State of Telecom Industry in Pakistan

Outsourcing of technology or business operations by telecom companies  is an area which has recently been in the headlines.  One of the reason for this trend is the popularity of managed services trends. Telecom outsourcing has a huge potential for Pakistani technology industry as well. Currently there is no large IT company in Pakistan which competes globally for telecom outsourcing projects. Here are some of the recent mega deals in South Asia which have made global headlines:

As noted by Analysys Research, IT vendors such as IBM and HP are building on their IT solutions and equipment businesses to capture outsourcing deals in the enterprise telecom space. They have been working hard to develop strong service offerings and, in some cases, have even set up telecom practices within their service divisions. The illustration below from Analysys shows how telecom companies are positioned in the outsourcing chain. Note that in this post I am focussing only on the outsourcing BY telecom firms and not any work which is outsourced TO telecom firms.

In Pakistan most of the telecom technology solution deals seem to be happening with foreign technology product and solution providers - at least that is the impression one gets from the press releases and the media articles. Si3 is a notable company - it has offered payment solutions to many telecom providers in Pakistan. I do not know if Pakistani companies such as Techlogix, NetSol, TRG etc. serve the telecom vertical but I’m sure there must be other outsourcing (Technical, BPO or otherwise such as HR services)  from Pakistani IT companies. However one thing is clear: the scale of such business seems to be on the small side or the work is limited to certain hot areas such as call centers. Is this another sign that Pakistan lags behind in depth of skills and technical resources needed for larger telecom outsourcing deals?

Of course we cannot compare directly with giants like Tech Mahindra in India (see below) but there is room for improvement. Here’s a relevant article from The Times of India.

The phenomenal growth in telecom, combined with severe competition and cost pressures and rising customer expectations, is driving a slew of huge outsourcing deals in the sector.

The telecom outsourcing story started with the Bharti-IBM deal and then the Idea-IBM one. Now, analysts and industry expect several more similar 10 or seven year deals to conclude soon. Hutchison (Vodafone) Essar is said to be looking for an outsourcing partner. The market speculation is that it could once again be IBM, in a deal worth $1.6 billion. Reliance Infocomm is said to be in talks with companies like Accenture and EDS for a $1.5 billion outsourcing contract. Sources say Aircel is also in talks for a large deal.

About three years ago, Bharti Tele-Ventures had signed a 10-year contract worth $750 million to outsource its entire IT infrastructure to IBM. Idea Cellular followed, a few months ago, with a $800 million deal with IBM for consolidating and managing its IT infrastructure and applications.

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This post examines the challenges faced by PTCL and its future prospects.  As we know the Etisalat owned PTCL has been engaged in battles with new competitors and regulatory body (PTA) on one hand and faces internal organizational issues on the other. Its profits have been sliding. Notwithstanding the grand claims by its executives, Will PTCL be able to reverse the trend and prove to be a good investment?

Background
In the last couple of years the impact of deregulation and increase in competition in telecommunication industry in Pakistan has been increasingly felt by PTCL. This phenomenon is not unique to PTCL - incumbent providers all over the world have gone through this difficult transition from being a monopoly to a free market competitor.

Let’s take a look at 2006 financial results of PTCL (As of Sep 30, 2006). The following is based on the information posted on PTCL web site and as reported on Business Recorder.

- During the period under review, PTCL added net 108,000 new working connections to its network. Overall, PTCL’s sales revenue for the first quarter was Rs.16.9 billion as compared to Rs.17.7 billion during the corresponding period of last year.
-The company announced net profit of Rs 8.4 billion translating into an EPS of Rs 1.64 for the first half of 2007, a decline of 23 percent over the corresponding period’’s net earnings and EPS of Rs 10.8 billion and Rs 2.12 respectively. The major factor for the decline in the top line was six percent downfall in the revenues from Rs 34.9 billion in first half of 2006 to Rs 32.7 billion in IH/FY07 owing to rapidly declining market tariffs
- Slide in profit is a continuing trend … question is when would it be stable? Investors do not welcome this uncertainty.

