BANGALORE, India-Although the growth of South Asia’s relatively new markets has temporarily slowed due to political and financial problems, increased competition and investment have made them extremely promising. With managed competition in India, minimal competition in Pakistan and a highly deregulated market in Sri Lanka, the South Asia region is a region to watch.
The mobile telecommunications sector in the Asia-Pacific region has experienced rapid growth in recent years. It has been forecast that the Asia-Pacific region by 2000 will represent about 35 percent of a US$200 billion global wireless market, ahead of the United States and Western Europe.
“Growth in cellular and mobile systems has been the most spectacular. Nevertheless, this is a region of great contrasts,” Henry Chasia, deputy secretary-general of the International Telecommunication Union (ITU), said three years ago.
This is still true today. Cellular services have taken on an unexpected role in Asian countries, where portable telephony, with networks that are easier and cheaper to roll out, is becoming a competitor of fixed-line services. Figures on wireless technology expenditures show nearly 100-percent annual growth.
During 1998, nearly US$13 billion in wireless systems and infrastructure contracts were cut in Asia, up 96 percent from 1997’s US$6.7 billion.
The Asia-Pacific paging industry also remains the largest worldwide and is projected to comprise more than half of the world’s total paging subscriber base by 2003.
The first issue that comes to mind when considering the Asian market is, inevitably, the economic crisis that has hit the area. Southeast Asian countries have been badly hit by the crisis, and as a result some of the focus has shifted to South Asian countries.
The most important issues being tackled in the majority of South Asian telecom markets are deregulation and introduction of competition.
If we look at the region as a whole, the process began in earnest in the early 1990s, as several governments began to loosen their regulatory grip on the provision of cellular and other services, leading to a highly competitive wireless local loop (WLL) market in Sri Lanka, the reopening of Pakistan’s GSM network and a gradual expansion of the Indian paging market.
South Asia
South Asia, comprising Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, is home to one-quarter of the earth’s population and some of its poorest states. Yet, South Asia also contains the world’s most populous democracy, launches indigenously produced satellites into space, and includes the sixth and seventh declared nuclear weapons states-India and Pakistan. It is also infamous for bureaucratic hurdles and has a wide range of languages, cultures and economic conditions.
With a population nearing 1.3 billion and a teledensity of just 0.98 percent, the Indian subcontinent of Bangladesh, India, Pakistan and Sri Lanka probably could be described as the most dramatically changing wireless market on the planet.
Continued urbanization, rising personal income, improved technology and increased mobile phone affordability all should remain key drivers of the South Asian mobile telephony market for the next three to five years, according to Craig Irvine, a Singapore-based regional telecommunications analyst for Merrill Lynch.
Less-mature markets such as India, Pakistan and Sri Lanka are projected to have the largest percentage growth in the region’s paging industry.
Bangladesh
Developed countries have a lesson or two to learn from their poor cousin, Bangladesh, concerning how cellular is sold and how to reach out to people in a country’s interior. This remains a significant issue since more than 75 percent of the world’s population still live in villages, and a majority of them still have not yet made their first telephone call.
The GrameenPhone (GP) experiment has made an impressive impact in Bangladesh. GP is a unique Bangladesh operator focusing on providing cellular to rural people, primarily women, to create employment opportunities and empower them socially and politically. It had about 30,000 subscribers in 1998, with enrollment constrained only by interconnection capacity. It is currently using a nationwide fiber-optic backbone of railways to connect calls.
“The holder of the cellular phone would set up a public office at which customers would pay per call. The system is common throughout the Indian subcontinent, where telephone lines rarely reach homes,” explained Iqbal Z. Quadir, director of external finance for the company.
Grameen Telecom is a 35-percent shareholder in GrameenPhone. Telenor of Norway has a 51-percent stake, Marubeni of Japan has 9.5 percent and New York-based Gonophone has the remaining 4.5 percent.
Laila Begum, a villager in Bangladesh, said, “I took a cellular phone on a loan of US$430, which I … repaid at a rate of US$3.50 a week.” In the process, she made about US$4.50 a day in the first three days she had the phone.
A novel way to a noble cause.
Hutchison Bangladesh Telecom introduced the first cellular communications service in Bangladesh, now called Pacific Bangladesh Telecom Ltd. (PBTL). In the process of liberalizing telecommunications services in Bangladesh, the government has given licenses to a total of three private operators for cellular communications: GP, Telecom Malaysia International Bangladesh (TMIB) and Sheba Telecom.
The Bangladesh Telegraph and Telephone Board (BTTB), the monopoly services provider for basic telephony in urban areas and for international long distance, currently is not a player in the cellular sector, but is expected to enter the market soon.
PBTL in 1989 was the first company to launch cellular services in South Asia and now has become the first to launch CDMA mobile as a digital platform for second-generation wireless services. PBTL launched commercial CDMA service using a Motorola system in the city of Dhaka, the first of two initial deployments on the 800 MHz network.
