Telecom Sector Outlook and Spectrum Trading: the Case of Pakistan

Shahbaz Nasir

Pakistan Telecommunication Authority

ITU Workshop on Economic Aspects of Spectrum Management21st 23rd November 2016

Tehran - IRAN

Pakistan: an overview

Pakistans Telecom Market

National Spectrum Management Structure

Telecommunication Policy 2015

Spectrum Trading Framework Under Consultation

Outline

2

Pakistan : An Overview

Key Stats

Pakistan

Income /Capita US $1560 Literacy Rate 60% Median Age 21.2 Geo-strategic Location

Land Area 796,095 km2

36th Largest Area

Population, mil 195 (6th Largest Population)

Pakistan has the 6th largest population in the world, making it an attractive market for global investors

Gross Domestic Product (GDP): USD 285 billion

GDP Growth in 2016: 4.7% (expected to cross 5.7% in 2017)

Population is young and becoming more educated

Urbanization trend is expected to continue, reaching a level of 45% by 2030

3

Telecom Market in Pakistan

Cellular Mobile

Network Operators

5

Fixed Local Loop

Operators

17

Wireless Local Loop

Operators

12

Long-Distance and Intl

Operators

16

Value Added Service

Providers

533

All the five MNOs are providing mobile financial services

4

Telecom Market Size

Data Revenues of Cellular Mobile Operators

Telecom Revenues

5

Competitive Market

Cellular Mobile Market Share

6

Telecom Services in Pakistan are the most affordable in the World: consumers get benefited from competition

1.68

1.38

0.930.77

0.60

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2010-11 2011-12 2012-13 2013-14 2014-15

Rs.

per

min

ute

Cellular Voice Revenues (Price) per Minute

Cellular voice revenues per minute (Price per voice minute) have been calculated from the overall outgoing cellular minutes and cellular voice revenues. This approximately shows the average effective tariffs of voice calls per minute in the cellular mobile market of Pakistan.

According to World Economic Forum Report (Network Readiness

Index), Pakistan is ranked No. 1 in affordability index.

7

THE M-BANKING MARKET IN PAKISTAN

1,055

2,639

6,668

8,827

13,734

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Dec 12 Dec 13 Dec 14 Dec 15 Jun 16

Rs

mill

ions

59

120.9

191.9

278.4

375

0

50

100

150

200

250

300

350

400

2011 2012 2013 2014 2015

In m

illio

ns

(As of month end) (during Jan to Dec)

Growth 105% 59% 45% 35%

492

802

1,353

1,872

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2011 2012 2013 2014 2015

Rs

bill

ions

Amount transacted through m-banking accounts

Growth 135% 63% 69% 38%

Source: State Bank of Pakistan

(during Jan to Dec)

8

PROLIFERATION OF MOBILE BROADBAND IN PAKISTAN : ENABLING GROWTH IN DIGITIZATION OF SERVICES INCLUDING M-AGRICULTURE, M-COMMERCE)

PTA conducted successful spectrum awards in 2014 and 2016

2014

Auction for spectrum of Next Generation Mobile Services (3G in 2100 MH and 4G in 1800 MHz) held on 23rd April, 2014

Award of additional 40 MHz spectrum to Mobilink (10 MHz),Telenor(5MHz), Zong (10 MHz for 3G and 10 MHz for 4G) and Ufone(5 MHz) for 3G/4G services

2016

Award of 10 MHz in 850 MHz for 3G/4G services to Telenor in July 2016.

