2007 South Asian - Telecoms Statistics and Market Overview

This Asia market report covers eight economies in the South Asia sub-region. It takes an overall look at the various telecoms markets, together with a particular look at the telecom statistics which describe the market in each of the countries.

The markets covered include: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

Through 2006 and into 2007, we have continued to see a generally strong run of economic growth throughout the Asian region. The region’s telecommunications sector was clearly benefiting from the healthy economic environment and this had certainly extended to the markets of South Asia.

Across the region, the granting of 3G licences continued, presenting the single biggest upheaval in licensing across the region. South Asia, however, was moving slowly on 3G. India’s regulator, for example, had still not decided on a 3G strategy or timetable, the local industry having become heavily introspective about the regulatory side.

South Asia’s mobile markets have been expanding at a considerable pace. In particular, India’s burgeoning mobile market grew at an annual rate of more than 70% in 2006 and this pattern was continuing into 2007. With the country’s mobile penetration standing at 14% in March 2007, India still had huge growth potential. Coming into 2007, its annual growth rate was continuing at over 70%. There will be around 230 million mobile subscribers in the country by end-2007.

The Internet segment of the market has been sluggish in South Asia, characterised by low subscriptions and low broadband penetration. Usage tends to be considerably higher than subscriptions. India had an estimated 60 million Internet users (6% penetration) by December 2006, making it the third largest Internet market in the region in terms of users after China (137 million) and Japan (87 million users).

The highlights in the individual markets of South Asia include:

Afghanistan

As the political and social rebuilding of Afghanistan proceeds somewhat fitfully following years of war and civil unrest, the country has started putting a new national telecommunications infrastructure in place. The 2001 war destroyed a telecommunications network already suffering serious disrepair due to neglect by the Taliban government. The nation’s network of telephone lines was left barely functioning. With telecommunications set to play a crucial role in rebuilding the country’s shattered economy and society, a properly functioning basic telephone network was always a priority. An important step was the creation of the Ministry of Communications by the Transitional Government in early 2002. The challenge has been to attract and manage foreign investment in the country. There have been some positive signs in this regard, especially the opening up of the mobile market to competition. But there remains much work still to be done. In the meantime, the government, in a push to develop the fixed-line network, launched what it called the Local Fixed Service Provider (LFSP) program. This program was expected to see hundreds of small-scale investors set up companies at the village or provincial level using WLL technology. For the country overview, see chapter 2, page 6.

Bangladesh

Bangladesh ranks among the most densely populated countries on the globe, but its fixed-line teledensity remains the lowest in South Asia. With teledensity at less than 1%, only a relatively small proportion of the population has had access to any telecom facility. Almost 99% of homes lacked a telephone and there was a four year waiting list for a fixed-line service. The situation was worse in the rural villages, with more than 90% of Bangladesh’s limited telephone services located in urban areas.

This inevitably set the scene for a massive expansion of the country’s mobile market. There have already been a number of consecutive years of strong growth (138% in 2005, 90% in 2006) in mobile subscribers, and this growth was continuing at 100%+ coming into 2007. Mobile penetration was 16% (20 million mobile subscribers) by March 2007. There were still only 1.1 million fixed-line services at the time. Fixed lines services are mostly provided by the state-owned Bangladesh Telegraph and Telephone Board, while mobile services are provided by six private operators.

The government can be expected to continue to vigorously pursue the de-regulation process. Expanding the national telecom infrastructure remains a priority. A critical factor is that Bangladesh has some of the most underdeveloped telecommunications infrastructure in the world. For the country overview, see chapter 3, page 12.

Bhutan

A country that preferred to remain isolated from the world from a long time, Bhutan has very recently started to improve its telecommunications capability. To do so it has had to overcome the country’s mountainous landscape. While the country had a basic connection to the outside world as early as 1974, with the introduction of trunk calls between Bhutan and India, it was not until 1999 that television, satellite dishes and Internet services started to appear. The tiny country proceeded to invest relatively heavily – to the tune of around US$27 million - in telecommunications infrastructure between 1996 and 2002 to provide the country with a modern fixed line network. (Note: Accurate statistical information on Bhutan is difficult to obtain.) For the country overview, see chapter 4, page 24.

India

Sweeping reforms introduced by successive governments over the last decade have dramatically changed the nature of telecommunications in India. The country continues to be one of the fastest growing major telecom markets in the world. Its telecom regulator, the TRAI, says that the rate of market expansion would increase with further regulatory and structural reform. The adoption of Unified Licensing, a change in the Access Deficit Charge regime, increased sharing of infrastructure and coverage of new areas by operators were initiatives designed to contribute to ongoing growth.

