KARACHI: The Pakistan Telecom Authority (PTA) in its recently released report gave an overview of the sector for FY09. “The year was marred by depleting fixed line connections and a marked slowdown in cellular growth,” the report read.
Although cumulative sector revenues rose by 19 percent to Rs334 billion, investment in the sector dropped by 47 per cent to $1.6 billion as most of the foreign operators faced difficult times given tough economic conditions. Broadband emerged as a potential force during the year, the report stated.
The Fixed Local Loop (FLL) segment was the worst performer in FY09 as the subscriber count continued to dwindle. As of Jun 09, subscribers stood at 3.5 million, dropping by over 20 per cent year on year, as infrastructure related issues and lack of investment saw consumers switching to the more convenient Wireless Local Loop (WLL) and cellular technology.
Interestingly, the FLL data for April-June paints a slightly better picture, as subscriber base remained flat hinting that the worst may be over. The move to bundle fixed line with broadband could provide a cushion going forward. Further, the growing clout of WLL should limit the damage to the local loop segment.
The Long Distance & International (LDI) segment performed well as revenues rose by 119 percent to Rs.48billon. Total international traffic (incoming + outgoing) reached 8.9 billion minutes from 7.1bn minutes in FY08 mainly led by 73 per cent growth in outgoing traffic.
A combination of cheaper rates and improved package plans offered by operators helped outgoing minutes reach 2.9 billion; however, increase in Approved Settlement Rates (ASR) curbed growth in incoming traffic to single digits after a three years (FY05-FY08) CAGR of 86 per cent.
The PTA has recently taken steps to resurrect the situation, with a downward revision in ASR, which is likely to assist LDI traffic and reduce the flow of grey traffic. The LDI segment has always remained a major revenue contributor to PTCL (14-15percent of total revenue) and is expected to remain so in the years to come.
Amid higher penetration levels (54.7 per cent in Jun 08), growth in cellular segment slowed to 7 per cent in FY09. Penetration reached 58.2 per cent while cumulative revenues reached Rs212bn, up 17pc.
Industry wide ARPU’s have fallen to $2.5 per month from $3.1/month in FY08 driven by a combination of high degree of low income prepaid customers and intense competition. Resultantly, all major operators barring Ufone (low infrastructure cost thanks to PTCL) are in the red, indicating consolidation is around the corner.
Additionally a detailed observation of the industry statistics, suggests that while urban penetration approaches the maturity phase, there remains untapped potential in the rural areas of Pakistan. Hence, it is expected increased focus from the major operators towards the rural areas particularly in NWFP and Baluchistan. The security situation there though remains a major bottleneck in achieving higher penetration.
The broadband sector remained a major out performer as 246,000 subscribers were added in FY09, taking the total to 414,000 – with PTCL, Worldcall and Wateen having a combined share of 79 per cent. Low penetration level of 0.26 percent, suggests massive room for growth, in our view. Hence we have witnessed an influx of new operators investing in technologies such as DSL, Fiber, WIMAX and more recently EVDO all pointing towards take off in subscriber base in the next few years.
Mustufa Bilwani telecom analyst at JS Research stated, “We expect FY10 to be another challenging period for the sector with low investment and limited avenues for growth. M&A activity, particularly in the cellular segment seems to be on the cards as the segment continues to consolidate. Broadband and other value added segments are likely to drive growth while FLL may see consolidation at current levels.”
