Mobile Penetration in Pakistan
An article on the Grey Mobile Phone market in Pakistan
Written By:- Aamir Abbas Khan
(The writer is an IT &Technology analyst)
A decade ago, high costs and irrelevance meant mobile phones were not that common in Pakistan. But as time passed and technological advancements were made on regular basis, mobile phone manufacturers began producing low cost mobile phones as part of a strategy to grab early market share in a suddenly booming sector. Combined with the growth of communications and transmission technology (fiber and satellite based) mobile phones have since become a necessity. Pakistan’s potential in the telecommunications market was underestimated in the beginning, but recent years have shown that this country can never be neglected. Judging by the increasing number of cellular subscribers, the smart companies got in early and stuck around.
There are several reasons behind the high mobile phone penetration in Pakistan; recently a number of Chinese phone sellers, following in the lead of global brands such as Nokia, Samsung, HTC, etc have entered the market and increased their sales and service networks. This in turn led to increased demand for post-paid and data packages, which boosted numbers tremendously. Now demand is increasing for 3G networks, something that should have happened several years ago, but was delayed several times. Secondly, but more importantly, millions of Parallel Import devices have penetrated the market and found success with their relatively lower prices by successfully evading the tax structure.
Experts say that there is a 15 to 20% price difference between Parallel Import devices brought in this way and those devices legitimately imported. For customers this sounds like a dream, and who cares if the government doesn’t get its pound of flesh. But the effects for consumers can also be adverse. Devices like these don’t come with warranties, guarantees, and service agreements. Often, sellers will replace parts or scavenge the phone and take out its most expensive parts before putting it back together and selling it again. And there’s nothing that customers can do to avoid this. Replacement parts become more expensive and suddenly a legitimate market becomes tilted by untaxed substitutes, leading manufacturers to cut down their participation, effectively driving them from the market.
There are numerous examples; One of the leading brands recently conducted research that showed an increasing number of complaints arising from purchases of warranty-less or PI phone products. Recently high end devices were also released which received an excellent response from the Pakistani market, but because of the impact of PI products on their brand name, the company has taken a hit. While some leading brands are staying, other manufacturers may not feel the same, if they see their brand equity and image of reliability tainted in this way.
Parallel Import devices affect all mobile phone manufacturers and leads to a negative financial impact for official distributors. The government recently started taking this issue seriously, partly because of growing security threats and the use of cellular devices in terrorism-related activities. The Government should also take further action to protect customers interest and to make sure they buy official products, because the service agreements make up for the extra cost, guaranteeing security and performance.