunication industry: a critical analysis
INDIA SIDE
Telecom statistics November’05 December’ 05 January’06
Total subscribers 119.9mn 123.85mn 129.82mn
Tele-density 11.00 11.43 12.00
Fixed line 48.47mn 48.93mn 49.21mn
Additions during the month 0.28mn 0.46mn 0.28mn
Mobile 71.46mn 75.92mn 80.61mn
Total additions during the month 3.51mn 4.46mn 4.69mn
GSM additions 2.32mn 3.19mn 3.52mn
CDMA additions 1.18mn 1.17mn 1.17mn

India’s tele-density in January 2006 neared 12% with the subscriber base nearing the 130mn mark. During January 2006, record 5mn subscribers were added as against 4.92mn subscribers in December 2005. This strong growth could be attributed to lifetime validity cards launched by almost all operators. During the first 10 months of FY06, 31.41mn subscribers have been added. In the fixed segment, a total of 0.28mn subscribers were added during January 2006, taking the subscriber base of fixed line services to 49.21mn. In the mobile segment, total additions during the month summed up to 4.69mn with highest ever GSM additions of 3.52mn and CDMA additions of 1.17mn. During the first 10 months of FY06, 28.39mn subscribers have been added.
Bharti set to raise FDI limit to 74%
Bharti Tele-Ventures has proposed to raise the foreign direct investment (FDI) ceiling to 74% from the present 49%. The private telephony major has placed a special resolution seeking shareholders' permission. In a letter to shareholders, Bharti said the move was "to comply with the terms and conditions incorporated in the licence agreement by DoT." The government through the press note 5 (2005 series) dated November 3, 2005 has enhanced the FDI ceiling from 49 per cent to 74 per cent in telecom. The company is also mulling over amending its `Article of Association', which states the maximum number of directors cannot exceed 18, so that it can induct three more members. To comply with the listing agreement requirement, FDI guidelines, other statutory requirements and shareholder agreements, the company is required to broaden its base. It is, therefore, proposed to amend article 117(a) of the Article of Association to increase the existing limit of 18 to 21. The existing article will be replaced by a new one, which would state that the company's management will comprise not less than eight and not more than 21 directors, "unless a greater number is required for legal, regulatory, listing requirements or to meet the provisions of the shareholder agreement". However, this is subject to government approval.

Mobile telephony update
Mobile telephony services are rapidly expanding and have contributed approximately 941% to new subscriber additions in January 2006. The segment’s subscriber base grew 5.16% mom to 80.61mn. Of the total subscriber’s added, almost 75% subscribers belonged to the GSM segment and the rest were CDMA segment. This strong growth is largely attributed to the lifetime validity cards launched by all major operators.
Market share of mobile subscribers

GSM mobile segment
India's GSM mobile operators added record 3.52mn subscribers in the month of January. The highest ever addition since inception of service was largely due to life time cards and falling handset prices. The total GSM subscriber base increased by 6% to 62mn
The growth was largely due to the life time validity cards launched by major players. The month saw the addition of 3.52mn subscribers as compared to 3.2mn in December 2005.
The growth was led by BSNL, which added over 1mn subscribers. Growth came from AP, Karnataka, Kerala, and West Bengal circles. Bharti added over 1mn subscribers led by Karnataka, Maharashtra, NE, Orissa, AP and Mumbai regions.
MTNL, the state run PSU added over 0.1mn subscribers. For MTNL, Mumbai witnessed a growth of 7% and Delhi 6.7%.

