In a year of political transition, the telecom sector continued its steady pace. Quite a lull, in other words! No major auction took place this year. Total tele-density failed to break through the 75 percent mark. PTCL, the market leader, kept struggling to grow its top-line. The events that did make waves in 2018 – e.g. Alipay and Alibaba investing in local payments and e-commerce, respectively – will perhaps see some tangible follow-up next year.

Meanwhile, the telecoms sector is again hitting saturation zone – this time with the next-generation mobile services. Mobile broadband subscriptions (3G+4G) have nearly flat-lined to 60 million as of November 2018, PTA data show. The growth in 3G subscribers came in trickles this year. Ufone did stage a comeback this year, only to poach other operators’ 3G users. The 4G network, however, continued to grow healthy, thanks to Zong, which, in fact, now has more 4G subscriptions than 3G.

The year marked another low in terms of FDI. Calculations based on SBP data show that in Jan-Nov 2018 period, net FDI for the sector was only $0.6 million – for year-on-year lower gross inflows ($175 mn) were nearly wiped out by the outflows. In what can be interpreted as the sector’s continued lack of momentum, this abysmal FDI performance was somewhat better than same period last year when net FDI came in at negative $52 million – for the gross inflows ($221 mn) couldn’t sustain the outflows.

Making the matters is the fact that telecom FDI inflows have declined to a point where they are at same or at lower level than the profit repatriation taking place from within the sector. SBP data show that the telecoms profit repatriation stood at roughly $172 million in the Jan-Oct period this year. Though this figure is down by more than a quarter from the $235 million sent out in the same period last year, it still raises the question of sustainability. (For more context, read ‘Telecoms: big on repatriation; short on FDI,’ published November 20, 2018).

The sectoral data makes it clear that the 2014 mega-auction of 3G and 4G licenses proved a game-changer for the sector – after a long wait of more than five years. Substantial investments were also made in the following two years, leading to creation and expansion of the 3G and 4G user bases. Those efforts were instrumental in raising the sector’s top-line as well as expanding the profit margins. Besides, the digital ecosystem, of which there are many nodes, got the needed boost.

But now the sector again looks stuck, if recent numbers are anything to go by. Short of another mega auction, this will continue to be the case in 2019 as well. The odds of another auction happening soon are low. However, the telcos, most of which have foreign parent groups, seem to be doing well, as depicted in profit repatriation numbers. Hence they may like to squeeze existing investments first. Let’s see what the PTI-led government, which is yet to form a coherent sector strategy, has in store for telecoms in 2019.