WCIS did record a fall in subscriptions from November to December, although the exact numbers did not match those mentioned in a brief Global Mobile Daily report of 20th January, which noted that Pakistan's total mobile subscription base declined 0.6% at end-December to 89.9 million from 90.4 million in November, according to the telecoms regulator the PTA.
I looked around for an explanation for the contraction in market size late last year. The neatest seems to be the one outlined briefly at the Pro Pakistani telecom & IT news blog earlier this week. The reason given there for that fall in numbers is the loss of subscribers who had failed to register and verify their SIMs. SIM verification is currently quite a contentious issue, the MNOs apparently contending that a new system could compromise privileged information and "hurt the credibility of the cellphone industry."
Mobile operators in Pakistan may not sell active ready-to-go SIMs. Instead, new users purchase an inactive SIM and must then register their details. What is newer is the requirement for operators to furnish the National Database and Registration Authority (NADRA) with their subscribers' mobile phone numbers before the activation of SIMs. The operators reportedly had no objection to providing other data about their customers, e.g. parents' names, address, place of birth etc. This newer requirement, however, has not gone down well with the MNOs, whose leaders are reported to have said that the new clause clashes with their contracts with the PTA, which had allowed them to keep their clients' information secret.
When the Dawn newspaper contacted senior executives of Mobilink, Telenor, Warid Telecom, Zong and Ufone, the responses were strongly worded. "Why does NADRA need our customers' numbers? It's ridiculous. This information is privileged and is only to be provided to the government...if there is a (credible) national security concern as mentioned in the terms and conditions of our licences," said a Mobilink executive. "How will this information be used? It is equally detrimental for companies and subscribers," said another top executive, adding that the new clause might jeopardise the entire mobile industry.
"This was not part of the agreement when we paid Rs291 million licence fees," said a Zong executive. "Licence terms cannot be changed just like that. We are providing [a] public service. We hired more than 300 people, trained them, set up new call centres and brought in expensive new equipment just to make the SIM verification system a success," he said.
From Telenor Pakistan, Dawn's reporter learned that both the PTA and NADRA came down hard on the cellcos, leaving them with no choice but to sign the new agreement. "We were told that this agreement was not negotiable. Without signing it, we will not be allowed to sell SIMs. It's a question of compromising an industry that generates Rs2 billion annually," said a source within the Norwegian-owned MNO
"Unjustifiably, NADRA had earlier raised the verification fee by almost 200 per cent," said a representative for Warid Telecom.
After all this fuss in January, the operators appear to have been working quite hard to win back lost custom. Reduced rates have been a quick remedy.
Naeem Pani Wala, a Pro Pakistani contributor, wrote last month about the resulting 'Paisa war', taking note of Zong's especially aggressive undercutting of market-leading Mobilink. "Despite the fact that current economic situation doesn’t allow low pricing," writes Naeem, "we know that this doesn’t matter much for [the] Chinese and they beat the competition with low rates."
Naeem analyses the various TV advertisements run by Pakistan's MNOs. His view seems to be that, being unable to compete with Zong purely on price, Mobilink has decided to focus on coverage and quality of service, as in this ad:
Naeem feels this is a good approach, enabling Mobilink to remain highly visible to consumers "without investing much on packages." According to Naaem's article, Telenor Pakistan seems to be staying out of the hottest price war action and focussing its efforts on dominating the high value post paid space, as explified by this advertisement:
Over time, I assume we will see figures indicating that while Pakistan's cellcos have managed to get back onto the subscriber growth path, the price war reported by Naeem is affecting earnings.
A South Asian market where there already seems to be confirmation of this is Sri Lanka. Cellular News reported earlier this week that market-leading Dialog Telekom has suffered a sharp drop in prepaid ARPU, which fell by 22.6% from Q4 2007 to Q4 2008. "Sri Lankan consumers may have been unpeturbed by local or global economic circumstances in 2008", says the Cellular News artcle, "but Dialog was not. Despite the strong customer growth, annual revenues grew by just 1.0% to SLR 33,108m. A 48.4% rise in costs saw gross profit down 26.0% to SLR 15,478m, while EBITDA fell 41.6% to SLR 8,370m. Fourth-quarter EBITDA was even worse hit, a massive 75.6% decline taking the figure to SLR 740m from SLR 3,027m in Q4 07. This was partly due to exceptional items, but even on a normalised basis there was a fall of 51.6% to SLR 1,466m."
While subscriber growth looks good in principle, it does seem that South Asian markets are at the stage where operators have realised that extending the availability of services to ever less affluent population segments will mean higher costs and steadily declinding ARPU. Let's see how many of the region's operator suffer significant hits to EBITDA as a result.
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