State of Telecom Industry in Pakistan

Does it make business sense to introduce 3G in Pakistan at this time? PTA has been deliberating on this question for a while. Recently PTA asked major technology stakeholders (equipment makers, mobile companies) to share their view points on 3G licensing and roll-out. The presentations have been posted at the PTA website. Telenor CEO has talked to press about his views on 3G, covered here. Take a look at few points from a presentation by another one of the major mobile company. The argument presented is that conditions are not suitable for 3G in Pakistan and the data revenue potential does not justify investments needed for 3G. They recommend to either defer spectrum allotment or give partial spectrum at nominal cost. Can you guess which mobile operator is this?

3G Situation in Pakistan

• Pakistan is a low priced voice dominated market. Industry is building voice capacity rather than enhanced capability
• Pakistan Mobile Data Subscriptions Disappointing
• Nominal GPRS subscriptions in the industry
• ARPU uplift from these subscriptions is negligible
• Multi-mode (GSM/UMTS) handsets are still costly
• GSM market exploded due to economies of scale in the hand sets
• GSM hand set is available as low as $25
• Small percentage of 3G capable hand sets in the market
• 3G non-voice mobile revenues are expected to be negligible
• Localized content stimulates usage — Low literacy in Pakistan
• No content available in local/regional languages

Spectrum Cost

• Spectrum forms part of investment for an operator to roll out a 3G network
• Five operators can be expected to invest over a billion dollars on initial launch
• More cell sites would required to support higher data rates
• Local content development is an uphill task

Option 1
Defer the allotment of spectrum for another 1-2 years (as per our recommendation May 2007)

Option 2
Award 5Mhz of 3G spectrum to all MNOs at nominal cost (similar to WiMax spectrum fee )

Why?

1. Incentive to build and grow 3G services
2. Justify high capex on roll outs
3. Technology proliferation
4. Affordable 3G services for masses
5. Allocation of additional 3G spectrum at a subsequent date
6. Operators keen to expand on 3G portfolio can bid
7. Market foundation is laid
8. Business case for further investments
9. Strengthen operator capability to offer better QoS and advanced services

One of the premiere events of mobile and wireless industry, GSM annual meeting is a place to watch for trends. In the event hosted at Barcelona last month, Yahoo got the award for mobile portal, Grameenphone for social cause (note the familiar logo) and SonyEricsson got the award for mobile device. The full list of winners for 2008 can be viewed here.

Best Mobile Handset or Device
SonyEricsson: W910 Walkman Phone
3UK: 3 Skypephone - Highly Commended

Best Use of Mobile for Social & Economic Development

Grameenphone: CellBazaar

Best Mobile Game

Cellufun: Call of the Pharaoh
Glu Mobile: My Hangman

Best Broadcast Commercial
Safaricom: M-PESA ‘Send Money Home’ campaign

Best Mobile Advertising
Crossmedia Avenue: AMF Pension – the MMS campaign

Best Use of Mobile for Social & Economic Development
Grameenphone: CellBazaar

Best Network Quality Initiative
RAD Data Communications: LA-130 Cell Gateway - Cost-Effective HSPA Backhaul

Best Service Delivery Platform
Aepona: Aepona Telecom Web Services Platform

Best Billing and Customer Solution
Bharti Airtel: mChek on Airtel – Mobile Payments Service

Best Mobile Music Service
Omnifone: MusicStation

Best Mobile Video Service
mywaves

Best Mobile Social Networking Service
BuzzCity: myGamma.com

Best Mobile Infotainment Portal for News/entertainment
Yahoo! Connected Life: Yahoo! Go for Mobile 2.0

Best Mobile Enterprise Product or Service
Microsoft: Windows Mobile 6

Best Mobile Messaging Service
Seven: System Seven 7.0

The GSMA Chairman’s Award
Sunil Bharti Mittal, Founder, Chairman & Group CEO Bharti Enterprise

Rabta is Urdu for making a connection. Here is the official Telenor press release about this. I am curious to find out more about the affordability of these centers and if these centers have the appropriate set of applications for the population in the remote areas.

“We want to establish an easy-to-access point for these communities to benefit from e-mail, scanning, faxing and printing facilities in their everyday lives. With information and Communications Technologies (ICTs) becoming an ever-increasing part of our lives, there is need for such facilities to be made available in Pakistan’s rural and semi-rural areas too”, said Sigvart Voss Eriksen, Chief Marketing Officer in Telenor Pakistan.

