Telenor Pakistan

Telenor Pakistan is a wholly-owned subsidiary of Telenor. On 14 April 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 Bank. As at 31 March 2011, Telenor Pakistan had 25.8 million mobile subscriptions. As at 31 March 2011, the mobile penetration and number of inhabitants in Pakistan were 62% and 172 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 currently being rolled out is GPRS and EDGE enabled.

The Pakistan Telecommunication Authority (the PTA) has issued M-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 Bank. While Telenor Pakistan has started working on the provision of mobile financial services via a bank-led model, it has also stressed the need for transition towards implementing a telecom-led model in the coming years.

Competition

As at 31 March 2011, 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 PTA numbers as at 31 March 2011, Mobilink was the largest mobile operator in Pakistan with a market share of approximately 30.8%, Ufone had a market share of approximately 19.3%, Warid had a market share of approximately 16.7%, and Zong had a market share of approximately 8.9%.

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 government of Pakistan has previously communicated its intentions to issue 3G licences through an open auction. This may create an opportunity for mobile companies to offer wireless broadband, as the broadband density is less than 1% in the country. In light of the current security situation, economic indicators and the market situation in Pakistan, however, the mobile operators have made a recommendation to the government to delay the auction until the environment in Pakistan is more conducive to further technological investment.

A SIM activation tax was first introduced in Pakistan in 2001. When it was introduced in 2001, the SIM activation tax was PKR 2,000 per activation. It has since then been reduced three times, to PKR 1,000 in 2004, to PKR 500 in 2005 and to PKR 250 effective from 1 July 2009. The general sales tax level (GST) in Pakistan is 15%. In June 2008 a telecom sector-specific GST of 21% was introduced, which from 1 July 2009 was reduced to 19.5% after the cellular industry lobbied against discriminatory taxation. Additionally, customs duty on handsets was also reduced from PKR 750 to PKR 250 per handset.

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. The rate was reduced to PKR 1.1 per minute from 1 June 2008, and further reduced to PKR 1.0 per minute from 1 January 2009. As at the date of this Base Prospectus, the rate is 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 a submission was made to the PTA in 2009 in which the cellular industry requested that the PTA maintain the MTR at PKR 1.00 per minute for at least the next 3 years. The request was reviewed by the PTA, however it was decided that the MTR would be reduced to PKR 0.90 as per the earlier determination issued by the PTA. The cellular industry’s stance remains the same, and, therefore, the request for revising the MTR to PKR 1.00 per minute has been submitted to the PTA once again.

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 submitted a request for equal treatment for provision of APC. The final proposal for APC share for the cellular industry is as follows:

• 1st year - USD 2.5 cents (PKR 2.12) per minute of international incoming traffic terminated on networks.
• 2nd year - USD 2.75 cents (PKR 2.34) per minute of international incoming traffic terminated on networks.
• 3rd year - USD 3.00 cents (PKR 2.55) per minute of international incoming traffic terminated on networks.
  

The Ministry of Information Technology (MoIT) has submitted the case to the cabinet and subsequently to the economic coordination committee (ECC) for approval. Further to this, the ECC has formed a sub-committee to evaluate the proposal and give recommendations. Currently, support has been requested (from MoIT) to expedite the process of approving the proposal for APC share for the cellular industry.