WiMAX set to drive broadband growth in Sri Lanka?

Sky Network: WiMAX offering set to shake up Sri Lanka's broadband market?

News items from Sri Lanka's mobile market have caught the eye of DevelopingTelecomsWatch a few times of late. Most recently, DTW asked whether the arrival of the UAE's Etisalat as a player on the island nation's cellular scene would cause price competition to become even fiercer. It was noted that a sustained price war has been eroding tariffs and weakening cellcos' profitability over the last four years. Since then, further worrying figures from the country's telecoms sector have been released.

On November 11th, for example, Reuters reported that market leading MNO Dialog Telkom posted a fifth straight quarterly net loss for Q3 2009, disappointing analysts who had predicted the company would break even. Reuters reports that the telco, a unit of Malaysia's Axiata lost 438.9 million Sri Lankan rupees (USD 3.83 million) in the quarter which ended on September 30th. As well as margins being squeezed by fierce competition, the Reuters piece traces a link between between this loss and profit remaining elusive at Dialog Telekom's broadband and direct-to-home satellite TV operations.

That's the latest from the Sri Lankan mobile market. What, though, of the country's incumbent wireline operator, Sri Lanka Telecom (SLT)?

SLT, which was part-privatised in 1997, hit the headlines this week for its efforts to improve the availability of its services in the country's Northern and Eastern provinces, the areas affected by the on-and-off conflict between government forces and the Tamil Tigers, which ended earlier this year after twenty-six long years.

Harshini Perera of Sri Lanka's Daily News writes that SLT has addressed the need to improve its services in these areas by expanding its copper and fibre access networks, installing new exchanges and the CDMA base stations.

With a view to improving its broadband offering across the whole island, Sky Network, a subsidiary of SLT, will, according to Sri Lanka's Daily Mirror, be providing the WiMAX services to parts of the country where ADSL services are not offered. The Daily Mirror reports that the venture will commence operations in March 2010 and will initially provide services to Colombo, Gampaha and Kalutara Districts.

It will be interesting to watch for the impact this WiMAX offering has once launched. Australian telecoms research company BuddeComm's Sri Lanka Internet Market report indicates that Internet access and other forms of data services have lately been starting to take off in the country, but that coverage and accessibility remain limited, with user penetration estimated by the ITU to be at around 6% by the end of 2008. Buddecomm's report contends that early moves to offer broadband Internet in Sri Lanka have met with only limited success, albeit with some promising signs of growth in 2008-09. The report notes that early activity in the wireless broadband segment of the market has not yet translated into significant subscriber numbers.

2010 looks to the year during which it will become apparent whether wireless access technologies will contribute significantly to the growth of broadband services in Sri Lanka.

WiMAX set to drive broadband growth in Sri Lanka?

Sri Lanka: Etisalat entry to drive even fiercer price competition?

Etisalat: set to make life hard for Sri Lanka's cellcos?

This blog has recently taken an interest in the fate of the three Asian mobile operations put up for sale by Millicom International Cellular.

Late last month, as noted here, the global emerging markets player sold its 78% stake in Tigo Laos to Russia's Vimpelcom. Prior to that, DevelopingTelecomsWatch had noticed the sale of Millicom's stake in Cambodian cellco Cellcard to the Royal Group, a fellow shareholder in that operation.

This just left Tigo Sri Lanka unsold.

The Sri Lankan mobile market is currently contested by that operation and four other MNOs. In terms of the operators' shares of the country's estimated 13.6 million subscribers (according to WCIS), the competitors are ranked as follows:

1. Dialog Telkom - 46.33%
2. Mobitel - 24.14%
3. Tigo Sri Lanka - 17.44%
4. Bharti Airtel Sri Lanka - 9.46%
5. Hutch Sri Lanka - 2.63%

The last time DTW offered an opinion about how this competitive landscape might change, perhaps too much was made of the likelihood of the number of operators consolidating down to four. No very sophisticated analysis was made, nor any inside information sought. It was simply the case that the prospective purchasers of Tigo Sri Lanka getting the most media coverage at the time were companies already active in the island nation. I had noted, for example, that Bharti Airtel was rumoured to be interested in snapping up Millicom's operation there, having read an article by R. Jai Krishna of the Wall Street Journal which reported comments from an unnamed person close to the development. Suggesting that any deal would be worth USD 100-120 million, that mystery source had said "in Sri Lanka, if you need to be a significant player in the market, you need to do an acquisition... greenfield, you will not be successful," by way of explaining the rationale behind Bharti Airtel's rumoured move.