Threats and Weaknesses
* Increased competition in long distance continues to exert pressure.
* VOIP use is increasing despite ambiguous and discriminatory policies - this will eat into its profits (example: international outgoing calls). Note that PTCL itself is also utilizing VOIP technology (from iBasis) and as a result it has reduced its international rates drastically in 2007. Rs 2/min call to US is cheaper than Rs 2.5/min call to mobile phone.
* Bandwidth rate dispute with PTA is been dragged in court: if PTCL loses it will be a major cost, EVEN IF PTCL wins the case their artificially high bandwidth rates cannot be sustained.
* Paknet, the Internet service provider arm of PTCL continues to incur losses due to poor managment and lack of network optimization.
* PTCL-V, the fixed wireless phone service is poor.  They should use some their marketing Rupees and use it for better service delivery, correct billing and competent customer service.
* Recent censoring fiasco  and its poor handling exposed deep problems with administration and bureaucracy at PTCL. It was yet another major public relations disaster.

Strengths and Opportunities
o Made large capital expenses on network improvement to stay competitive.
o Ufone is performing well though Warid and Telenor are tough competitors. PTCL, Ufone’’s profitability increased by 49.2 percent to Rs 977 million in 1H/FY07 as compared to Rs 655 million in the corresponding period last.
o IPTV rollout can change the game, if done right it will tilt the odds in PTCL’s favor. It will make sticky bundles possible (tv+pohne+mobile) with say a single bill for convenience.
o With over 2 million lines PTCL is the largest WLL provider. 1134 base stations cover 720 cities and capacity is being added.
o Local service revenue is ok, paying bills through phone is a commendable start.
0 Has vast infrastructure and real estate assets which can be leveraged further.
0 Global connectivity reliability has been improved. PTCL is expanding the long distance and infrastructure side through spreading out two SEA-ME-WE submarine cables.

Conclusion & Recommendations

There are many ways to get in touch with mobile phone user in Pakistan. One of the option is to send and receive text message through the Internet. All you - the sender - needs is a web browser with Java. It works well for Pakistanis abroad who often have broadband and who want a quick chat with friends or family in Pakistan. Here’s how.

Let’s start with the example of the case when you want to send a text message to a Telenor user. Below is a screenshot from Telenor web to sms page where you enter the recipient’s phone number and your name and message. It is free for the sender and Telenor charges Rs.2 to the mobile user per message.  

Note that the mobile user will receive the first message e.g. “Atif has sent you a Web 2 SMS chat message. If you wish to receive the messages from Mak, please reply Y. To reject, please reply N”. In case of reply with Y the session will start - otherwise it won’t. Once a session starts you can send and receive messages.

For those mobile users who do not use text messaging often this may be a surprise! This may not work with all handsets and this service can be blocked by the mobile users.

This functionality is available at many websites which connect to the mobile company’s gateway. I prefer going to the mobile provider site as much as possible so that I may avoid the clutter and ads at the other sites. Here are the links for sending such messages for other providers.

According to China Mobile chairman Wang Jianzhou, the company plans to spend USD400 million this year to expand its network in Pakistan. This was reported by Telegeography. China Mobile entered the Pakistan mobile market earlier this year when it acquired an 89% stake in Paktel for USD284 million, its first acquisition beyond China and Hong Kong. Wang said that the company had invested USD460 million in Paktel to date, and that China Mobile was hoping to gain experience from the venture that it could apply to further overseas expansion in the future.

According to TeleGeography’s database, at the end of 2006 Warid claimed a 15.7% share of the country’s wireless market, while Paktel had 2.7% of users. Orascom Telecom-owned Mobilink was the market leader with 22.5 million customers and 46.5% market share, ahead of Ufone with 20.9%.

As reported by Tee Emm on his blog, some big branding changes are on the way. He writes:

Flare, the showbiz-looking-telecommunication magazine (Issue April 2007, Page 84 - downlad the full issue in pdf) says the brand name change is from Paktel to CM-Pak.  How good or bad is this choice (if the Flare report is correct) is subjective.

The China Mobile has sought the Pakistan Telecommunication Authority (PTA) consent to swap the Paktel mobile company name as CM-Pak, the name under which the company intends to operate.  The China Mobile that took over Paktel from Millicom International after paying dues has now formally requested the regulator for change of Paktel’s name.  Officials from PTA have confirmed that it was approached by the China Mobile with the application that it wanted to operate under the name of CM-Pak, but added no decision has been taken so far.

