Leaving The Gates Open for Zong!

By Salman Wassay!

China Mobile over the last decade has, at least a couple of times, felt the pain of lagging behind in the technology race when they missed the 3G bandwagon in Hong kong and China. In hong kong they opted out of the bidding process and in China they went the TD-SCDMA route and both times they faced trouble in form of losing market share and pride. China Mobile is a very proud company and loss of face in front of the world was not going to happen to them again, at least not in Pakistan.

When they had bought Paktel back in 2007, there were some quarters in the government of China and also within China Mobile who were not in favor of the deal and felt that they had bought junk. World’s largest operator was suddenly the smallest in Pakistan. It hurt their ego, and I remember when Chairman Wang Jianzhou came to Pakistan before Zong launch and addressed the team in Pakistan. His key message was that the whole world is looking at Pakistan and that he doesn’t want Zong to be the smallest player in the market for long. His direction for the team was three words, Scale, Scale and Scale!

Not only was Zong small, it had the Paktel baggage and also the perception of being Chinese. Which unfortunately means poor quality in Pakistan. How Zong overcame those hurdles is history and a story for some other times, but the 3G/4G bidding has now given Zong a splendid opportunity to not only take their image a few notches up but also attracting better value subscribers.

If the other operators were thinking that Zong would play conservative in going for the licenses, they were only fooling themselves. Not only Zong went for full 10 MHz in 3G but also grabbed the 4G spectrum. Looking at the bidding strategies of all the other operators all I can say is that they had little or no faith in the Pakistan market. Ufone, Mobilink & Telenor thought that it was too risky to put in so much commitment in Pakistan.

On the other hand I think the biggest risk taken was by Mobilink by not going for 4G. Mobilink is not only the market leader but also by perception a premium brand. About two years ago they had gone for a total brand change by letting go of the biggest telecom Brand of Pakistan, “Jazz” and sticking to their original name Mobilink. By letting go of the 4G spectrum they not only risked their leadership position but also left the gate open for Zong to put their foot in the door.

In revenue terms Zong is now approximately 40 percent of Mobilink while in subscriber base they are around 70%. This doesn’t necessarily mean that Zong customers are poor customers compared to Mobilink. It surely means that Zong customers are using more than one SIM and their telecom spent is split into more than one SIM.

Now getting back to 4G, the 4G launch by Zong will effect Mobilink in at least two ways;

  1. Mobilink does not know exactly how many of their low end customers also have a Zong SIM? Will some of them try the 4G? How many of them? Will there be a shift in their spending patterns towards Zong?
  2. Also how many of their premium subscribers will try the 4G of Zong?

I have tried the 4G and believe me 20+ Mbps is way faster than 3 Mbps. It is even more obvious on the iPads and the Samsung S5 and Note screen sizes. My estimate is that about 4-5 million Mobilink subscribers contribute about 70% of their revenues. Too many eggs in one little basket for my liking and with such a delicate situation I would have never risked not going for 4G.

Look at it this way, if 500,000 high end Mobilink subscribers decide to shift their usage to Zong 4G, the revenue loss would be equal to the 4G bidding value in just 12 months! I must say a very risky approach by Mobilink and may be the beginning of the end as a true leader in Pakistan market.

I can clearly imagine what happened at Ufone (by having the benefit of working their twice). The board did not think going beyond 5 MHz made any ROI. I was once told by one of my bosses that succeeding in business is like show jumping. When you reach the hurdle you have to throw your heart across that hurdle first, only than the horse will follow. Ufone, already facing a positioning challenge due to Zong’s aggressive pricing, cannot afford a lower technology positioning compared to Zong. They have to understand that their flexibility of playing on price is limited by their Boards’ lack of understanding of the Pakistan, hence Zong will always have a better or cheaper price perception compared to Ufone. Couple that with the 4G and 10 Mhz of 3G spectrum will give Zong the license to launch an assault on Ufone which will cause an irreparable damage. Very soon in the urban centres, due to limited spectrum, Ufone customers will face not very sexy 3G speeds. Already we see a capping of 3 Mbps. Ufone is an urban brand, and a relatively poor 3G experience in top metros in terms of download speeds will further hamper its growth prospects. As they say, Ufone may very soon find themselves between a rock and a hard place and if that happens I will only fault the strategy at the Board level!