Digital Media Asia reports on this:

Telenor Pakistan recently launched Telenor Rabta Centres as part of a pilot project involving local communities. These community information centres offer all modern communication facilities under one roof. The services use Telenor Pakistan’s high-speed EDGE network.

Telenor Pakistan is collaborating with the GSMA Development Fund, Nokia Siemens Networks and the ILO (International Labour Organisation) on the project. Rabta Centres have been established in Quetta (Balochistan), Khuzdar (Balochistan), Bagh (Azad Kashmir), Jamal Deen Wali (Rahim Yar Khan, Punjab), Ahmadpur Sial (Jhang, Punjab) and 18 Hazari (Jhang, Punjab).

Each centre is equipped with two PCs with EDGE data card to connect to the internet, a printer, scanner, webcam and a handset with Telenor Pakistan connection.

The GSMA Development Fund is providing support in project management and facilitation activities for the pilot implementation. Telenor Pakistan and its project partners have selected entrepreneurs from the corresponding local communities to run these centres as their business. All entrepreneurs have been trained in computer and entrepreneurial skills.

I am sharing a piece about WiMAX in Paksitan, which I wrote for All Things Pakistan. As this is an overview, some of the information here may already be in my previous WiMAX posts.

Pakistan’s telecommunication industry - mobile communication in particular - has made impressive strides in the last few years after deregulation. However broadband growth in the country has been very disappointing - there are less than 100,000 broadband users in Pakistan. The open competition observed in mobile industry has not been replicated to broadband. Reasons include high prices, control of PTCL over bandwidth resources, policy issues, lack of infrastructure and legal disputes.

Enter WiMAX. Simply stated, it’s a relatively new standards-based wireless technology which is intended for large coverage areas on the order of several kilometers (instead of a few hundred meters, as is the case with Wi-Fi).

With base stations transmitting signals and some equipment at customer location, it promises fast bandwidth for both fixed locations and mobile users. In this backdrop, Pakistan made headlines in 2006 when Wateen announced plans to work with Motorola to rollout Mobile WiMAX, the largest network of its kind in the world.

Is WiMAX (Worldwide Interoperability for Microwave Access) the right technology for developing countries? In other words, will this new technology deliver the promise of broadband at affordable prices?

WiMAX comes with many theoretical advantages but its potential is yet unproven. Without getting too technical, it is purpose-built for Internet (IP) communication and is based on standards (as opposed to other proprietary solutions) endorsed by a respected world standards body, the Institute of Electrical & Electronic Engineers (IEEE)*.

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Nokia has made a welcome move to further tap into the Islamic VAS market, as reported here and at many other blogs. The N73 phone from Nokia was introduced in Middle East this week. It is packed with Islamic content and applications. This special edition should become popular in South Asia too, as it supports Urdu and has many desired features.

The new Nokia N73 Special Edition includes a unique portfolio of pre-loaded applications including a collection of Azkars for the morning and the evening, an Islamic Organizer with audible alarms for the five daily prayers, a Qibla direction indicator and a Hijri calendar. The Hajj and Umrah application provides simple step-by-step descriptions for the Hajj and Umrah, while the Ramadaniat application explains all the instructions and rules for the Holy month of Ramadan. Also included with these on the 2GB miniSD card are two Islamic e-books and a Universal Dictionary application which supports English, Arabic, Farsi, Urdu and French.

‘In addition the Nokia N73 Special Edition offers unique Ramadan Greetings, a very special customized e-card application that enables families and friends to send greeting cards through SMS or MMS in celebration of this Holy month’ said Neil Gordon, Vice President for Multimedia, Nokia, Middle East & Africa, ‘This new edition is a reflection of Nokia’s commitment to continuously provide consumers with tailored services, based on their needs and requirements.’

In addition to the pre-loaded content consumers using the Nokia N73 Special Edition can also download other additional applications. Downloadable content includes the Name of Allah application, exclusively available for Nokia users as well as a third e-book.

N73 is available in 3G, quadband EDGE/GSM networks.

If you or someone you know has used this phone, please share your feedback with other readers of this blog.

Sharing some text from an interesting article about China Mobile (CHL) which appeared at Fortune Asia Edition. Interesting commentary about their many masters, marketing efforts and the CEO’s management style and preferences of the CEO. Also note how investors are concerned about expansion abroad. As its first major acquisition abroad, CMPak has strategic significance for China Mobile.

China Mobile, the world’s largest wireless company, has 330 million subscribers, thousands of shareholders, and one Communist Party to please. That’s not an easy job for CEO Wang Jianzhou.