China Mobile has pumped in $700 million in the Pakistan telecommunication sector since taking over the management control of Paktel.  The company will invest $2 billion in the next three years (till 2009) to expand its network, an official of the Paktel

In other news, China Mobile is changing its strategy for charging for content in China. It wants to charge for access to all mobile internet portals that offer content downloads as the company tries to boost revenue from the sector from last year’s 1 per cent of turnover, industry sources said. Subscribers at present can access more than 50,000 free wireless application protocol, or WAP, portals, many of which offer content free through the internet and bypass China Mobile’s Monternet value-added service platform. Let’s see what content plans are offered in Pakistan - I’d like to see the flat-rate which China Mobile offers in China.

On a related note China Mobile reported earnings for the first-quarter recently. Its net profit rose 22% as its subscriber base continued to grow rapidly, but the company failed to meet Wall Street expectations (I’m not sure what were these people looking for!). The listed arm of China’s largest mobile carrier by subscribers said net profit rose to 17.56 billion yuan ($2.28 billion) from 14.36 billion yuan a year earlier. Revenue rose 20% to 77.71 billion yuan.

I have written about Business Monitor International’s coverage of Pakistan Telecom before here. In the past BMI has made interesting projections about growth of Pakistan’s telecom industry. This time they have extended their forecast to 3G services in Pakistan. A subscription is required to view the detailed reports but here’s a summary as reported by Business Recorder. I think their forecast of 6% handsets by 2010 is a bit high.

According to BMI’s 3G forecasts for Pakistan, a difficult exercise given that no licences have yet been awarded to other operators. The PTA is eager to kick-start the process in 2007, which would mean that there are unlikely to be any active paying 3G subscribers until well into 2008.

With GSM the main mobile technology in use in Pakistan, as accessed by Mobilink, Ufone, Warid Telecom, Telenor, and local group Paktel (since its emigration from AMPS in 2004), the preferred 3G technology would be UMTS.

It is likely that the PTA will stage an auction in mid of 2007. It is even possible that licences could be awarded later still. It is improbable, therefore, that any commercial 3G launch would happen before H1 2008.

The introduction of EDGE services (such as the one by Telenor) and popularity of WLL may hinder the development of 3G, but BMI forecasts that by the end of 2010, about 6 percent of all mobile subscribers in Pakistan will have a 3G handset. This, however, remains very much in the hands of the PTA, the operators themselves and, of course, Pakistan’s consumers.

This post was originally published by Tee Emm at Tee Emm on Pakistan Next Generation Issues.

Fellow blogger Tee Emm from Karachi wrote this interesting piece about how mobile companies in Pakistan are increasing coverage to the remote areas. Tee Emm is one of the few pioneer bloggers about technology issues in Pakistan. His analysis and commentary is interesting and refreshing.

Here’s an excerpt, read the full post here.

Telenor & Mobilink will collectively spend over 15 million dollars on satellite based capacities to reach the juiciest of the cellular markets in Pakistan. These markets are FATA (Federally Administered Tribal Areas) and AJK (Azad Jammu Kashmir)

There are many factors that make these markets irresistible for the cellular business. These places have remained under-served for various reasons. Political reasons, difficult terrain, extreme weather. The market remains a popular telecommunication service destination because of the people from these areas have been ‘going out for work’ to every part of the country and every country of of the world. This special nature of ‘half-migration’ which is particular to the population of FATA and AJK people paints a unique equation in term of calling patterns.

Calls are made from all over Pakistan to FATA areas by the hard-working Pathan population. AJK receives majority of its call from United Kingdom where a huge number of people with Kashmiri origins reside.

Telenor has been the first one to penetrate in these markets. With no traces of fiber going out from any of the major cities of Pakistan to these areas, the only option available to the cellular operators is to use satellite capacities to connect their networks in FATA and AJK back to their national network in the rest of Pakistan. Telenor is reported to have obtained satellite capacity and services from Wateen Telecom.

Smart phones or PDAs cost between $300-500 (Rs 18,000-30,000). If you are going to spend that much money on a blackberry or Treo, it had better be a phone which works really well and is easy to use. What determines whether one phone will be more usable than the other? Keypad and battery life are two main top priorities. Also screen resolution of 240×240 pixels is recommended.

There are usability experts who are devoted to answering such questions. And as you will read, many of the smart phones in the market do not pass their tests. Computer World recently published this story here. There are other reviews as well such as the one by CNET and WIRED. The summary of the usability article from Computer World is presented below.