GSM subscribers
Group Company Subscribers as of December'05 Additions In Jan Subscribers as of January'06 (%)Growth
Bharti 16,327,150 1,046,020 17,373,170 6.41
BSNL 14,298,890 1,074,110 15,373,000 7.51
Hutch 11,413,277 772,583 12,185,860 6.77
IDEA 6,473,962 258,579 6,732,541 3.99
BPL 2,889,698 5,825 2,895,523 0.20
Spice 1,627,081 90,397 1,717,478 5.56
Aircel 2,282,044 99,006 2,381,050 4.34
Reliance 1,664,700 65,148 1,729,848 3.91
MTNL 1,526,422 104,252 1,630,674 6.83
Total 58,503,224 3,515,920 62,019,144 6.01
Source: COAI
GSM MARKET SHARE GSM SHARE OF NET ADDITION

The Metro subscribers grew by 3.70% over the previous month. Kolkatta recorded the highest growth at (5.21%) followed by Chennai (3.86%).
Category A circles recorded a healthy growth of 6.85% over the previous month. Karnataka recorded the highest growth at (11.3%) followed by A.P. at (7.8%).
Category B circles witnessed a growth of 6.2%. Amongst the Category B circles, West Bengal & A.N. recorded highest growth at (14%), followed by Kerala at (8.8%).
Among all circles, Category C circles continued to witness the highest rate of growth at 8.3%, which is much higher as compared to Metros and A & B circles. Within the Category C circles, the highest growth was recorded by the Assam Circle (14.22%) followed by N.E. Circle (10.86%).

Circle wise subscriber addition
Circle December January Subscribers Subscribers (%)Growth % Share
Metro 13,963,036 14,479,449 3.70 23.3
A 20,474,324 21,876,761 6.85 35.3
B 19,253,132 20,449,705 6.21 33.0
C 4,812,732 5,213,229 8.32 8.4
Total 58,503,224 62,019,144 6.01
Source: COAI
CDMA mobile segment
CDMA subscriber’s base grew 7%mom to 17.96mn with Reliance a chunk of additions in subscriber base. Tata witnessed a 10.3% mom growth in subscriber base, crossing the 4mn mark. This phenomenal growth witnessed over the last two months is largely due to the 2-year non-stop incoming mobility scheme (NSM) from Tata. Reliance witnessed a 6.2% growth in the month of January. Reliance is gradually losing its market share to Tata but still remained a market leader with a total subscriber base of 13.8mn
CDMA subscriber data
Group Company Subscribers as of December'05 Additions In Jan Subscribers as of January'06 (%)Growth
Reliance 13,014,967 804,207 13,819,174 6.2
Tata 3,680,609 380,595 4,061,204 10.3
HFCL 63,809 1,895 65,704 3.0
Shyam 27,490 (297) 27,193 (1.1)
MTNL 126,022 (10,904) 115,118 (8.7)
Total 16,786,875 1,175,496 17,962,371 7.0
Source: AUTSPI,
Market share of CDMA operators CDMA share of net additions

Fixed line
During January 2006, 0.28mn subscribers were added in the fixed line segment and the total subscriber base stood at 49.21mn. During the first 10 months of FY06, about 3.5mn subscribers have been added. Growth in fixed line segment continues to be driven by the fixed wireless terminals.
Fixed Wireless Terminals (FWT)
FWT continues to be one of the fastest growing segments with 3.7% mom growth. Tata maintained it leadership position in FWT segment with 57.9% market share amongst private players. In net additions, Reliance led with 90% share. However, Dot’s latest ruling removing FWT service from the ambit of basic service and instead terming it a ‘limited mobile service’ liable to ADC levy may be a serious blow to the growth of this segment.
Subscriber data of private players in FWT
Group Company Subscribers as of December'05 Additions In Jan Subscribers as of January'06 (%)Growth
Tata 3,636,051 21,049 3,657,100 0.6
Reliance 2,363,667 197,724 2,561,391 8.4
Bharti 22,858 15 22,873 0.1
HFCL 41,594 4,511 46,105 10.8
Shyam 27,412 856 28,268 3.1
Total 6,091,582 224,155 6,315,737 3.7
Source: AUTSPI
Market share of private players in FWT Share of net additions of private players

Fixed wire line segment
The subscriber base of private operators in fixed wire line segment crossed the 2.1mn mark with the segment witnessing 3.2% mom growth. Bharti continued with its top position among private players with a 55.9% market share. Last month witnessed Bharti starting its operations in Mumbai. It has a subscriber base of 12,361 subscribers in Mumbai.