It has a network of more than 230,000 base stations and is spending furiously to put up more. When you run the biggest mobile-phone network in the world’s most populous country, you operate on a different scale.

In China’s largest cities, where mobile penetration rates match those in the U.S. and Europe, China Mobile offers a dizzying array of non-voice services including Internet search, ringtones, and music downloads. It has struck content deals with domestic and foreign providers, including News Corp., MTV Networks, Yahoo, and the National Basketball Association, and transmits 1.2 billion text messages every day.

Read more »

This post is a brief overview of how Telenor did in Pakistan for second quarter of 2007 . I’ve included the extracts from the reports available at Telenor’s website. Most indicators are good: Revenues have soared, subscriber share is steadily increasing. The EBITDA (earnings before interest, tax, depreciation and amortisation) is positive for the first time, though the ebitda margin is only 7%. Another thing which needs to be noted that Telenor’s operating losses have reduced in 2007. Yes, they lose money. The losses are  due to leasing line costs and capital expenditure, among other factors. I still rate Telenor “buy” but at the time of this writing they are trading a bit on the high side.

The average revenue per user (ARPU) has stabilized around Rs 280 per month for Pakistan - its low but that’s the reality of the market. The bottom chart below shows the minutes of use and the average price per minute, which for Pakistan is around Rs 2/min. Interesting to compare the same for Bangladesh.

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As we cross the midyear mark, CMPak Limited remains one of the most interesting mobile companies in Pakistan (see my past story from last year). Yes, they are late in the game of foreign acquisitions in emerging markets. Yes, Paktel has below 2% market share in Pakistan. But CMPak has huge amounts of cash. Some people have even questioned: why are they here? Well, they had to start somewhere and even if they don’t make big bucks in Pakistan it provides a great learning opportunity. Besides, who does not want to play in a growth market?

Re-branding, investments and price war seems to be a dominating theme for CMPak formerly known as Paktel. I am not sure when will they start phasing out the Paktel name and logo as many of their campaigns still show Paktel. Can someone shed more light on this?

The big news in the initial months were the announcements of capital investments deals with combined worth over $1 billion with Alcatel and Ericsson, discussed by TM here and here. Then came the first promotional Power Package- 50 paisas, which I consider a good start … Let the paisa wars begin! My only complaint is that the strings attached with such packages - and this applies to ALL mobile companies - can be too complicated for consumers to grasp - see if you can make sense of this tariff summary page from PTA. As TM points out:

the prices have come down to a point where the marketeers of the services can bring in the 50 paisa mention in their sales pitches with fine prints telling us that this is for 30 seconds, on-net and/or for a (predefined) user groups of friends and families.

Now lets talk about the overall strategy of CMPak, rebranding work and what about jobs?

To start with, China Mobile is the largest wireless carrier in the world in terms of subscribers and second largest in the world in terms of market value ($185 billion) so it can potentially benefit from its scale. It has experience of dealing with falling ARPU from China and has the capacity to compete on rock-bottom prices. However it is unclear on what are its plans for 3G. Its history as a government run monopoly till recently makes some people believe that it is not as business savvy as other global run telecom companies. According to an article in Flare:

China Mobile, a hardly-reconstructed former government department, falls into the category of a government run enterprise. The record of incumbent telecom companies abroad is an unimpressive one. Not least among the reasons for failure were the inability to adapt to the role of challenger and the unfamiliar regulatory and cultural environment.

No senior Mobile executive has experience of any market outside China. Few speak English to any extent. The strength that CM will bring to Pakistan, where 70% of the population lives in the countryside, is its rural experience. It has won business in western China by deploying low-cost networks, and selling handsets for as little as $38 with low-denomination prepaid top-up. This year CM has put itself on a learning curve, but to succeed abroad it will have to defy history as well as its own legacy culture.

With the acquisition of Paktel and injection of cash there was hope in the market that many jobs will be created. However the job situation is still uncertain. I’ve heard that technical jobs for locals have not been announced yet and Chinese engineers have been brought in. Even the website says: No jobs opening available right now!

Talking about websites, I was a bit disappointed by the quality of CMPak’s website . Anything beyond the home page is mediocre at best. I found plenty of stale content and inconsistent design which leads to poor usability. Telenor sets the bar when it comes to online experience. For Paktel, a fresh site with upated content should have been an important part of their rebranding. For now I’ll give them the benefit of the doubt and hope that CMPak will soon fix their website.