Here are the 5 criteria used in this story to rank a phone’s usability:

1. Ease of Navigation: It includes factors such as how simple it is to access and select various functions and finding your way to those functions.
2. Overall usability/information architecture. This relates to issues such as how clear and well-explained the icons are and the simplicity of the file structure.
3. Ergonomics. How does the device feel in your hands? What are the physical dimensions? Are the buttons and switches well-placed?
4. Look and feel. How pleasing is the interface, specifically its graphical design, colors and other design elements?
5. Functionality. This relates to how many applications are included with the device and how sophisticated and customizable those applications are.

Usability Score Results (out of 4.0):
* Nokia E62: 3.5
* Palm Treo 700wx: 3.5
* Motorola Q: 3.0
* RIM’s BlackBerry 8800: 3.0

However the WIRED review of Oct 2006 placed Motorola Q at the top because of its style, speed and QWERTY keypad. Palm Treo took the second spot. Nokia was not reviewed.

Note that Nokia uses the Symbian operating system, all other phones used Windows Mobile. Example of some issues found by usability experts: nonstandard elements to the interface, inconsistent behavior, wrong placement of buttons, slow performance, clunky. Read complete story at Computer World.

This is second in a series about mobile commerce. The first post was a case study about mobile wallets in Japan. In this post I review the efforts by US banks and financial institutions such as credit card companies to push mobile commerce as another channel for their clients.  This post is based on a study and report by Information Week. As you go through this, compare this with the experiment in Japan, especially how applications are loaded on the phone … it will be interesting to revisit this after a few months.

Citibank has unveiled Citi Mobile, the first downloadable mobile banking application from a major financial services provider. After enrolling online and downloading the app to a cell phone or smartphone, customers can view balances, pay bills, transfer money, locate ATMs, and click to call customer service.

Citi Mobile can be downloaded to 100 cell phone and smartphone models. It’s initially available in California, but Citibank says it will be out in other states by midyear. The app has been more than a year in development, and Citibank execs think U.S. cell phone users are ready to do more than talk and text on their phones. “They can manage their accounts while sitting at a red light in their car,” says Steven Kietz, Citi’s business manager for enhancement services and e-commerce.

Citi Mobile has the graphics

Information Week is not so sure. As they say: There will be a growing market for mobile banking when there’s a need for immediacy, like emergency fund transfers and balance checks, predicts James Van Dyke, president of payment consulting firm Javelin Strategy and Research. But his take on a mass market for mobile bill paying: “It’s ridiculous.” The banks beg to differ, though. Wachovia, which has a mobile offering, says mobile bill paying is one of the top customer requests.

Since the Citi Mobile app resides on the phone, it’s faster and offers a graphics-intensive interface that’s closer to online banking than text-heavy Web-based apps. Customers select the Citi icon on their phones to access accounts instead of navigating through multiple Web pages on a tiny screen. They’ll also receive new features automatically whenever Citibank makes an upgrade available.

Bank of America took a different approach, launching its WAP-enabled Web-based mobile banking service in February. Most mobile browsers can access the service, which lets Bank of America customers check account balances, pay bills, and transfer funds. “We chose to go with a WAP application, so that everyone can access it,” says Sanjay Gupta, an e-commerce executive for Bank of America. The downside: WAP displays information mostly in text form without rich graphics.

More from the report:

Wachovia also went with a Web-based app, launching its Wachovia Mobile service in December. It works only with Web browsers that come on smartphones running Microsoft’s Windows Mobile 5.0, Research In Motion’s BlackBerry, and the Palm OS. More than 50,000 people access Wachovia Mobile each week, says Ilieva Ageenko, the bank’s director of emerging applications.

But Wachovia has another option in the works. It has teamed with AT&T, which will offer later this year mobile devices preloaded with a mobile application for accessing Wachovia’s and other bank’s services. Preloading the app makes it easier to use on the phone. By getting together with AT&T, Wachovia has “enough footing to reach out to this huge base of customers,” says Ageenko.

But preloaded apps have their downside since the number of customers a bank can reach is limited to the number of phones its app is loaded on. But even with downloaded and Web-based apps, banks may have to work hard to convince customers to sign on. “Instead of banks giving away toasters, maybe they’ll give away phones,” says Richard Crone, of Crone Consulting. Also, putting an app on a mobile device could increase calls to the support center as people struggle to get an app to work on a particular device, thus increasing a bank’s costs, he says.

Besides usability and access issues, security looms as a potential problem. Mobile applications preloaded on cell phones mean personal information will be stored on phones, posing a huge risk. The good news is that the banks are putting a lot of effort into securing their mobile offerings. With Citibank’s Citi Mobile service, the phones don’t store any personal information and transactions are secured with 128-bit encryption, the same technology that’s used at Citibank.com.