This has came to nought, however. The happy new owner of Tigo Sri Lanka is none other than Etisalat of the UAE.

Commenting on this latest purchase, Etisalat Chairman, Mohammed Hassan Omran said: "This new acquisition is a clear example of Etisalat’s international investments strategy of seizing distinctive growth opportunities and maximizing value to shareholders."

He added: "Entering the Sri Lankan telecom market is a logical addition to our interests in the Asia continent. The acquisition promises attractive returns as the Sri Lankan Government is increasing its effort to promote foreign investment in all sectors. The acquisition is of a mature operator with a strong reputation for its good network and quality of service. It also offers great opportunities for synergy with our other operations in the region, particularly in the UAE, Saudi Arabia and India. We also plan to invest in this company to ensure that it has the dynamism to take the leading position in the market in the next few years and that it continues its effective role in the development and growth of the telecommunications sector in Sri Lanka."

How far, then, will this transaction affect the Sri Lankan mobile market? Shortly after it was announced, Fitch Ratings reacted with a gloomy prediction, stating that the entry of Etisalat into Sri Lanka could further delay any prospects for recovery in the country's operators' profitability.

The ratings agency's statement notes that price competition in Sri Lanka has led to a rapid deterioration of tariffs over the last four years, weakening the profitability of the operators, especially in the wake of the licensing of the Bharti Airtel-owned fifth entrant in 2007.

Fitch notes that Etisalat has tended to enter other new markets late in the race and has generally pursued a course of aggressively challenging established operators. "If Etisalat's track record is anything to go by, it is possible that it may invest heavily to acquire more market share in Sri Lanka, which will intensify the challenges facing other operators," says Buddhika Piyasena, Director of Fitch's Asia-Pacific Corporates team. Certainly, I recall a conversation a few months ago with the marketing director of one of Afghanistan's cellcos. He spoke about how the arrival of the the Etisalat-owned operator in that market had caused the price of a voice minute to tumble, with the country's nascent regulatory regime offering little by way of protection for the longer-established players.

Fitch contends that something similar could easily unfold in Sri Lanka, where "apart from lax regulation, a major reason for the heavy price-based competition... is the absence of a framework that requires mobile operators to pay other networks for interconnection." The ratings agency argues that this allowed Bharti Airtel, which has "limited coverage", to challenge other operators to the point where a full scale price war resulted. As Fitch notes, a revision to the interconnection framework is currently on the telecom regulator's agenda. When implemented in 2010, Fitch expects this to ease further pressure on tariffs.

According to Fitch, however, operators may see subscriber acquisition and retention costs - including handset subsidies, and subsidised starter packs - increasing with competition intensifying for market share.

Fitch is also of the view that a higher level of regulatory oversight over the competitive practices of operators and some intervention on tariffs is required to ensure the financial health of the industry.

Etisalat has made this latest acquisition against a background of mostly positive coverage about the group's prospects. While Q3 revenue fell slightly vs. the same quarter last year, the company posted a 5% improvement in net profit.

Also encouraging is the performance of Mobily, the Saudi MNO in which Etisalat has a 27% stake. Q3 profits were up 49.7%, vs. Q3 2008, beating the most optimistic forecasts by about 10%.

Etisalat, then, is well-placed to compete extremely aggressively in Sri Lanka. Industry watchers will doubtless be interested to observe how seriously this affects the profitability of its competitors there.

Sri Lanka: Etisalat entry to drive even fiercer price competition?

Sri Lankan mobile market: one way or another, consolidation looks likely

Sri Lankans queue to get their hands on Airtel 's low price offers earlier this year

When Bharti Airtel's Sri Lanka operation Airtel Lanka launched its cut price services in January this year, the new cellco became the fifth operator competing for a share of the country's mobile market. The number of mobile service providers in the island nation, however, may soon be set to fall back to four. This will depend, though, on which party comes forward to snap up one operator currently sporting a 'for sale' sign.

