2005 has ushered two new players - Al Warid and Telenor - into an already competitive Pakistani mobile market, which now boasts six mobile carriers who provide services over a variety of platforms - AMPS, TDMA, GSM, and GPRS/EDGE. Despite this sudden increase in competition, the country's largest operator continues to add subscribers at breakneck speeds and defy analyst expectations. Mobilink, owned by Egyptian giant Orascom Telecom, added over 3m subscribers last year, or 65% of the country's net additions, and remains on track to record another stellar performance in 2005.
GOING WHERE NO OPERATOR HAS GONE BEFORE:
-- Mobilink's success in the Pakistani market rests on two things - expanding coverage and streamlining tariffs. During the year Mobilink recorded a 60% increase in its capital expenditures, investing $340m into the Pakistani mobile industry.
This enabled the operator to extend its reach to over 300 cities and towns in the country, besides providing mobile connectivity to thousands of rural villages.
With this, Mobilink possesses the country's most extensive mobile network yet, and the results are there to show - besides accounting for 65% of the country's 2004 net subscriber additions, their expansive growth has prompted the Pakistani regulator to raise its projection of the country's mobile penetration rate from 10% to 25% by 2010.
The operator was also the pioneer in streamlining tariffs for local vs. domestic tong distance calling, while drastically reducing on-network calling charges, contributing to its stellar 2004 performance and prompting competitors to follow suit.
-- With the introduction of GPRS this year and expansion of its coverage even further, Mobilink has also almost single-handedly raised the expectations of the entire country, while highlighting the potential of the country's mobile industry to foreign vendors and investors alike.
Over a mere six months, we have revised upwards our estimates for the country's mobile penetration rate and subscriber base by a factor of two, to reflect this breakneck growth experienced by Mobilink in the Pakistani mobile market.
This new estimate may not be enough, since recent reports suggest that the country has added over 2m subscribers in the last 3 months and had already broken the 10m subscriber barrier at the end of April 2005. As Exhibit 2 reveals, we expect the penetration rate in Pakistan to rise to 21% by 2009 as operators add over 28m subscribers through 2009.
EXHIBIT 2: Pakistan Net Subscribers Additions and Penetration, 2001-2009
NET SUBSCRIBER ADDS PENETRATION RATE:
-- With the recent entrance of two new operators, one of them being backed by the Norwegian operator Telenor, and its primary competitor, the government-owned Ufone, both being hot on its heels, Mobilink has reached the peak of its dominance in the Pakistani mobile market. Although increasing over the last few years to a high of 63% in 2004, Mobilink's market share is slated to drop starting 2005.
This will be due in part to Telenor introducing the country's most extensive GPRS network and touting its network quality in an effort to lure Mobilink's enterprise and high-usage subscribers. Moreover, U-fone will try to bite away at Mobilink's prepaid subscriber base by emulating the operator's pricing strategy, streamlining per minute tariffs across the country.
As Exhibit 3 depicts, this will result in Mobilink's market share dropping to 52% by 2009, as the country's two new entrants begin to channel roughly 20% of all new subscribers towards their networks.
EXHIBIT 3: Pakistan Market Share by Operator, 2000-2009
SOURCE: Pyramid Research Mobile Advisory Service
-- If Mobilink continues to invest in expanding coverage, but does not augment that spending with investments in technological upgrades, it will slowly erode its base of the corporate subscribers, which it claims currently represents 90% of the country's total corporate mobile subscriber base.
By looking towards potential corporate users, Telenor is positioning itself as a high-value provider operating a superior quality network. It is already the first operator to claim 100% of its GSM network to be GPRS-enabled, because its initial GSM launch included a GPRS launch as well.
Very soon we also expect Telenor to launch EDGE, given that the migration to EDGE would likely require a software-only upgrade since the current GSM equipment it's deploying is already EDGE-capable. If Mobilink is unable to deploy such high-speed networks, at least in the country's major cities, and enhance its portfolio of non-voice applications (which currently include SMS and WAP over GSM), it increasingly stands as being branded the provider of the masses, while Telenor steals the title of being the provider of the class.'
MOBILINK - THE GIANT:
-- However, as Exhibit 3 shows above, Mobilink will remain the giant in the Pakistani mobile industry. Its 52% subscriber market share will translate into a 50% revenue market share by 2009, as it generates over US $lbn in annual service revenues starting 2006.
Nevertheless, the new entrants, led by Telenor, will manage to take a bite size equalling 25% of the total market revenues by 2009, as they continue to focus on quality and increasing usage, while Mobilink and Ufone continue to extend their reach to the country's thousands of towns and villages.
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