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has provided tax relief to the sector where Activation tax has been reduced by 50% and import duty and regulatory charges on import of mobile handsets have been reduced by about 67% [For details see Chapter - 3]. Reduction in mobile termination rates by the regulator will also go a long way in improving the current economic situation of the industry. MNP, which was introduced by the regulator two years back, is also becoming popular as subscribers do not have to stay forcibly with one operator. The services like 667 through which subscribers can check connection against their name is another measure taken by the regulator to improve the sector.

The mobile operators including Mobilink, Telenor, Warid and Zong are also making efforts to provide their services in rural and interior areas of the NWFP and Balochistan. These companies are jointly working with Universal Service Fund for provision of telecom services to the areas where telecom access is not yet available. The new mobile policy, which is expected to be made public in the current year, would also bring improvement to the telecom sector. The long-awaited 3G licensing may also be finalized this year, which is likely to prove a breather for the mobile subscribers.

As for competitive environment in the sector, there is intense competition among all 5 operators. Since the market shares of all the operators have marginal difference and the gap between the market leader (Mobilink) and the rest of the operators is rapidly narrowing, the companies are now getting into a price war, whereby undercutting each other for Voice and SMS services is resulting into higher financial burden on the companies. The operators have come to launch a range of value added services like Mobile banking, Mobile Internet, Music Library, Utility Bills Payment, Stock Market Updates, Voice Messaging, GPRS services, etc that would help industry to improve ARPUs. The regulator, operators and the Government, in their own respective spheres, have been taking care of the mobile subscribers in Pakistan. The steps taken by these three are bringing value added services, increased accessibility; better quality, lower tariffs and better value for money. PTA has estimated that cellular mobile subscribers would cross 102 million by 2011 in Pakistan.

Substitute products and services

Low switching costs from fixed line to cellular and WLL has made prices competitive in the telecom sector. Fixed Line subscribers have the options to make international and local calls from cellular line with Cheaper/Decreasing trends of Tariffs across the board.

New Competitors

Deregulation of Telecomm Sector has resulted in increased competition amongst various telecom operators. High Capital Requirements due to high investment in telecommunications equipment requirements has been enormous. Interest of global investors in the telecomm sector is on the rise with China Mobile being the latest entrant with purchase of Paktel while Warid and Telenor started operations during the last few years. Recently, Omantel acquired further stake in WorldCall Telecom after Etisalat won the bidding for a 26 percent share in PTCL in April 2006.

Market Models

In this section we will discuss two extreme market models with respect to telecom sector here In Pakistan.

The Monopoly of