Up for grabs is Tigo Sri Lanka, one of the Asian operations that Millicom International Cellular is keen to sell. When this blog first commented on Millicom's planned withdrawal the three Asian markets in which it has done business, Axiata (formerly Telekom Malaysia International) was mentioned as a possible purchaser of two of these operations - Tigo Sri Lanka and Cambodia's Cellcard. In both cases this would lead to market consolidation - in Sri Lanka, Axiata has a controlling stake in market-leading cellco Dialog Telekom; Cambodian MNO Hello is a wholly owned subsidiary of the Malaysian group. As discussed in the most recent DTW article, however, it was another existing shareholder in the Cambodian cellco (the Royal Group) which eventually relieved Millicom of its stake in Cellcard. Given that other organisations have been more recently and more regularly touted as potential purchasers of Tigo Sri Lanka, Malaysia's Axiata also seems to be out of the running with regard to that opportunity.

One potential suitor mentioned very recently is state-owned Indian operator BSNL, whose management committee approved a proposal to submit a bid to acquire the Sri Lankan operator company last week, according to Manoj Gairola of the Hindustan Times.

The public sector telco seems to have attracted considerable criticism of late, some of which has been reported here. Quite striking was the August 12th article written by Kunal Kumar Kundu, who feels that BSNL is crippled by political interference, poor demand forecasting, lack of effective budgetary control and a bloated payroll. This blog has also reported the very modest take-up of BSNL's wireless broadband offerings and negative feedback about the company's preferred franchisee business model for the development of both 3G mobile and WiMAX services. Almost as often, however, the state-owned operator has been linked here with possible overseas investments. Perhaps the competitive pressure from India's numerous private sector mobile players is felt so keenly by BSNL's management that foreign opportunities are seen as a much better bet in terms of realistic growth opportunities. This may explain the fact that in the few months since the inception of this blog, the Indian operator has been mentioned in connection with a stake in pan-MEA mobile group Zain and with a new telecoms licence in Tunisia. BSNL's interest in Tigo Sri Lanka, then, is perhaps not very surprising.

Also connected in media reports with the sale of Tigo Sri Lanka is the UAE's Etisalat, which in August was reported to be considering an investment in the country now that the long civil war seems to have finally reached a conclusion. Priyantha Kariyapperuma, Director General of Sri Lanka's telecoms regulator, reportedly met with a visiting official from Etisalat last month and told journalists that "with the war over in May, there is ample scope for investments into telecom services and infrastructure facilities, especially in the north and east," referring to the area of the island that was most affected by the conflict. Few of the reports on Etisalat's possible interest in Sri Lanka have stated explicitly that the UAE company's route into the country's market would be via the acquisition of the Tigo-branded MNO. All of these reports, however, mention the availability of Millicom's Sri Lankan operation, so perhaps it's not unreasonable to infer that the Emirati company might have had Tigo Sri Lanka in its sights.

The most recent name floated in connection with the opportunity, however, is one from India rather than from the Middle East. As with an Axiata purchase, this move would also lead to market consolidation - because the company concerned is Bharti Airtel, already present in the Sri Lanka market since January, as we noted at the top of this article.

It seems, then, that the management of the giant Indian telecoms firm is not completely absorbed by the ongoing negotiations about the proposed mega-merger with South Africa's MTN. That saga has been notable for the repeatedly-extended deadline for concluding the talks and for various parties weighing in with opinions about the desirability of the mooted deal. One recently expressed opion comes from South Africa's Communications Minister, Siphiwe Nyanda, who voiced caution over the proposed tie-up in an interview yesterday. The Minister told the Sunday Times that any deal should take into account that MTN was a "South African company with a footprint in Africa." I take this to mean that there exists concern over MTN potentially losing its identity as a telecoms group with its roots - and the bulk of its business - in Africa. The Minister's comments are certainly of relevance given that South Africa's Government-owned Public Investment Corporation holds a 21% stake in MTN.

Bharti Airtel's interest in Tigo Sri Lanka came to my attention earlier this week, when R. Jai Krishna of the Wall Street Journal reported comments from an unnamed person close to the development. Suggesting that any deal would be worth USD 100-120 million, the mystery source said "in Sri Lanka, if you need to be a significant player in the market, you need to do an acquisition... greenfield, you will not be successful," by way of explaining the rationale behind Bharti Airtel's rumoured move.

