Millicom International Cellular (MIC) – the parent company of Paktel GSM has annonced that it plans an exit from the Pakistan cellular market. The shock was delivered in a press release dated 13th November 2006 (pdf available here) on its corporate website the international cellular group that specializes in operating in virgin cellular markets.

This news is definitely high-impact. First, its bad for the so-far positive image of the Pakistan Telecom market which has shown good growth over the past few years with tele-density reportedly reaching 30% from a dismal 2.7% at the beginning of the sector opening.

The news has also been a shock not in that it was not expected but the urgency that has been conveyed in the press release for this to happen. Earlier, when Millicom and Arfeen split apart, exchanging their respective shares of both Paktel and Instaphone, the common wisdom was that Millicom, taking away the Paktel GSM brand with them and loading Arfeen International with the older TDMA leg of the joint Paktel-Instaphone operations will come out strong both as a brand as well as a service. However, less than a month after the official closure of 0303 Paktel TDMA services, this news of total Paktel closure has shocked all.

Insiders are reporting that the management of the Paktel has advised the employees to look for alternate jobs and that they shall facilitate the same. For a nationwide telecomm operator of the size of Paktel, that is a lot of telecom employees suddenly on the job search for the Pakistani market size.

The shake-out/consolidation phase that typically occurs in all liberalized markets initially is now appearing up. If Paktel decides to abruptly close down its services – something that seems unthinkable given over a million users using or having subscribed to the service – there would be lots of legal implications – floating liabilities being just one of them. On the other hand, if a graceful exit is being planned (which insiders insist is not the case given the signals that the management is not ready to bear even the opex) some probabilities could be plausible. Mobilink or Warid both could acquire the million odd customers of Paktel in a commercial contract. Whether or not these parties would be interested in acquiring the physical infrastructure of the outgoing brand is anybody’s guess. How does such an abrupt closure of the service is taken by PTA – the supposed lapdog watchdog of the telecommunication sector will also be an interesting watch.