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Potential of Telecom Investment in Pakistan:

Potential of Telecom Investment in Pakistan Abdul Aleem CFO, Pakistan Telecommunication Company Ltd National Investment Conference ICMA, Karachi, Feb 26’ 2005

Slide 2:

According to the GIIC (global Information Infrastructure Commission) which originated from one of the G-7 annual meetings, · between 1995 and the end of 2000, the number of landlines in the world increased by 50%, from 689 million to more than a billion lines. i.e half as many traditional landlines were laid in the last six years of the 20 th century as in the entire history of telephony ! · The 1000% growth in the mobile sector during the same period was even more staggering. However the commission also observed that……. GLOBAL ICT EXPLOSION

Slide 3:

……While 80% of households in developed countries have access to reliable telecom networks, in the developing world that share stands at 20%! According to the recent ITU statistics , · 16% citizens in the developed world have access to PC’s as compared to a mere 1 % in the developing world · 98% of the Asians have no access to the net However falling costs and high underserved volumes makes Asia a potentially greater beneficiary of the telecom goldmine. Already demonstrated by the fact the number of telephone users in Asia is estimated to have tripled between 1990 and 2000 ! China and India have attracted an average annual investment of $28b and $4b respectively over the past 5 years due to large underserved populations and low costs. Pakistan , for similar reasons, is on course to become a telecom investment hub in the region. GLOBAL ICT EXPLOSION

Global Fixed Lines Growth:

Global Fixed Lines Growth Source: Telegeography 2002 (www.telegegraphy.com) WTO Accord

Global Cellular Growth:

Global Cellular Growth Source: Telegeography 2002 (www.telegegraphy.com) WTO Accord

Slide 6:

Pakistan is one of the 10 most populous countries in the world with an estimated population of 149 million by end 2003. Approximately 33%of the Pakistani population resides in urban areas. The average Teledensity for the world is 17.19%, varying from 52% in the High Income Group countries to 1.48% in the Low Income Countries. The fixed line Teledensity in Pakistan is about 3 % (5 Million ALIS) ranging from 5.8% in the urban areas to 0.77% for the rural area. PAKISTAN’s EXISTING DYNAMICS AND TELECOM INFRASTRUCTURE

Pakistan Telecom Landscape:

Pakistan Telecom Landscape PTCL the lead fixed line provider PTCL fully owns the backbone. Two non commercial players : NTC and SCO for specific areas/segments PTA has recently issued 12 LDI and 82 fixed LL licenses 4 companies including PTCL hold WLL licences PTCL and Telecard have launched WLL service

IT Services – :

IT Services – GOP recently announced an open Broadband (BB) policy Dramatic reduction in IP bandwidth prices making Pakistan the most IT friendly country in the region International IP bandwidth rates reduced to $ 2000 p.m. Currently 70 ISP’s with 2.5 m users Only 40000 BB service users Higher opportunity for growth in BB segment

Slide 9:

Basic ICT services: 5 million fixed telephone lines in service 8.0 million mobile connections 2.5 million Internet subscribers Value Added Services: Pre-paid calling cards Advanced Toll Free Service (0800) Premium Rate Services (0900) ADSL Broadband & Data Services Cable TV and broadband services International and domestic Call Centers EXISTING ICT SERVICES IN PAKISTAN The internet sector has seen a growth of over 500% during the past five years and The cellular reaching phenomenal growth rates over over 1000% across the same period!

Slide 10:

High growth and expansion of services to the consumers in majority of the ICT sectors in Pakistan has been due to the deregulation that was carried out in these sectors five years ago. These sectors include Mobile phone services Data Communication Services Internet Service Providers Pay Phone Services Pre paid calling cards ICT sector deregulation was completed in 2004 with the ‘opening’ of the fixed line telephony services. Complete deregulation of the ICT services in Pakistan has lead to high growth

Phenomenal growth in Pakistan’s deregulated sectors-I:

Phenomenal growth in Pakistan’s deregulated sectors-I Cellular growth

Phenomenal growth in deregulated sectors-II :