Telenor has started 4G services

3.8

11.4

16.9

37.0

0

5

10

15

20

25

30

35

40

Jun 14 Dec 14 Dec 15 Sep 16

Bro

adb

an

d s

ubsc

rib

ers

(I

n m

illio

ns)

Extra-ordinary response to 3G/4G services

Warid also carved out 5 MHz spectrum out of the spectrum it had, to offer LTE services.9

GROWTH OF MOBILE BROADBAND HAS BEEN FURTHERFACILITATED BY THE MERGER OF MOBILINK AND WARID

Integrating network assets will create better quality mobile network, and new products and services at scale, e.g., mobile financial services, mobile apps, value added services

Cost efficiencies will lead to investment for availability of broadband services in underserved areas

The merger is expected to contribute to overall industry growth and competitiveness

10

GROWTH OF MOBILE BROADBAND HAS BEEN FURTHERFACILITATED BY THE MERGER AND SPECTRUM AWARD 2016

Award of 10 MHz in 850 MHz spectrum to Telenor and Merger have increased competition in 4G/LTE services

Zong, Telenor and Mobilink /Warid are offering 4G/LTE services to their customers

Zong26

Million

Telenor38

Million

Mobilink/ Warid

51 Million

0

20

40

60

80

100

120

(In m

illio

ns)

Zong26

Million

Warid 11

million

0

20

40

60

80

100

120

(In m

illio

ns)

Note: Accessibility is defined as total number of subscriptions that can avail or have access to 4G/LTE network 11

Extensive Data Usage on 3G Networks

1,243 1,322

1,601

1,887 2,392 2,837 2,583 3,021 2,954 3,070 2,892

3,503 3,196

363

691

4,448

8,634 9,594

13,689 14,841

15,934 16,282 17,942

28,535

63 143 266 616996 1,600

1,815 2,536

8,089

1243 1322

1964 2578

6903

1161412443

1732518,790

20,604 20,989

23,980

39,820

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jan-14 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jul-16

Terr

a B

yte

s (

TB

s)

2G 3G 4G Total

3G Launch

4G Launch

Total

3G

4G

2G

12

NATIONAL SPECTRUM MANAGEMENT STRUCTURE

13

Pakistan Telecommunication

Authority (PTA)

receive applications for the use of radio frequency spectrum and subject to grant of licences, refer such applications to the Frequency Allocation Board (FAB) for assignment of spectrum;

Undertake spectrum auctions or other transparent competitive process to determine eligibility for assigning spectrum

Frequency Allocation Board

(FAB)

allocate and assign portions of the radio frequency spectrum

analyzes and assigns the portions of Radio Spectrum to intended wireless users

performs necessary international coordination and agreements with other administrations

Ministry of IT & Telecom (MoIT)

Issue necessary policy directives

PTA in consultation with FAB provides recommendations to MoITon spectrum strategy, refarming, spectrum assignment / demand / supply, etc.

SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015

The purpose of spectrum trading is to allow markets to determine the best use of spectrum.

Spectrum trading will be subject to license conditions and approval by PTA / PEMRA under intimation to FAB.

A spectrum trading framework will be developed by PTA, PEMRA and FAB, and will be subject to policy level approval by Federal Government (MoIT).Factors like spectrum capping shall be considered while developing such framework.

A Processing Fee and any other applicable fee will be levied to cover re-issuing of licenses.

The decision to trade is a commercial decision for the license holder. The terms of the trade will be a commercial agreement between licensees.

14

SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015

Spectrum trading will be permitted only for spectrum that has been acquired through a pricing arrangement that represents its market value (i.e. auction).

Spectrum may be traded between holders of the same license type only. For example, spectrum trading may take place between LL licensees or mobile licensees but not between an LL licensee.

15

SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015

Spectrum will not be traded by any licensee with the necessary license conditions until the licensee has fulfilled its payment and roll out obligations unless it also transfers its roll out obligations with the trade and same is verified and authorized by PTA.

The acquirer of spectrum will be required to obtain (or already hold) the appropriate telecommunications license and to meet the terms of that license.

The framework for spectrum trading will take into account the effects of such trading on competition, national security, public health and safety, compliance with the national laws and policies and compliance with international obligations and international relations.

16

SPECTRUM TRADING FRAMEWORK (2016) UNDER CONSULTATION

Interested parties will apply to PTA, under intimation to FAB, on a prescribed form seeking permission for either category of spectrum trading.

Spectrum may be traded between holders of the same license type only

Spectrum trading will be permitted only for spectrum that has been acquired throu