Picture from Paktel site shows Mr. Guo Yonghong, CEO, CMPak and other executives at Chamber of Commerce in Karachi.

How much would an unlocked (or liberated as some call it) iPhone cost in countries like Pakistan? Expect to pay around Rs.75,000 ($1250) or more. Ridiculous, to say the least, in a world where 2.7 billion people live below 2 dollars a day. Now that I’ve finished my rant, lets talk about the availability and technical stuff.

Apple intends to make the phone available in Europe in Q4 2007 and in Asia in 2008. Even though official distribution channels for the world outside US may take a while to be established but the phone (and its clones) will be available soon, depending on how soon hackers unlock it. Most probably consumers in Pakistan will not have to wait long for iPhone. Unlocking is not going to matter a lot as the original network related features of the phone were not state-of-the-art to begin with. Let’s see when the 3G version of iPhone comes out.

Why would iPhone matter? There are two main areas: one is the breakthrough interface and design. Other is the data features which require a network such as WiFi.

In my opinion, iPhone makes sense for:

Leaving the details to others I’ll just mention one thing: iPhone runs a full version of safari browser, which has recently been introduced for windows as well. The safari browser is an important piece here as it allows developers to create apps. According to fiercewireless at the WWDC conference, Apple CEO Steve Jobs told developers that they didn’t need an SDK to write apps for the iPhone–they can start building Safari-based mobile Web 2.0 apps now. But beware: The Safari browser in iPhone supports neither Adobe Flash nor Java.

On a related note RSS is being touted as a killer application for iPhone but in reality its not the first phone to offer RSS – Flurry already offers RSS on majority of the phones.

Reviews and Further Information:

As mentioned at macworld: For a product that hasn’t even been released yet, there’s sure a lot of information out there about the iPhone. To name a few: Apple’s 40-plus minutes of marketing videos, early reviews and at USA Today, and Newsweek.

I’ll finish this with a quick review of how competitors are handling this threat from Apple.
- pointing out iPhone’s shortcomings
- touting their better network features
- introducing their own rival phones: - See this WSJ article
- Nokia was forced to do a whole re-organization due to iPhone!

Many GSM industry supporters have looked at WiMAX as a competitor - though others disagree and call attention to its complementary uses as I’ve covered before in the post Why WiMAX?. In Pakistan Wateen is an interesting case because it wants to have a two prong strategy and cover all its bases. However in India there’s some resistance to WiMAX which gives an idea of the uphill battle WiMAX is facing.

Here’s a (story) which tells about the internal struggles in India about WiMAX standards. However the Cellular Operators Association of India (COAI), the body representing all GSM operators, has cited compatibility / interference issues and wants more time before agreeing to the proposed standards.

The global WiMax Forum has sought the Indian government’s support in its endeavour towards getting the International Telecommunication Union (ITU) to include WiMax as part of International Mobile Communications - 2000 (IMT-2000) standards.

The forum has asked the Department of Telecom (DoT) and the Wireless and Planning Wing to support its cause in the upcoming ITU meet in Kyoto, Japan. Indian cellular operators have, however, opposed the move and said that the DoT must not support the forum’s proposal until further details such as compatibility and interference issues with regard to WiMax are available.

IMT-2000 is the global standard for third generation (3G) wireless communications as defined by the International Telecommunication Union. It has defined five standards which are followed globally for 3G services. In January 2007, a proposed sixth standard (WiMax) was submitted into ITU by the Institute of Electrical and Electronics Engineers (IEEE) and supported by the WiMax Forum.

Read more »

The annual conference of CTIA, the wireless association, was held last week of March 2007 in Florida. The CTIA annual event is said to be ”the world’s largest technology event dedicated exclusively to wireless, broadband convergence and mobile computing technologies”. It is a great place to showcase new technologies, network and socialize with top decision makers and create buzz about upcoming work. For example the much awaited voice search applications from Google and Yahoo were announced here.

The event covers the entire industry from network infrastructure to microprocessors to applications to content to end-user hardware. More info at the CTIA site.

The covered topics for 2007 conference include:
- The Quadruple Play
- Mobile Enterprise
- Mobile Payments
- Mobile Entertainment
- Social Networking & Mobile Communities
- Advertising
- Globalization
- WiMAX

See the webcasts of the conference here.

One of the major highlights is the Emerging Technology Forum track at the conference. The forum focussed on the following four tracks:

For detailed roundup of the conference see this post.

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.