Pakistan Telecommunications Report Q3 2007

Focusing this quarter on Pakistan's wireless market, BMI's Pakistan Telecommunications Report analyses the country's increasingly competitive and high-growth mobile market. We are very bullish about prospects for continued growth in Pakistan's mobile market. Not only is consumer demand prevalent, but the government and regulator have created a telecoms regime that has been successful in attracting inward investment. This can be seen most recently from Orascom electing to take outright control of its mobile unit Mobilink, but also from China Mobile's brave decision to take complete ownership of Paktel and to re-brand that ailing company as CMPak, and SingTel's eagerness to buy into Pakistan's growing market. It was this that drove the Singaporean operator to acquire a 30% stake in Warid Telecom for US$758mn in June 2007. Other smaller examples of investment in Pakistan's fixedline sector from Qatar Telecom and Omantel are further evidence of an attractive telecoms regime.

Our five-year forecasts remain on track. We estimate that with all Pakistan's mobile operators looking to extend their reach further into Pakistan's rural market there will be over 17mn net additions in the second half of the year, taking the country's overall subscriber base to 80mn by the end of the year. This would mean a 10 percentage point rise in the country's penetration rate as Pakistan reaches the 50% level. The competition between Mobilink, Ufone, Telenor and a Warid Telecom boosted by SingTel's involvement should spur such a rise in customer numbers. BMI's forecasts suggest that there will be over 100mn subscribers by the end of 2008 and that Pakistan's mobile market will be home to 130mn subscribers at the end of 2011, accounting for 75% penetration.

A note of warning to Pakistan's government comes from the country's operators and the GSM Association. The levels of tax paid by carriers have increased quite significantly recently and could be seen as representing a hindrance to operators currently seeking to further their investment. Nevertheless, BMI notes the importance of the role played by the government and the Pakistan Telecommunication Authority (PTA) in driving growth in Pakistan's mobile market. At the end of 2004, there were just 5mn mobile subscribers and, if our forecasts are correct, there will be a total of 75mn net additions in just three years. Without question a key factor behind this phenomenal growth has been the US$9bn of foreign investment in the last three years. With at least another US$4bn of funds expected over the next three to four years, BMI is confident that this growth can continue until the end of our forecast period and beyond. Indeed, comparisons with neighbouring India are relevant, where a highly competitive market has driven similar levels of growth over a longer time period, and is beginning to result in high levels of take-up in rural areas of the country.