Fixed-line services, although not as spectacular as mobiles, have been growing solidly. By end- 2006, the country has passed the 50 million fixed-line milestone. (Note: The statistics on fixed lines in India are complicated by different ways of counting the so-called fixed-wireless services.) In 2001, the government opened the whole fixed-line business to an unlimited number of operators in each of the 21 telecom circles. Prior to this, fixed-line telephony had been the preserve of the state-owned MTNL and BSNL, with only one private company being allowed to compete with an existing state-run player in each circle. VSNL, the former monopoly provider of international telephony, also lost its exclusive status when the market was opened to competition in April 2002.

A series of mergers and takeovers among the mobile operators has produced a welcome consolidation in that part of the market. The ‘licensing by circles’ policy was generally credited with having established a highly competitive telecoms market that has certainly been benefiting the country. With what is seen as a well regulated commercial environment and with further growth potential, India has become an attractive market for foreign investment. For the country overview, see chapter 5, page 28.

The Maldives

With its relatively small population of 300,000, the Maldives can rightly claim an efficient, up to date national telecommunications system, despite it being spread over a large archipelago of islands. Dhiraagu, the country’s incumbent telco, invested considerable effort to ensure that there was a complete and effective telephone service covering the whole country. As well as operating the fixed-line network, the company also began operating an extensive mobile service and an ISP business. Dhiraagu’s monopoly was officially set to run out in 2008, but the government was keen to open up the market earlier than that and this was starting to happen progressively. For the country overview, see chapter 6, page 76.

Nepal

Nepal is among the poorest and least developed countries in the world. Amid what has been an unsettled political climate that erupts as a major problem from time to time the country has been moving steadily towards a more liberalised telecom market. Positive regulatory changes in the telecom sector have been implemented, including the incumbent telco losing its monopoly status in the market. By 2006, over 170 operators had been authorised to provide a wide range of telecom services, including two for basic telephony and two for mobile telephony. The expansion of telephone services has not been able to keep up with the growing demand, an estimated 50% of demand for telephones remaining unmet. The biggest challenge has been in providing rural services. This area has been neglected as the level of investment over recent years fell well short of what was required. More than 60% of telephone services are concentrated in the capital Kathmandu. The almost 600,000 fixed-line customers at end-2006 represented a teledensity of just over 2%. Mobile penetration was running at almost 4% at that time. For the country overview, see chapter 7, page 80.

Pakistan

After a period in which the country slowly transitioned from one dominated by a regulated state-owned monopoly to a comparatively deregulated competitive structure, Pakistan’s telecom sector had finally begun moving and in fact had entered a period of phenomenal growth. The mobile subscriber base, after growing by almost 170% in 2005 and 123% in 2006, had reached over 48 million (30% penetration) by early 2007 and was continuing to grow. Fixed-line penetration, however, stood at a low 3.4% (5.2 million lines) by end-2006, with plenty of room for further expansion in that segment of the market. The government was continuing to pursue its targeted national teledensity of 7% (around 10 million lines) by 2010. To achieve this target, more than one million additional lines needed to be installed every year.

An important aspect of reforming the telecom sector was the privatisation of PTCL (Pakistan Telecom). In June 2005, the UAE operator, Etisalat, submitted the highest bid of US$2.6 billion for a 26% stake in PTCL. Despite lodging the winning bid, the acquisition took a further six months to complete after a dispute over payment terms arose almost jeopardising the sale. For the country overview, see chapter 8, page 87.

Sri Lanka's

Sri Lanka has been demonstrating considerable determination in its efforts to develop the country despite its ongoing political problems. With a modern progressive telecommunications sector high on the list, the sector looks to be well positioned for vigorous growth. The country’s fixed-line teledensity was approaching 6% and mobile penetration was over 17% in early 2006, with annual growth of the mobile sector running in excess of 50%. At the same time, the strong growth looks very much like it was set to continue. There are a range of major initiatives being put in place that are set to give a boost to the building of national infrastructure and open the market to even more competition. Sri Lanka Telecom progressively losing its monopoly on a range of services has led the way as the market is made more interesting for new players. It is well recognised by the government that for economic well-being the country needs the ready availability of Internet, e-finance, e-commerce and all the other communications facilities products that play an important role in global commercial activity. For the country overview, see chapter 9, page 112.

Data in this report is the latest available at the time of preparation and may not be for the current year.