On the other hand Telenor may also have a risky strategy by only going for 5 MHz spectrum but their real strength is in the rural markets of Pakistan. My belief is that rural markets have a huge potential for 3G as in almost 100% of the cases they are not Wi-Fi supported. So the only wireless broadband available will be 3G. Compared to that in the Urban centres, the consumers have Wi-Fi access in both office and home, and Wi-Fi is much more affordable than 3G! 5 MHz may also be enough to cover the small less densely populated rural markets of Pakistan. Hence I think Telenor may have a workable plan. I am not too sure if any re-farming will be of any value to them to increase capacity in the urban centres.

On the other hand re-farming is something, which Warid is seriously putting all their bets upon. Due to lack of financial resources they did not bid for any 3G or 4G spectrum. Since the license is technology neutral, they believe they can re-farm their frequencies to launch 4G without paying anything extra. They probably have a case. I believe Warid is targeting around November to announce their 4G launch. This will definitely give a boost to their declining subscriber base and revenues for a short time, but telecom in Pakistan is a big boys game and not for flirting by the small pocket companies. Warid needs to have a clear plan on the way forward in either a merger or a complete sell-off to get any return on all the investments made. I think they missed a golden opportunity in not building trust and relationship with SingTel, who would have been a great partner for them to have in times like these!

Zong has a great opportunity to capture the fancy of the high end users in Pakistan. I feel they are not communicating in a way, which will attract them in high numbers. At the risk of sounding too critical, I must say that the advertising strategy and execution of Zong post 3G/4G leaves a lot of room for improvement. Its one of the brands that I was part of when created and prompts me to be critical when I see reason to be!

Winter is approaching and the industry is going in to the budgeting mode. I feel 2015 will be an year where fortunes will change – Telenor may claim market leadership position both in revenues and subscribers, Zong may take the 3rd position in revenues and Warid may play the disruptive role – yet again. All in all it will be an exciting year.

4G is here! – enjoy the Naya Pakistan, whatever that means!

With over 20 years of experience in telcoms, Salman Wassay, former CCO of Ufone and Marketing head of Zong when it Launched in Pakistan, is currently involved in setting up a company in the M2M & IoT space. He recently started opining thoughts on his blog here: http://telcopinion.wordpress.com/

  • Very Nice Article..!!!
    But Still U Didnt did Justice With Warid..they are Launching 4G Very Soon & Ufone was the first to commercially Launch 3G so..

    • Warid 4g will not achieve great speeds because of the lower frequencies they have and Ufone may have commercially launched 3g first but their coverage in Lahore is still pathetic as well as call quality.

    • Doesn’t matter who launches first. The thing that does matter is which operator gives the best service and attracts customers with their economical rates. I, for one left ufone after the 3G auction due to their high prices & pathetic coverage and waited for Zong to launch their 3G.

      Warid on the other hand will only be used by a few rich people, as I’m sure their 4G will be more expensive than 3G of other networks (seeing as Warid is/was the most expensive 2G network) and they also won’t be offering 3G – which will be a huge issue for them as not everyone can afford or would want to buy a 4G handset, and they can’t expand their 4G coverage to rural areas, nor the people their would own/or want to buy a 4G handset, which makes it easier for other operators to win the race.

      As I see it, The real competitors are Mobilink, Zong & Telenor. That’s it.

      • Telenor’s 3G technology is poor. Their 3G signals disappear and shifting on 2G takes time; as a result you go offline from cellular network for almost a minute. I had a postpaid connection of Telenor and was using 3G on it. However, I gave it to my wife since she does not use 3G at this time. I have turned to Ufone but their 3G rates are too high with speed limit starting from 256 Kbps. So, I have ported into Zong.