Phenomenal growth in deregulated sectors-II 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Years Sourc 3000000 2500000 2000000 1500000 1000000 500000

The announcement and implementation of an ‘open’ fixed line telecom deregulation policy is the biggest initiative taken in the sector that will help ,:

The announcement and implementation of an ‘open’ fixed line telecom deregulation policy is the biggest initiative taken in the sector that will help , 1) improve employment : by attracting new investment, creating new businesses and thereby increasing the employment opportunities. and 2) reduce the digital divide : by stimulating infrastructure expansion and by reduction in prices due to competition

Incentives available to the foreign Investor in Pakistan.:

Incentives available to the foreign Investor in Pakistan. GOP has introduced several measures to attract more foreign investment in the telecom sector. GOP has declared the telecom sector as an industry No minimum requirement of the foreign equity to start the business in the telecom sector. Foreign investors can now repatriate 100% of their profit.

Incentives available to the Telecom Investor in Pakistan. :

Incentives available to the Telecom Investor in Pakistan. Duties and Taxes To further promote Pakistan's international competitiveness and enhance the viability of investments in the country, the following incentives are available to both foreign and local investors: Imported plant, machinery and equipment (not manufactured locally) now subject to Customs Duty only @ 5% (previously up to 25%) GST exemption on domestically produced and imported plant and machinery. (previously 15%) Corporate Tax Rates for companies within the services sector have been fixed @ 39%. Previously this rate was 45%. Initial Depreciation Allowance @ 50% is permissible on an "eligible depreciable asset" placed into service in Pakistan for the first time in a tax year.

Forecast and initial Investment in Pakistan’s Telecom market:

Forecast and initial Investment in Pakistan’s Telecom market The world Bank projects about $ 8- 10 Billion investment in Pakistan’s Telecom sector during the next 5 years. Two new cellular operators and more than 100 new local loop and long distance (LDI) operator’s license investment alone exceeded $ 1.4 billion during the past six to eight months. Added to this will be the on going investment on infrastructure deployment & expansion and marketing and customer services. This will be for an expected increase in the fixed and wireless lines from the current 13 m to around 50m lines in the next five years.

PTCL’s role in facilitating investment:

PTCL’s role in facilitating investment Readymade provisioning of the largest telecom infrastructure in the country for the investor. Provision of long distance nationwide fibre optical backbone to all the new LDI operators. Provision of international and domestic bandwidth to all ISPs, Call centers and other data based value added services. Already running successful Business partnerships (annual collective turnover in excess of $200m) with private sector investors in: DSL Broadband VoIP Pay Phone / Wireless Pay phone Pre paid calling cards, PCOs, GMPCS

… providing nationwide coverage and international connectivity:

… providing nationwide coverage and international connectivity National long distance network PTCL has a modern network. 100% lines installed are digital PTCL provides network services to all mobile, data, internet service providers and payphone licensees Existing Digital Cross Connect covers 39 major cities UAN Internet access being provided to over 1,400 cities Overview Network overview — graphical illustration Microwave Copper Cable Optical Fiber* OF/Digital Radio International Network Domestic Network Int’l Gateways Islamabad Int’l Gateways Karachi 23 Primary Digital Transit Exchanges Local Exchanges Local Exchanges TE Telephone Subscribers Trunk Network Junction Network INTELSAT Satellites Source: PTCL INTELSAT/ IMARSAT Satellites SMW – 3 Submarine cable Source: PTCL 10 Combined Exchanges Karachi Submarine cable 19

Expansions and opportunities for further business partnerships:

Expansions and opportunities for further business partnerships Further expansion of DSL, WPS and PCC services Provision of Optical Fibre Access Network (OFAN) in three major cities: Multimedia Service provision CATV Broadband IP VPN IP Telephony Possible Business partnership opportunities Content ownership Marketing and customer care Customer acquisition and billing

Conclusion:

Conclusion Supply constraint market Open deregulated environment High volumes Availability of high capacity and reliable network resources and facilitation Logically, this has to be the right time to invest ! PTCL’s role: Full availability of resources and facilitation for that investment.