2008 Asia - Telecoms, Mobile and Broadband in Afghanistan, Bangladesh, Maldives, Pakistan and Sri Lanka

Additional Information

Executive Summary

BuddeComm’s Annual Publication provides a comprehensive overview of the trends and developments in telecommunications, broadcasting and pay TV markets in: Afghanistan, Bangladesh, Maldives, Pakistan and Sri Lanka.

Afghanistan

As the political and social rebuilding of the country proceeds following years of war and civil unrest, the country has been busy putting new national telecommunications infrastructure in place. Telecommunications has already started to play a big role in helping repair the Afghanistan economy and society.

A properly functioning basic telephone network has been and continues to be a high priority for the Afghani Government. As part of this commitment, an important step was the creation of the Ministry of Communications in 2002, followed by the establishment of a regulator, the Afghanistan Telecom Regulatory Authority in 2005.

With ongoing unrest in the country and the recovery from war not yet complete, one of the big challenges for the country has been to attract and manage foreign investment. There have been some positive signs in the telecom sector in this regard and, interestingly, for a period the telecom sector was the only one in the country that was attracting any foreign capital.

With two mobile operators already in place, the MoC announced in late 2005 that two more mobile licences had been awarded. In July 2006, the Investcom/Alokozai consortium launched its Areeba Afghanistan service in four provinces and by mid-2007 the new operator already had 500,000 subscribers, as the overall market pushed along at an annual growth rate of around 70%. In a similar story, UAE’s Etisalat was awarded a GSM licence in May 2006 and beginning its operations in August 2007, launched a network with coverage of the country’s main cities, picking up 200,000 subscribers in the first month.

Bangladesh

Despite being one of the poorest, most densely populated, least developed countries in the world, Bangladesh has found a way to grow its telecommunications sector. It has done this by creating a highly competitive mobile market and encouraging healthy foreign participation. The country is still struggling with its lowly economic status, frequent natural disasters such cyclones and floods and the slow implementation of much-needed economic reforms. This state of affairs is reflected in the fixed-line segment of the local telecom market which remains stagnant with a teledensity of less than 1%, the lowest in South Asia. With almost 99% of homes lacking a telephone and with a four year waiting list for fixed-line services, the country is still struggling with some of the most underdeveloped telecommunications infrastructure in the world.

So it is with some fascination that the outsider observes what has been and continues to be a booming mobile market in Bangladesh. After a number of years of strong growth, mobile penetration was approaching 25% coming into 2008 and the market was still growing at an annual rate of around 75%. The challenge for the operators is to maintain viable business models, given that ARPU falls as they chase subscribers in the rural areas where 80% of the population lives in 86,000 villages. The market was given a real boost when, in early 2008, the Vodafone Group signalled that it was looking to buy a 30% stake in mobile operator AkTel.

The Maldives

The Maldives prides itself on having built one of the most advanced telecommunications systems in the region. With the country’s well-developed national network, the capital Malé is particularly well served, as are the tourist resort islands. The critical issue of connectivity to the rest of the world for its relatively small population of 300,000 has been addressed with considerable success; this has been further enhanced by the recent provision of a major submarine cable connection to Sri Lanka; at the same time the opportunity was taken to provide submarine cable links between the main atolls, thereby substantially strengthening the domestic connectivity. Incumbent national telco, Dhiraagu, which has been criticised over the years for its high tariff structure, has played an undeniably important role in the successful setting up of the country’s telecom infrastructure.

Dhiraagu’s monopoly was officially set to run out in 2008, but the government was keen to open up the market earlier than that. The licensing of a second ISP in 2002 signalled the government’s intention to move ahead of time. Then, in 2004, a second mobile licence was issued. Although the new mobile operator Wataniya Telecom was tardy in becoming operational, it launched in 2006. By September 2007, it had 62,000 subscribers, an almost 25% share of the market.

