Pakistan’s mobile telecom industry found itself at a crossroads in 2024, and the options are either to stagnate or take advantage of the changing technology landscape and diversify into new value-added enterprises. Telecoms have been struggling to generate sufficient returns on their investments for quite some time, as their pursuit of revenue growth has become exceedingly challenging in a highly competitive market where traditional revenue streams are shrinking. Soaring operational costs in uncertain economic conditions, recurring balances of payment crises, currency devaluations, elevated interest rates and spiking capital investment costs have made matters worse for MNOs in recent years. Even those who have been successful in fending off losses and earning profits are witnessing their revenue go down significantly in dollar terms.

Plunging revenues amid average revenue per user (ARPU) dipping to below one dollar from eight to nine dollars in 2004, coupled with growing costs, are seen as reasons that forced Telenor to exit Pakistan in December 2023. Surprisingly, whatever compelled Telenor to exit also prompted Abu Dhabi-based e& (formerly Etisalat) to acquire it for $381 million. Surprising perhaps, but the acquisition of Telenor’s spectrum will put e& in a dominant position in Pakistan’s telecom market. The move, according to industry sources, is not just about controlling a larger retail market of commoditised telecom services. It is part of e&’s global strategy to transform, restructure and rebrand itself as a ‘technology powerhouse.’

Given their shrinking margins and surging costs, telecoms in several other geographical jurisdictions are reimagining themselves as technology companies or ‘technos’ in order to diversify into non-telecom sectors, such as streaming services, entertainment, retail, financial services, IoT, cloud services, free messaging and voice calls through web-based apps. Pakistani telecoms too are following the same path.

The consensus among industry analysts is that moving beyond their traditional core offerings and expanding into enterprise services may not produce the desired results, as Pakistan’s mobile market is very small even for three telecom companies, and profitability based on commoditised services of telecommunication and internet services will not generate enough revenues to meet their future needs for investment in infrastructure.

According to Ahtasam Ahmed, a telecom analyst, “Diversification is the new frontier of growth for mobile telecom companies. Cellular services alone are no longer profitable for any telco, and this is not a Pakistan-specific phenomenon; it is a global one. Their survival is dependent on their transformation into technology or data companies.”

Pakistan’s telecom companies have no doubt realised the need to change their business models and project themselves as tech companies. In many ways, this transition is a natural evolution of their core business, as connectivity forms the backbone of this shift. In this context, Jazz was the first telecom company to announce its vision as a tech company in May this year. The company has already launched a number of verticals, offering financial, media, cloud, web-based messaging and calls, streaming (entertainment, sports, etc.) and other services. However, some of these verticals may not prove to be as big a success as its fintech vertical JazzCash because of competition from popular global streaming and messaging apps like Netflix and WhatsApp. The other two telecom companies no doubt have their own plans in this regard, and none of them (including Jazz) may get everything right. Nevertheless, it is the only direction they are left with in their search for new revenue growth opportunities in a very competitive market.

Nasir Jamal is the Bureau Chief of Dawn, Lahore. nasirjamal6592@gmail.com