Subscriber data for private fixed wire line players
Group Company Subscribers as of December'05 Additions In Jan Subscribers as of January'06 (%)Growth
Bharti 1,176,655 44,017 1,220,672 3.7
Tata 406,916 4,598 411,514 1.1
HFCL 197,773 1,665 199,438 0.8
Shyam 140,009 794 140,803 0.6
Reliance 204,040 6,500 210,540 3.2
Total 2,125,393 57,574 2,182,967 2.7
Source: AUTSPI
Market share of private players in FWT Share of net additions of private players

Source: AUTSPI

PAKISTAN SIDE
Telecommunication sector of Pakistan is one of the fastest growing in the region. It has shown excellent upward trends over the past three years. Mainly owing to implementation of deregulation policies, the services have improved and rates of telecom products have come down significantly. The inception of new telecom operators has not only facilitated in increasing Foreign Direct Investment (FDI) but also provided thousands of new direct and indirect employment opportunities.
The current telecom indicators available with the Pakistan Telecom Authority (PTA) show that the Pakistan stands out in the telecom growth patterns. FDI in telecom sector, for instance, remained US$ 494 million bringing telecom share to 32.44 percent in the total FDI during 2004-05 reflecting a quantum leap over the last year in the investment coming from foreign countries.
The telecom portion in total FDI was just 1.26 percent with US $ 6.1 million in 2001-02. And during July 2005 to December 2005, FDI worth US $ 304 million poured into telecommunication business. The revenues collection from the telecom sector presents the same picture. In the year 2004-05 Rs. 20.5 billion was collected from this sector on account of GST/CED which were Rs. 12.1 billion in year 2003-04.
Foreign Direct Investment in Telecom Sector
(US $ million)
Years Total FDI FDI in Telecom Sector Percentage Contribution in
Total FDI
2001-02 484.7 6.1 1.26
2002-03 798 13.5 1.69
2003-04 979.9 207.1 21.13
2004-05 1524 494.4 32.44
Now turning to the penetration of telephone service in the country. The over all teledensity of the country has risen to 18.81 in January 2006 as compared to 6.25 in 2003-04.
Years Total Tele density (%)

2000-01 2.80
2001-02 3.66
2002-03 4.31
2003-04 6.25
July-05 12.76 Aug-05 13.67
Oct-05 15.66
Nov-05 16.47
Dec-05 17.78
Jan-06 18.81
Pakistan Telecom Authority endeavors to serve the telecom sector of Pakistan for its growth and development while regulating and promoting new technologies and services, introducing competitive operators on fair grounds and protecting consumer interests. Pakistan’s Telecommunications Market:
In April 2004, the Pakistani Ministry of Telecommunications awarded two new mobile licenses, bringing the total number of licenses in Pakistan to six. Ufone, the state owned GSM operator re-launched its services during the year-returning to the market after a gap of more than a year. Paktel also converted to GSM technology and launched its services aggressively. In addition to these the government of Pakistan issued two new GSM licenses in the Pakistani market; Telenor which started its operations in the first quarter of 2005, the other operator Al-Warid started their operations in the first half of 2005. Mobilink’s recognition within the market, its history of cash generation and profitability, the support of its majority shareholder, and the existing coverage and quality of its network provide Mobilink with a strong foundation on which to consolidate its market leadership and increase the competitive pressure it can impose on the existing operators.

Mobile phone operators
Mobilink

Mobilink the market leader in Pakistan's cellular communication remains at the top. Entrance of new companies into the cellular scene did not hurt the growth of Mobilink's subscribers and even could not force them to slash their tariff to such a low level, which other cellular companies had to.