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;
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/