Pakistan

Pakistan has begun to experience sustained growth in its telecom sector, and especially the mobile segment of the market. This pattern has emerged after many years of relatively low growth and market uncertainty. The 2006/07 period has been a remarkable period for the mobile operators in the country, as the total subscriber base moved from 22 million at the beginning of 2006 to 77 million at the end of 2007. By early 2008, the 50% penetration milestone had been reached, probably much faster than most people expected.

There is no doubt that the arrival of two new operators - UAE-based Warid Telecom and Norway’s Telenor, who entered the mobile sector with impressive debuts in 2005 - has had an enormous impact on the market. This quickly resulted in increased competition and spurred growth in the country’s mobile sector. Telenor attracted 839,000 subscribers in the space of a few months and Warid added 509,000 customers in an even shorter period of time. By end-2005, Telenor had 1,870,000 subscribers and Warid Telecom claimed 2,070,000. Between them, they had rapidly grabbed 18% of the booming market. By end-2007, their combined share of the almost 80 million strong market had reached 35%. Strong marketing by the operators has been central to Pakistan’s mobile growth phenomenon.

In the meantime, fixed-line penetration in the country stood at just over 4% (7 million lines) in early 2008, leaving plenty of room for further expansion. The government has indicated that it is continuing to pursue its targeted national teledensity of 7% (around 10 million lines) by 2010. To achieve this target, though, around 1 million additional lines need to be installed each year. Internet penetration remains low in the country, with little apparent interest in the marketplace in broadband access. With competition spreading through the market, however, development is accelerating and it may impact on the Internet segment soon.

Sri Lanka

A modern progressive telecommunications sector still remains a high priority for Sri Lanka and the country is continuing its efforts to achieve this. Progress is being made, but with ongoing political problems still hovering in the background. The mobile sector in Sri Lanka has continued to grow at an annual rate of around 50% coming into 2008. With mobile penetration was at around 40% by end-2007, this is relatively low compared with some of the other more developed Asian markets and the current strong growth will more than likely to continue.

The country’s fixed-line teledensity stood at 12% by end-2006, the number of fixed line subscribers having jumped by 100% in a two year period. This was evidence that low fixed-line penetration levels have been more a result of acute supply constraints rather than a lack of demand for service. The growth surge was spurred on by the extensive use of WLL services to meet demand. There were still a significant number of customers waiting for a basic telephone, but there were healthy signs that infrastructure problems were being addressed.

Market reform still demands attention as this is central to ensuring continuing growth. The market has undoubtedly benefited from the liberalisation of the market and the competition that comes with having four mobile operators battling for market share. This is despite one of these - Dialog - having close to 55% market share. Sri Lanka Telecom (SLT) progressively losing its monopoly on a range of services has led the way as the market is made more interesting for new players.

Key highlights

• Afghanistan’s rapidly expanding mobile market was impressive, with 100% growth in 2007;
• Early signs of a boom in Internet usage in Afghanistan with an estimated one million users by end-2007;
• In Bangladesh, mobile subscriber numbers more than trebled in the two years to December 2007 and the market was continuing its strong growth;
• The Maldives has benefited from its newly competitive market, with overall service improving greatly since the arrival of Wataniya Telecom;
• Wataniya has quickly grabbed 30% of the mobile market in the Maldives;
• Pakistan has also seen its mobile sector boosted by increased competition, with newcomers Warid Telecom and Telenor claiming a big stake in that market;
• By end-2007, their combined share of the almost 80 million strong Pakistan mobile market had reached 35%;
• Fixed-line subscriptions have experienced a surprisingly big surge in Sri Lanka, doubling in the last two years.

Mobile subscriber growth and forecast - by country - 2004 - 2007; 2011
Country 2004 2005 2006 2007 2011
Afghanistan 0.6 1.0 1.6 2.0 4.9
Bangladesh 4.0 10.4 22.0 35.0 70.0
Maldives 0.11 0.17 0.28 0.32 0.35
Pakistan 7.9 15.5 48.2 80.0 150.0
Sri Lanka 2.2 3.3 5.4 6.8 13.2
(Source: BuddeComm data, forecasts)