Telenor Pakistan

Last updated June 2012

Telenor Pakistan is a wholly-owned subsidiary of Telenor. On 26 May 2004, Telenor was awarded a GSM licence to build and operate a mobile network in Pakistan. On 15 March 2005, a full multimedia platform for commercial mobile services was launched under the name of Telenor Pakistan. Telenor Pakistan owns 51% of Tameer Micro Finance Bank. As at 31 March 2012, Telenor Pakistan had 29.4 million mobile subscriptions. As at 31 March 2012, the mobile penetration and number of inhabitants in Pakistan were 69% and 176 million, respectively.

Network and licences

Telenor Pakistan currently holds a nationwide GSM 900 MHz/1800 MHz licence (excluding Azad Jammu and Kashmir (AJK) and the Northern Areas). This licence was awarded in April 2004 for USD 291 million. In June 2006, Telenor Pakistan was awarded a GSM 900 MHz /1800 MHz licence to build and operate a mobile network in AJK and the Northern Areas for USD 10 million. Both licences are valid for a 15 year period.

Telenor Pakistan met its rollout obligations under both licences during January 2007 and March 2007, respectively. In addition to the two GSM licences, Telenor Pakistan holds a Long Distance and International licence through which it is providing nationwide and international call services. The licence expires in 2024. Since its inception, Telenor Pakistan has rolled out its GSM network at a steady pace and has become one of the fastest growing mobile networks in Pakistan based on its coverage and capacity. The network is currently GPRS and EDGE enabled. A five-year network modernization project was launched in early 2012 to upgrade the network to 3G and 4G capability.

The State Bank of Pakistan issued branchless banking regulations which envisage a bank-led model for mobile banking in Pakistan. In response, Telenor Pakistan worked to acquire a bank and was successful in acquiring a 51% share in Tameer Micro Finance Bank.

Easypaisa

In October 2009 Telenor Pakistan and Tameer Micro Finance Bank launched Easypaisa, a portfolio of mobile financial services. The vision of Easypaisa is to serve as a vehicle for financial inclusion for under-served households in Pakistan that have limited access to banking services. Customers can benefit from Easypaisa services in two ways: over-the-counter products, where certified merchants are used for financial transactions; and mobile products, where a customer uses his own mobile handset to undertake financial transactions. Currently, customers can, amongst other things, pay utility bills, send/receive money, donate to charities, top-up their prepaid mobile connection, pay for air tickets and receive their pension via Easypaisa; whilst corporate organizations can set up a mode of payment collection from their customers.

Competition

As at 31 March 2012, Telenor Pakistan had a market share of approximately 24.2%. In addition to Telenor Pakistan, there are five other mobile operators in Pakistan: Mobilink, Ufone, Warid, Zong and Instaphone. Based on numbers produced by the Pakistan Telecommunication Authority (the PTA) as at 31 March 2012, Mobilink was the largest mobile operator in Pakistan with a market share of approximately 29.2%, Ufone had a market share of approximately 19.1%, Warid had a market share of approximately 14.9%, and Zong had a market share of approximately 12.6%.

Regulatory matters

The PTA has broad regulatory power including power to grant licences, regulate market conditions, including the price of interconnection, and monitor and enforce the licence conditions pursuant to the Federal Government’s telecommunication policy. The Frequency Allocation Board, a separate entity under the administrative control of the PTA, manages radio frequencies.

Certain regulatory issues are stated below:

The PTA issued an information memorandum in January 2012 for 2G and 3G licence auctions in Pakistan. The 2G licence auction was due to take place on 28 March 2012, whilst the 3G licence auction was due to take place on 29 March 2012. It is believed that due to the PTA failing to hire an independent consultant, the auction process has been delayed. The PTA is now in the process of hiring an independent consultant. As at the date of this Base Prospectus, new timelines for the auctions have not been communicated to operators in Pakistan, however it appears that the auctions will not take place before June 2012. Concerns relating to auction design and ensuring transparency in the auction process have been communicated to PTA by Telenor Pakistan.

The sales tax applicable to the telecoms industry in Pakistan is 19.5%, which is 3.5% more than the sales tax which applies to other sectors (16%). An activation tax on sales of each SIM card stands at PKR 250 per SIM card, whilst withholding tax at 10% is also applicable and affects an estimated 100 million people. Collective cellular industry efforts are underway to reduce these taxes.

The PTA issued a determination in April 2008 in which the MTR, which was previously PKR 1.25 per minute, was revised downwards after conducting a cost based study (LRIC) to the level, as at the date of this Base Prospectus, of PKR 0.90 per minute (effective from 1 January 2010 onwards). The cellular industry believes that the MTR should not be further reduced. Based on this belief, a submission was made to the PTA for revising the MTR to PKR 1.00 per minute. The PTA on the request of the operators initiated a LRIC study in 2011 and requested that the operators submit additional data. The operators have not provided such additional data to the PTA because, were the data to be submitted, MTR through the application of a LRIC model will further come down. The cellular industry is currently lobbying with the PTA to increase the MTR based on the prevailing economic and security conditions in Pakistan.

Access promotion contribution (APC) is a financial premium given to local loop operators (either fixed local loop or wireless local loop) on international traffic terminated in Pakistan. The main aim of the APC is to foster new infrastructure development, to increase telecom density. Currently, the cellular industry does not receive a share of APC proceeds, even though the cellular industry has significantly contributed to increasing cellular telecom density in Pakistan. Based on this, the cellular industry has submitted a request for equal treatment for provision of APC.