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War of the telcos

Now with the advent of 3G/4G technology in Pakistan, the next big question is how the potential of this industry is successfully tapped

War of the telcos
Courtesy: Flickr.com

The last time there was so much excitement in the air was when cell phones came to Pakistan in 1996. Then too, there was talk of how the technology would revolutionise the way we live, work and socialise. That, we were promised, would be the real game changer. Eighteen years later, the advent of 3G/4G technology on these shores is the newest game in town.

So far, none of the successful bidders in the 3G/4G auction — Mobilink, Telenor, Ufone or Zong — have begun commercial operations and are waiting for the formal award of licenses by the Pakistan Telecommunications Authority. (While Zong has paid its licenses fees in full — in dollars, no less — and Telenor has paid its first installment, the licenses were yet to be granted at the time of writing.) All say that they’ll be ready to begin operations within a few days after.

Meanwhile, all four have rolled out 3G/4G services on a trial basis, with a view to resolving teething issues prior to the commercial launch. The initial plan for all is to focus on the big five metropolises (a few lucky clients in some cities are currently enjoying the service for free) and then branch out, depending on their individual capacity.

Take the example of Telenor. During the 2005 earthquake, the company was heavily involved in relief efforts in the northern areas. To their credit, they were able to utilise this knowledge to plan out their network infrastructure and, accordingly, few have been able to surpass their coverage in the area. Ufone, on the other hand, rules the Punjab airways while Mobilink dominates in urban centres.

But the most interesting case to watch will be that of the sole 4G license winner, Zong. At the time the Chinese company entered the telecom market, the other providers had already reaped the benefits of their investment. Once they hit their respective ceilings, began the telco wars.

In a bid to lure clients away from their rivals, each telco launched grand ‘packages’: more free minutes, more SMSes, better international rates and what not. While these competitive strategies worked with new cell phone users, they were less successful with those clients who didn’t want to change their number. But with the advent ofmobile number portability(the technology that allows one to change one’s carrier while maintaining the original number), the telco wars for a customer base of 126 million became more intense.

There are two million users of broadband technology in Pakistan and 3G/4G services are expected to improve internet penetration by anywhere between 10 million to 20 million, depending on who you talk to.

While the older companies had skimmed the cream already, they could sustain the race to the bottom. But the price wars hit Zong badly because it was forced to compete without having the financial cushion the others had. (In fact, had it not been for the financial muscle of China Mobile, the company would have gone under.)

This is why Zong’s acquisition of the 4G license is significant. In one fell swoop, the company has climbed to the top of the pile since the others have 3G licenses only. Further, the Information Memorandum circulated by the PTA commits that the auction for the leftover spectrum will not be held till 18 months after the April 23, 2014 auction. Accordingly, it will be a while before anyone else — including a new entrant can come onto the same pitch.

While the news of Warid’s seeking permission for the launch of Long Term Evolution technology created flutters in the market, the combined clout of the other telcos will probably prevent this permission being granted anytime soon.

At the same time, Zong is said to be planning major investment — worth at least half a billion dollars — that may just be the final push it requires to enter the big league.

Even so, telecom sector analysts expect 3G/4G technology to provide the players an opportunity to up their game. At present, the Pakistan market comprises two million users of broadband technology and 3G/4G services are expected to improve internet penetration by anywhere between 10 million to 20 million, depending on who you talk to.

Finance Minister Ishaq Dar (right) and Minister of State for IT Anusha Rahman (left) address a press conference on the spectrum auction.

Finance Minister Ishaq Dar (right) and Minister of State for IT Anusha Rahman (left) address a press conference on the spectrum auction.

However, how the potential of this segment is tapped remains to be seen. Already, there are signs of a shift towards the kind of ‘plans’ you see abroad, where the carrier provides phones at subsidised rates for those who sign up for annual coverage plans. There will also be the usual set of ‘packages’ which will flog faster Facebook/Twitter access. There will be others which will be more entertainment-centric (live streaming of songs and videos etc) and a few which will be specifically niche (faster internet browsing, high quality video calls and apps developed exclusively for farmers etc).

But the big question that needs to be addressed is how the regulator intends to tackle the quality issues likely to crop up. Even with 2G, many users have long been complaining of poor voice quality on certain networks and poor connectivity on certain others. Sometimes the text messages are delayed; at others, calls are ‘dropped’. Often, even within a city, you’ll find users complaining about poor coverage in certain suburbs.

Most of these issues have to do with the fact that companies often take on more customers than they can reasonably service and subsequently fail to manage their load efficiently. While there do exist guidelines for service providers, these aren’t rigorously enforced by the regulator because of the influence wielded by the telecom companies who never tire of reminding the government that they are among the largest tax payers in the country.

In this situation, fear analysts, the quality issues are bound to be significant. Even now, people currently using 3G services talk about ‘connectivity jump’ issues between 2G and 3G technology as one moves around a city. Unless all providers gear up to boosting infrastructure, the increase in the number of users is likely to put a significant load on the existing system.

For now, however, the fact that the government managed to hold an auction that has been widely praised as fair and transparent is good enough. That it has also managed to achieve its target — $1.1billion — is another plus. How the government utilises this money eventually is a story for another day.

Sanaa Ahmed

Sanaa Ahmed
The writer is a staffer at The News International. She may be contacted at [email protected]

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