Customers accessing Bank of America’s online banking service from their cell phones are protected by the bank’s SiteKey security technology. Data also remains encrypted when it’s sent between the phone and the bank. Once AT&T rolls out mobile devices with Firethorn’s preloaded banking application, it will have the ability to remotely wipe devices clean of personal data if they’re lost or stolen.

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Voice search for mobile phones is one of the killer applications  - just think of all the people for whom mobile is the main tool for connectivity and they do not prefer to - or simply cannot - type. How nice it would be if the phone understood your speech and provided accurate information based on your voice commands? Well we are not there yet … but there are some positive developments. When Google and Microsoft step in, things move fast and people pay attention. Here’s a summary based on a recent WSJ article.

Google released a free experimental service last week called Google Voice Local Search. It allows users to dial a number 1-800-GOOG-411 (in US) and search for businesses in specific cities, using technology that recognizes what callers speak. It will connect you to the business or you can get the results via SMS.

Google’s test announcement comes a few weeks after Microsoft announced plans to buy Tellme Networks  for a price that people familiar with the matter put at $800 million. The closely held Silicon Valley company specializes in services that combine voice-recognition technology with the Web, and already provides automated directory-assistance services for AT&T Inc. and Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC.

Yahoo is also planning to enter the voice search race, which is largely driven by the huge opportunity to sell ads that will run on mobile phones– and by the fact that Google doesn’t dominate that business, as it does for searches that use computers. Yahoo officials say spoken queries could eventually become an option; two executives from Tellme recently joined Yahoo.

The Journal Adds:

Until recently, voice recognition has mainly been used by telephone carriers and companies to lower their costs by reducing the need for live operators. Recently, that technology also has been used by some new entrants to provide free, ad-supported alternatives to paid directory assistance, such as Jingle Networks Inc.’s 1-800-FREE411 service.

The latest push by technology companies is also designed to make voice-based searches better, not just less expensive.

Google’s experimental service, like the Web, can work even if callers don’t know the name of a business they want. A user can ask about a type of business, such as a coffee shop, and specify an intersection or ZIP Code. The service will read off a list of nearby businesses that fit the criteria.

Another step, being pushed by Tellme in a service it has been testing, is to let users start with a spoken query, but display the results from that question on the display screen of their handset. Besides the name of a pizza shop, for example, a user could instantly see a map to it. That capability, which requires software downloaded to a handset, could also ultimately help the user complete a transaction, such as order a pizza.

“Voice is a great way to input information,” said Angus Davis, a Tellme co-founder. “It’s not always the best way to get output.”

Combining other kinds of information also can improve searches. Verizon, using technology from start-up Medio Systems , allows users to speak the name of ringtones, games or other things they want to buy. The technology can guess whether callers are interested in, say, the weather in Seattle or a band called Weather in Seattle by analyzing their past searches, said Brian Lent, Medio founder and chief executive.

Microsoft, besides mobile search, says it plans to use Tellme technology to add voice input for many products, including computers and hand-held devices. A spokeswoman for Google said, “having quick, free access to local business information over the phone may prove to be very valuable to our end users.”

A few years ago Mobile Commerce was touted as the killer application of mobile technology. With the overall lukewarm interest in 3G, mobile commerce has also been slow to take off. In the next few posts I’ll share stories from around the world about mobile commerce applications. Industry analysts often point to Japan and Korea for signs of early mobile technology adoption so let’s start from a case study from Japan. The recent effort to introduce the so-called ”mobile wallets” in Japan has been interesting. Here I’ll share a news report from CARD TECHNOLOGY which ran a story with a sub-title “Japan’s Mobile Wallets Fail To Inspire - Yet”.

As the report argues, Japan’s mobile telcos and payment card players haven’t yet convinced subscribers to think of their handsets as mobile wallets. As you read the story note how the usability of the whole process has created hurdles for the users and technology adoption. Also note how preloading applications on the phone helped in increased usage.

Here are excerpts from the news report:

Carried by 19 million commuters in what is reputed as the world’s busiest mass transit system, East Japan Railway’s Suica contactless card is used more than 200 million times per month. So it seemed like a natural for Suica to move to the contactless mobile wallet phones telco NTT DoCoMo has been selling for more than two years, later joined by Japan’s other mobile network operators. With Mobile Suica, commuters could download train tickets and recharge their Suica e-cash purse over the air to their phones, which they could tap to pass through transit gates or make purchases at more than 10,000 merchant locations in Tokyo.

