With a booming cellular market, Pakistan’s telecom sector is the country’s number-one destination for foreign direct investment.

In July of 2003 President Musharraf’s administration announced the deregulation of Pakistan’s telecom sector, including the abolishment of the fixed-line monopoly of state giant Pakistan Telecommunication Company Limited (PTCL). Since then a number of new operators have arrived on the scene and the sector is registering unprecedented growth and revenues. In the first year of deregulation, Pakistan’s cellular sector grew by an astounding 173% and registered revenue growth of 55%. Since then airtime tariffs have been
reduced by 48%. With the existing teledensity of fixed, mobile and wireless local loops hovering around 9% and expected to rise to 15% by 2007, opportunities for international investors are ripe. Chairman of Pakistan Telecommunications Authority Shahzada Alam Malik says: “There are tremendous opportunities here because we have a population of 150 million and the existing teledensity rate is still quite low. The government’s policies are very friendly, allowing companies to expatriate their entire investment or capital and there are no stipulations that say they must have local partners. We have also reduced the taxes and duties on mobile phones.”

With fixed telephony expected to grow by 12% over the next five years, and mobile growth predicted to grow between 35% and 40% over the same period, Pakistan’s telecom sector is set to become a major revenue generator for the government and to increase in its percentage of GDP to 3% by 2010 from its current 1.7%. In just 2005 alone, Major General Malik expects mobile subscribers to grow from the current level of 8 million users to 15 million. With the entrance of two new mobile operators this year, bringing the country’s total to six, and the end of PTCL’s monopoly, authorities are hoping that teledensity will rise to 15% by 2007.

Awais Ahmad Khan Leghari Minister for Information Technology and Telecommunications	Aamir Matin Director of Pakistan Software Export Board

Not surprisingly, Pakistan’s telecoms sector is the country’s number one destination for foreign direct investment. Between 2003 and 2004, telecoms accounted for 22% of the country’s total FDI. Fuelled by the sector’s incentives-laden deregulation, the $3 billion that has been invested to date in the sector is expected to rise to $5 billion within the next five years. However, this is nothing compared to the country’s potential, according to Minister for Information Technology and Telecommunications Awais Ahmad Khan Leghari. He observes: “In telecommunications a huge amount of investment has flowed into the country and the market has picked up tremendous momentum but the potential that exists far outstrips the infrastructure investment that has come in so far.”

Pakistan’s IT sector is also registering growth of 30% year on year. The target for exports of IT enabled services is $100 million for the fiscal year 2005-2006, and the government is intent on increasing Pakistan’s share of the global IT market. The growth of both enabled services such as business process outsourcing and software development to become a priority focus for the government, which has begun to establish competitively priced high-tech parks in various locations in the country. Call centers in particular are already a flourishing business. Pakistan has the technology, English language skills, and infrastructure for the call center sector, and represents a competitive alternative to other regional bases. Pakistan also boasts a well-qualified pool of IT professionals and an expanding software export business.

“A huge amount of foreign investment has flowed into the country’s telecommunications industry and the market has picked up”

The Pakistan Software Export Board (PSEB) currently has listed over 900 Pakistani IT companies, many of which work with clients from all over the globe. Managing Director of PSEB Aamir Matin comments: “We have a number of very good companies that provide services to some of the best known names in the global marketplace such as General Electric and General Motors, which is an indication of how the rest of the world trusts the quality and capability of Pakistan’s IT sector. It is a good idea for companies to look towards Pakistan as a potential outsourcing destination. They are guaranteed to get the best possible people at the best possible prices.”