One fine morning I opened my eyes and looked around. To my surprise there were now five GSM Operators offering Telecom services in Pakistan. The monopoly had broken and the war had begun. It’s hard to say who delivered the first blow but every few days, each operator came out with a new package trying to outdo its competition.
Supported by an aggressive media campaign of mudslinging and direct attacks on each other; the war raged on. All we saw were billboards from different companies claiming the same thing: “The cheapest call in the world”.
There was one major difference between a conventional war and this guerilla type urban warfare, which was that the casualties were non-civilian.
The consumer remained unscathed and turned out to be the eventual winner of this scenario. In an attempt to increase the subscriber base, the operators fought furiously with each other and the eventual victor turned out to be the end user. As shocking as it may seem, you, me , we were the ultimate winners of this war and the operators became mere casualties of this conflict. Let me explain this phenomenon in a little more detail.
By reducing their call rates, the operators wanted to gain more market share. ‘Cheapest call in the world’ was the tagline that each operator wanted to make its own. At the turn of the century, both incoming calls and outgoing calls were charged at Rs10 by the only GSM service provider in Pakistan.
Now, incoming is free and most operators offer outgoing call tariffs as low as Rs1/min. One could argue about the greatness of this but there is a catch. Just like any other business, the mobile operators are here to make money. By waging this price war, they shot each other along with themselves in the foot.
With such low call rates, the Average Revenue Per User (ARPU) fell from $9 per month in 2003 to around $3 per month in 2007, and it is forecast that there will be no increase in this for the next five years. This reduction in ARPU is a direct result of this price war.
Pakistan is one of the only markets in the world where the traffic of the telecom networks is increasing but the revenue generated is decreasing. This great achievement can be owed to slogans such as ‘Duniya kee sab sey sasti call’, Rs70 per day and unlimited calls, etc. This low ARPU market is a resultant of the hyperactivity of the telecom operator’s price war and the lack of activity and governance by PTA .
This brings us to our current scenario. Operators have already spent an arm and a leg in obtaining the GSM license; then spent a fortune in infrastructure cost and operational expenditure. After serving seven years in the telecom industry, I can humbly say that our operators are already bleeding financially and it may not make business sense to invest in 3G license and network modernisation.
If the investment in this high potential industry is not made, we will surely not be able to experiment with other technologies which are sweeping the telecommunication arena globally. 3G and LTE will remain words that we will keep hearing about but never get to experience.
Video calling and high speed internet on the phone will remain science fiction for us. But one thing we can be proud of is the fact that we can melodiously sing the song “The cheapest call in the world”. In a country where the literacy rate is optimistically reported at 50 per cent, teledensity is 66 per cent, cellular traffic increases daily but revenue does not. It’s like living in the Bermuda triangle of the Telecommunication World.
The writer is a telecom industry executive
Very well expressed Usman. Being from the Telecom industry myself, I also share your opinion that we may indeed have shot ourselves in the foot. The price war has definitely benefited the consumer (which is a good thing in itself). But somewhere along the way the operators went overboard. Moving from 60 paisa per call to 50 paisa may not make a huge difference to the pockets of the consumer, but puts a dent in our profits… all at the time when the cost of doing business in Pakistan has sky rocketed with rising oil fuel prices (nearly doubled in the last 5 years), the huge power outages and worsening security situation.
All in all it would be madness to invest more into Pakistan unless the business case becomes positive. From being one of the most vibrant and emerging telco markets in the world 5 years ago, we have gone straight in stagnation.
Sad to hear that Tughral 🙁
Well-disposed, succinct and factual.
Usman the cogent effort . In my reckoning, consumer is the beneficiary of this "Lowest Call of the World" in materialistic terms but it has badly affected the morality factor of the nation. PTA is unable or unwilling to make any law to spurn out cheap packages like "Lovers and Ladies packages" from the market. The positive side is if one cannot get the food, atleast he can call to have it from neighbour. lol
Enlightening facts and figures for the public but surely these big companies will have some big plans on how to sustain and grow in the long term.
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