The new service in Dhaka provides service to 50,000 subscribers and operates alongside the Motorola AMPS analog network that serves an additional 25,000 subscribers.
“Our intent has always been to bring the best services and technology to our customers,” said M. Morshed Khan, chairman of the Pacific Group of companies. “After a thorough evaluation, we selected Motorola … to deploy this cellular system for us. Once our Chittagong commercial deployment is completed, our plan is to expand the network to achieve a countrywide footprint.”
The total number of cellular subscribers in Bangladesh is increasing very quickly, and had reached 113,000 by the end of 1998.
India
In March, less than four years after the introduction of cellular services, India had close to 1 million subscribers, a total that took other Asian markets more than seven years to achieve. This illustrates the fast growth and high potential of the Indian cellular market.
Subscriber rates are forecast to continue growing, living up to aggressive market projections. However, high license fees, on top of lower-than-expected customer usage rates and the cost of buildout, are squeezing cellular operators.
The Department of Telecommunications (DoT) is still the policy maker, licenser, regulator and operator of basic telephony services in India. The inevitable conflict of interests that follows this now-rare state of affairs is the major sticking point when discussing the telecommunications landscape in India.
There are currently 22 cellular companies operating 41 networks around the country. Considering the fact the country has relatively low tariffs and airtime usage is on average as low as 90 minutes per month, it is clear the sector is facing major problems.
The Cellular Operators Association of India (COAI) has
brought a number of issues to the government’s attention.
Other problems in the sector include hasty initial analysis from
operators regarding potential demand, inefficient partnerships with international telecom investors and a low problem-solving awareness as a result of operators bypassing analog and directly adopting digital GSM technology.
By April 1998 there were about 950,000 paging subscribers in India, an 80-percent increase from the year before. There is a total of more than 120 licenses issued to 17 companies to provide paging services in the country.
Pakistan
Mobile telephone penetration in Pakistan is still low. In 1998 it stood at 165,000 subscribers, which translates to 0.19-percent penetration. All three operators are in joint ventures with international partners.
PakTel, 80-percent owned by Cable & Wireless, launched its AMPS service in Karachi and Lahore in 1990, and by December 1997 the network had more than 40,000 subscribers. Current subscriber numbers could not be obtained.
PakCom Instaphone, with stakes owned by Millicom and Arfeen International, launched its AMPS network in December 1990 in Karachi.
Motorola owns 66 percent of Pakistan Mobile Communications Ltd. (PMCL), the country’s only GSM operator. Its MobiLink system was launched in August 1994, and by 1995 it covered Lahore, Islamabad, Rawalpindi, Gujaranwala, Karachi and Faisalabad.
Digital Radio Paging Ltd. (DRPL) of Pakistan is currently upgrading its nationwide paging network to the FLEX protocol. As of July 1998 there were 45,000 subscribers, translating to only a 0.03-percent penetration.
That number is expected to increase further. The government has recently invited companies to apply for digital radio paging licenses. The successful company would establish, maintain and operate the service for the general public in Pakistan.
Sri Lanka
There are currently four licensed cellular operators in Sri Lanka. With a teledensity of 2.5 percent and a market open to foreign companies, Sri Lanka has succeeded in attracting foreign capital to expand its phone network, and prospects seem solid that this will continue.
Companies from the Luxembourg, Australia, Malaysia and Singapore (Millicom, Telstra, Telekom Malaysia, and Singapore Telecom, respectively) have invested in the four competing cellular operators, which together serve about 120,000 users.
Local observers expect strong growth-more than 25 percent annually in the next three years.
The Ministry of Posts and Telecommunications has decided there will be no new licenses until the year 2000, the existing four operators will not be permitted to provide fixed services, and those operators providing analog services will be encouraged to migrate to digital.
Call Link (Lanka Cellular), owned by Singapore Telecom and local investors, operates an ETACS-A network using equipment from NEC.
Celltel Lanka, owned by Millicom and local companies, operates an ETACS-B system from Motorola.
The two companies had a total of about 70,000 subscribers in 1998.
Mobitel, a joint venture between Sri Lanka Telecom and Telstra, operates the AMPS network using equipment from Ericsson. It had about 35,000 subscribers on the system as of January 1998.
MTN Network, owned by Telekom Malaysia and Sunpower, operates the country’s only GSM network, which opened in February 1995 with infrastructure supplied by Alcatel. Subscriber figures had reached 18,000 by the beginning of 1998.
With two WLL operators at work expanding the local network, equipment manufacturers are increasingly interested in Sri Lanka.
Ericsson, which established a full-time presence in Sri Lanka in 1994, is supplying about one-third of wireless network projects there and is seeking to expand its 20-percent share of the local handset market.