  • Well written and sumarised …however I agree that warid needs to be given credit they have handled the 3g asult well and now let’s see how they handle this …The most interesting will be which operator panics first and reacts stupidly …We know this industry to over react ..no wait and see policy

  • the article makes sense …however I don’t think there is an overnight danger to any operator …firstly there are compatibility issues than 4G is bigger WIN for corporates & though now Zong will have an edge in solutions , it will take some time …but wat needs to be seen is how the other operator utilize this time & what do they do to handle this threat, as in long term this will be a game changer

  • …China will eat all of them …by 2 years they will be no 1!!! ..mobilink and all are lame …4G!!!

  • He only trying to prove that its was wise decision by ZONG to have 3G and 4G license. All others TELCOs was wrong on their respective initiatives.

    • Writer ka pehla pehla pyar (Zong) ser charh kr bol raha hai…. BTW, I would never go for Zong due to its World’s #1 crapest call quality & pathetic customer service. Hate at first sight u know!!!

      • Some people might disagree with you due to their ”awesome” experience, you know.

    • Agreed!
      But you need to see the world through author’s eyes to see the dismal future of all other operators except Zong.

  • Great topic but when did zong going to launch full array of 4G products like USB dongles etc

  • His experience is fully visible in the article. After very long time read a strategic sort of blog.

  • I agree with the point ‘rural markets have a huge potential for 3G as in almost 100% of the cases they are not Wi-Fi supported.’ If Telenor have the same planning to target rural ares, they will succeed. Zong and Telenor both have wife coverage specially in KPK mountainous ares.

    • Just like IDEA. in India for 3G… Also 4g enabled devices and coverage will be limited for few years… Many people are just switching to 3G now and not even thinking about 4G. How much uses of 4G are here yet… Rare…so wait long for this is to happen

  • So, in short, as per author, all other operators are idle & passive, only Zong is proactively taking bold steps & making mind blowing progress. Hence future of all other operators is in dismal. Quite good analysis of the situation but very biased conclusions.

    • After all he is a ZONG employ and holds a key position so why you expect him praising other companies, try to understand

  • People pointing the article to biases, should at least think about professional background of the author, at least watch our words before we say something to someone!

    • Please mention your complete address & designation as well so that you may be contacted by your next employer.

      • Very Thank full of Allah, I am already employed, in a respectful organization, even I am not related to telecommunications, but I don’t make assumptions for any one!

  • Interesting article indeed but we have to wait for a couple of weeks before commenting on Warid LTE. I think Warid will maintain its track record of superb quality though it will be a great challenge for Warid due to bandwidth issue

    • Maintain superb quality with what, voice on 900 band and LTE over bottlenecked spectrum, although I appreciate the efforts and greet to see aggressive competition in the masses but warid has think about ground realities,.

    • The legacy of superb quality of Warid has become the tale of gone days. Now service of Warid is pathetic. I am a Warid user since 2005 but has really disappointed me since last 1-2 years.

    • What about coverage? Specially in rural areas….
      How many Warid customers will purchase a 4G handset?
      How many Warid customers can afford a 4G handset?
      Will it maintain it’s track record of excellent service along with expensive rates?
      How many Warid customers would prefer to use expensive 4G with limited coverage after purchasing a 4G handset?

      Just a few questions….

  • Ufone wanted to acquire 15 MHz spectrum for 3G but could not. Ufone was also interested in 4G license. Had they succeeded 15 MHz or a lot of 10 MHz, they would have grabbed 4G license. Ufone was aggressive in their 3G launch campaign and they were certain to grab a plenty of spectrum but Zong was lucky.

    • Lol. What utter cr*p. Obviously they needed to spend money to buy licenses. Did they expect to purchase it for free? You go to the market to buy 10Kg Chicken, only return with 1Kg simply as you only wanted to spend Rs. 250. Then you boast around that I ”wanted” to buy 10Kg Chicken? Ufone knew very well that they’re loosing the auction and they could’ve bid higher… but they didn’t,.. so no point in saying what they did purely for the sake of publicity.

