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Pakistan government thinking of phasing out prepaid mobile?

I have heard many absurd proposals related to the mobile industry, but this about takes the cake.

Pakistan’s government is considering a radical plan which could dramatically alter the mobile phone industry in the country – as it mulls proposals to ban Prepaid SIM cards from sale.

The Interior Minister Rehman Malik said that the government is considering a phased ban on all prepaid SIM cards in an effort to clamp down on terrorism in the country.

However, with something in the region of 97% of the entire mobile subscriber base on PrePay tariffs, the impact on the industry would be huge.

In addition to the costs of upgrading billing systems to cope with the surge in contract customers, and having facilities in retail stores to cope with the migration – the networks would also face a hole in their finances as payments switch from in advance, to monthly in arrears.

The report misses a key point: the cost of generating bills, delivering them, collecting on them and so on. One of the key conditions for the success of the Budget Telecom Network (BTN) model was lowering the transaction costs of dealing with long-tail customers (those who yield small revenues individually). These costs are dramatically higher in post-paid.

Transaction costs have to be paid by someone–in the end the customer. If the government of Pakistan acts illogically to raise transaction costs, the necessary result will be that the prices, in some fashion, will have to increase, with disproportionate impact on the low-revenue-yielding long-tail customers. Many of them will drop off the system.

The ramifications are broad. For example, the Minister should be aware that this could also result in a decrease in incoming international calls to Pakistan.

3 Comments to Pakistan government thinking of phasing out prepaid mobile?

  1. Abu Saeed Khan's Gravatar Abu Saeed Khan
    August 25, 2012 at 11:24 am | Permalink

    A functional national ID database solves the problem. It’s not rocket science but a continuous process. Malaysia is a good example. Political leadership with average intelligence is essential in South Asia.

  2. Aslam's Gravatar Aslam
    August 25, 2012 at 4:12 pm | Permalink

    Pakistan already has a mechanism in place. In Pakistan pre-paid SIM are not pre-activated, new customer has to make first call, give his National ID and answer 3 questions for verification before getting his SIM activated.

    If this has not solved the problem, nothing will. Interior Minister has a history of making idiotic statements without thinking.

  3. Aslam Hayat's Gravatar Aslam Hayat
    August 27, 2012 at 5:41 am | Permalink

    Here is the clarification from PTA:

    “There has been no proposal to phase out the prepaid connections under consideration. The interior ministry neither asked us about this nor gave any specific directions regarding the issuance of SIMs,” PTA chairman Farooq Awan told Dawn.


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