But 13 months after its much-anticipated launch in January 2006, only 350,000 customers had signed up for the mobile service. That’s only about a third of what the commuter rail operator had expected. It declines to release transaction numbers.

The registration process has been difficult for many prospective users, Akio Shiibashi, director of the Suica Systems Department at JR East, tells Card Technology. “Membership is a little complicated, so we need to make it simpler,” he says. “The digital ticketing function has not materialized.”

Nor was 2006 a breakthrough year for any of Japan’s other contactless payment schemes that have launched service on wallet phones, known as “Osaifu-Keitai” in Japan. While a reported 2.6 million subscribers had signed up to tap their wallet phones to make credit payments in convenience stores, supermarkets, restaurants and vending machines as of January, it’s obvious the number of transactions are less than what backers had hoped for. The 2.6 million doesn’t include users of e-cash on the wallet phones.

Interestingly even in Japan consumer awareness remains an issue and there aren’t enough places for consumers to tap.

“The most important thing is the number of acceptance points,” says consultant Masayuki Yamamoto, a former executive with Visa International in Japan. “The number of merchants is not very great. (And) because the startup is slow, people are not aware they can use mobile payment.”

Wallet-phone backers say it’s only a matter of time before their investment pays off. But the teething pains in Japan-the most advanced mobile payment and ticketing market in the world-have implications for mobile operators, banks, transit operators and others in Europe and North America, which are planning to launch services in coming years using phones supporting similar contactless technology, NFC.

Among the issues facing the mobile-commerce players in Japan of interest to the outside world is how to solve difficulties in personalizing phones over the air with applications. After all, this is a major advantage contactless phones hold over cards. Transit operators could reduce the number of their ticketing agents by allowing customers to download monthly passes or e-cash for single rides. Banks could avoid card-issuing costs. And the handset could serve as the multiapplication platform cards never managed to become.

Preloaded Applications

This study shows that makes a big difference if the application comes preloaded on the handset and is ready for the end-user. Excerpts from the above story:

For most of the registered users of contactless mobile payment in Japan, applications are preloaded on the handsets. Every new wallet phone the telco sells comes with iD pre-installed, ready to be registered by the subscriber-a much easier process than downloading the application itself. Japan’s largest credit card company, JCB, says its registered users jumped by three times after DoCoMo chief rival, telco KDDI, began preloading JCB’s QUICPay service onto its phones in February.

“It’s kind of difficult for average users to download the Java application,” says Shusaku Maruko, general manager in the planning department for FeliCa Networks, the DoCoMo-Sony joint venture handling the secure downloads.

Japan’s mobile-payment players face other challenges that those in the NFC world are unlikely to see. Foremost among them is the fact there is no standard application for contactless payment in Japan, in part because contactless phones and cards use a nonstandard technology called FeliCa, from Sony. It means when consumers find a contactless point-of-sale terminal, it may not accept the brand of contactless credit or e-cash they are carrying.

There are 5 contactless schemes rolling out in Japan. Efforts to make the point-of-sale terminals and readers interoperable rely not on international standards bodies, but bilateral agreements between the schemes. And progress has been slow. There are perhaps 100,000 terminals and readers deployed by the various contactless schemes at merchant locations in Japan, not counting multiple brands accepted at the same shop or restaurant. But that is still a small number in Japan’s vast retail market, says Yamamoto.

A Turning Point?

Still, wallet-phone backers are confident. DoCoMo’s Hiromiki Moriyama, a director in the telco’s multimedia services department, tells Card Technology 100 Yen shops (Japan’s counterpart to the U.S. dollar store) are among the latest retailers to accept iD. About 90 stores owned by the Aeon Group, one of Japan’s largest retailers, have already installed iD terminals. And Aeon also is among the first merchants to deploy readers supporting more than one brand of contactless payment.

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As reported by The News, the import of mobile phones in Pakistan has increased almost six times over the last three years. This is alarming because it causes huge drain on foreign reserves and deprives Pakistan of the economic benefits of telecom growth. One wonders why have we not come up with any alternatives yet? I find it completely unacceptable and a failure on the part of Pakistan government. A quote from the report:

A senior PTA official said that it was need of time to promote and facilitate local manufacturing of telecom equipment, he said and added that the government should attract foreign companies to invest in this area as there was continuous demand for telecom equipments in the country which would decrease the burden on foreign exchange and create further employment.