      • Arsalan I agree with you but the factor of luck also influences if not at all. I hate Ufone but said so since they showed interest in spectrum but Warid did not show it all. Maybe Ufone thought to have grabbed more spectrum for less…

  • O c’mon people with your BS comnts about calling him a Biased person … get 2 the heart of the matter … any ways …. really good article

  • opinions may differ.but a very well written article.
    and who knows what next. Elder Martizin from Russia predicted the decline of nokia in 2008 when no one has ever think of it. no one ever believed him at that time. but it happened. and now nokia is history. so I belive author pridicted right about all cellular companies

  • I have been using Telenor for 7 years and I only have one sim. I find it offending that Telenor is still not providing 3G coverage to my area (Wapda Town, Lahore). I am still seeing Edge on my Nexus 5 which is 4G LTE capable, while at the same time Zong is providing 4G in my area. Although as much as I love the voice quality of Telenor I have finally made a decision to move my number on Zong network. I don’t keep more then 1 sim, sorry Telenor you lost an old and loyal customer. My monthly mobile bill is usually over 2500 Rs.

  • Interesting Analysis! The brilliance of the article reflects the extensive Telecom experience of the Author but Koi Warid ko “Easy” na lay :)

  • hahahahahah i like the ending part “4G is here! – enjoy the Naya Pakistan, whatever that means!”

  • Reasonable analysis though; it is far from reality to hint a market positioning based on acquisition of liscence (4g) alone. To my eyes atleast 2015 is not the year of 4G in pakistan; neither it can be. 3G will bear a 95% say until end 2015. And at the same time, one should not forget that PTA still holds rest of blocks for 4g spectrum. Other operators may and they will get hold on them sooner than later. In no way it is wise to speculate the lead of one just based on a liscense instrument. I must add that the so called number game (determining market leadership) based on number of subscribers is no more than a fallacy. We should not ignore that the real value comes from the ARPU; and that plays an enduring role in such determinations for future. To conclude, i must say that its 3g infact (and not 4g at all) that will scope the critera for a lead or a fall for the CMOs in coming year. However the majority of the other facts elaborated in the article make good sense for readers to understand the rising scenarios in telecom market of pakistan. Nice effort, overall!

    • That is what I tried to say that article is purely pro-zong, though unintentionally, I would say. But people started bashing me & telling me that I should keep quite.

  • With so much buttering, it appears that Salman Wasay is looking for a job with Zong.

    But apart from the sarcasm, the state of telecom would have been much better had he not played on price wherever he has been. He killed calling card business while he was at DVComm, killed the cellular revenue and margins while being at Zong, and failed to grow subscriber base while being at UFone. By his own admission, Zong is 40% of Mobilink’s revenue while being 70% of its subscriber base. The Zong story is hardly one of success and its financial losses are evident by high Opex and Capex on a per subscriber basis, generating the lowest ARPU in the industry, and accumulation of continued losses where the company is persistently EBITDA negative. The investors look for a healthy ROI, and Zong has failed to deliver to its investors.

    I have not seen the 3G subscriber numbers since launch for any operator, but it does not appear that the service uptake is encouraging, notwithstanding how much spectrum a particular operator has, which is immaterial at this point as it does not appear that the operators are facing any spectrum congestion issues owing to increased IP/data traffic.

    • Oh my God …u really hate the author …what happened …He dnt give u promotion while u were in his team …

  • Good for country’s technological pace in telco industry BUT only the launch with no internet connection quality puts customers in serious dilemma! 3G, 4G, LTE, etc. symbolize fast speed reliable internet connectivity but Alas! this thought hasn’t been proved up till now in Pakistan.

  • It is an excellent analysis of telecom market.Definitely Zong has edge in market with 4G licence.Uptil now Zong has more than one million 3G subscriptions which shows amazing performance of Zong.The way Zong is progressing, it will have more than 5 million 3G/4G subscriptions within next one year that will change the whole scenario. It will be difficult for any new 4G operator to compete with Zong. Excellent decision by Zong.

  • Zong 4G did get me from Mobilink, all I can say now that service quality is not that bad, when I happened to be at 19th floor everyday.

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