Here is the rest of the report, courtsey of The News.

During July-November 2006 of last year, mobile phones worth $294.7 million were imported in the country as compared to $51.3 million during the same period in 2003.

The import of advanced technology and sophisticated sets with camera and music facility are on top while Pakistan Telecommunication Authority (PTA) says that this trend looks to grow in the next one year as these features have become standard.

Mobile phone companies have reduced the rates of sets boosting the trend of replacing old mobiles with new ones. Retailers believe that the number of handsets imported currently in the country has crossed the figure of one million per month.

According to an estimate, there are more than 1,50,000 mobile phone shops across Pakistan generating employment for over 6,00,000 people. Mobile phone shops include high end franchise show rooms to small kiosks in markets and shopping malls.

The total value of handsets imported in Pakistan during the last fiscal year crossed $1 billion and expected growth in imports is 25 per cent.The import of other telecom equipment has also increased due to the expansion of telecom network and services.

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There’s an interesting story about Bangladesh’s Grameen Bank in Financial Express. The story is inspired from a book called “You Can Hear Me Now” by Nicholas Sullivan, in which he writes how microloans and cell phones are connecting the world’s poor to the global economy.

I’ll share the story of Grameen phone from Financial Express first. You can read a presentation (pdf) about Grameen by its founder here. For more about Iqbal Quadir’s current work at MIT Entrepreneurship Center follow this link.

The idea of GrameenPhone was conceived by 36-year-old Manhattan-based venture capitalist Iqbal Quadir in 1993. It was triggered when his computer network crashed, leaving him unproductive. Concluding that connectivity is productivity, the Wharton business graduate returned soon after to Bangladesh to launch a phone service.

At that moment the country had one of the lowest teledensities in the world with one phone for every 500 people. What followed were years of struggle, frustration and failures. Anything that could go wrong went wrong. The government, funding agencies and investors were not easy to convince. He himself worked out of his home and car without any salary for years. The Grameen Bank, too, took its own time to get on board. Why cannot a cellular phone be like a cow? A business plan built on this argument managed to convince Yunus finally.

Then there was no looking back.The next crucial step was negotiating a partnership between nonprofit Grameen Bank and Norway-based for-profit Telenor and the service was up and running in 1997. Today GrameenPhone has 10 million subscribers, connects 100 million people through 2,50,000 phone ladies, who buy phones on microloans from the Grameen Bank and lease air time to villagers to make a living after paying off their loans. Today a phone lady earns on an average $750 a year, which is double the average annual income of a Bangladeshi. GrameenPhone has revenues of $1 billion and annual profits of $200 million. In 1999, Quadir left GrameenPhone and Bangladesh for the US to teach what he had succeeded in doing at the grassroots back home. He has also come up with the concept of invisible leg to explain how technological innovations influence economies.

GrameenPhone’s success in bridging digital divide and generating profits is not an exception, though. It has been demonstrated earlier also that connectivity increases GDP in poor countries and eradicates poverty. While econometric research by the London School of Business has shown that 10 phones per 100 people add 0.6% to the GDP of a country, the United Nations estimates that 0.6% growth cuts poverty by 1.2%.

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Author Nicholas P Sullivan embellishes the unusual Bangladeshi success story with such facts and figures in You Can Hear Me Now, which pans out not only vertically, but also horizontally to capture the big story with its smaller sub-plots.The GrameenPhone story is located on the larger global telecom map dotted by other profitable digital divide bridging initiatives like Celtel in Africa, MTN and Vodacon in South Africa, Orascom in the Middle East and South Asia, and Smart Communications and Globe Telecom in the Philippines. Last year’s Nobel Peace Prize winner Muhammad Yunus, India’s telecom ambassador Sam Pitroda, Celtel chairman Mohamed Ibrahim Mo and social venture capitalist Joshua Mailman also keep on walking in and out of the story, offering their insight on the initiative.

Concluding that an external combustion engine can catalyse bottom-up development to fuel economic growth, the author elaborates, “The engine comprises three forces: information technology, imported by native entrepreneurs trained in the west, (and) backed by foreign investors.” Emphasising that information technology and private investment are better than ineffective foreign aid to corrupt regimes, the author makes a case for out-of-the box thinking by the private sector to tap business opportunities in developing countries, provided by four billion people living on less than $2 at the bottom of the pyramid.