A strengthened presence in Sri Lanka on the part of the Indian cellco could be welcomed by consumers - certainly if the company continues to compete aggressively on price, a strategy that has yielded impressive subscriber growth. Since going to market in January, the new entrant had 900,000 subs by the end of June, according to WCIS market intelligence. Another Informa Telecoms & Media service, Global Mobile Daily, reported in late July that Airtel Lanka claimed to have reached the one million subs mark.

The Bharti-owned cellco, however, has seen some of its competitors crying foul over its tariffs. Late last month, for example, Duruthu Edirimuni Chandrasekera of Sri Lanka's Sunday Times, reported that some operators have threatened to cut their interconnection with Airtel Lanka to retaliate for the the Indian-owned company failling to withdraw tariffs not approved by the country's telecoms regulator.

This sounds oddly familiar - the most recent article here covered a very similar wrangle over tariffs and interconnect agreements in Cambodia. Competition in Asia's mobile markets, then, certainly seems to be brutally fierce right now. Again I find myself voicing the view that there may well be casualties when the going gets this tough.

What price on mobile market consolidation in Sri Lanka then?

Sri Lankan mobile market: one way or another, consolidation looks likely

Millicom's withdrawal from Asia to prompt (much-needed?) market consolidations?

Russia's Beeline brand comes to Cambodia - and set to drive consolidation in the wake of Millicom's withdrawl? Picture (C) Roger Barlow.

Millicom International Cellular, the Luxembourg-based company which provides cellular telephony services to more than 30 million customers in across Latin America, Africa and Asia recently announced that its assets in the latter of these three regions are up for sale. The company's announcement mentioned that during Q1 2009, these Asian operations and joint ventures generated UDS 68 million in revenues and USD 4 million net profit for the group.

Even more recently - on Tuesday last week - the company announced its 2Q 2009 results, encouraging highlights of which were:

• mobile subscribers up 25% vs. 2Q 2008 - bringing total subscribers up to 30.8 million
• reported revenues up 5% to USD 814 million (2Q 2008: USD 774 million)
• EBIDTA up 14% to USD 371 million (2Q 2008: USD 326 million) - this beat the USD 361 million forecast in a Reuters poll of twelve analysts
• EBIDTA margin of 45.6% (+340 basis points vs. 2Q 2008)
  

These results excluded "discontinued operations" - this means Tigo Sierra Leone and the three Asian operators. This, then, certainly leaves little doubt that the group is committed to its exit from Asia. The three Asian operations concerned are in Cambodia, Laos and Sri Lanka.

Why is Millicom looking to get out of these markets? Zacks Investment Research offers the following explanation: "The major concerns in these markets for Millicom are increased competition and an extremely tight credit market." According to Zacks, the Asian region contributed just 8% of the company’s total revenue and its EBITDA contribution was even lower at 6% of the total. The Zacks commentary also notes that overall ARPU in Asia was just USD 6.2 in the first quarter of 2009, compared to USD 6.6 in the previous quarter and "a massive" USD 8.7 in 1Q 2008.

According to Millicom CEO Mikael Grahne, increased competition certainly does seem to have affected the profitability of Cellcard, the Cambodian cellco in which Millicom has a 58.4% stake. Steve Finch, writing on Friday in the Phnom Penh Post, observed that Millicom's Grahne appears very critical of the "disruptive market-entry strategies" of new entrants into Cambodia's increasingly crowded mobile sector. On the other hand, Finch also observes that another major shareholder in Cellcard does not agree with Millicom's assertion that this is negatively impacting profitability: "[There are] no concerns on profitability from our side," said Mark Hanna, CFO of Royal Group, which owns a 38.5% stake in the cellco, denying that margins had become tighter. As well as investments in property development and the media sector, Royal Group is very active in Cambodia's telecoms sector. In addition to its stake in Cellcard, the group has shares in Royal Telecam International (the second licenced international gateway in the Kingdom; also a joint venture with Millicom) and teleSurf, a broadband service provider.

Whichever side of this argument is the more valid, it seems undeniable to me that Cambodia is currently supporting an incredibly large number of cellcos. Millicom-backed Cellcard, which is by some margin the market leader (43.65% of subs according to WCIS) is one of three well-established players, the others being Hello (an Axiata company with 13.28% of subs) and Mfone (19.84% of subs). From 2007 onwards, a number of further entrants have piled into the market. The most recent of these is Beeline Cambodia, owned by Vimpelcom, one of Russia's big three cellcos. The arrival of this new operator, whose services were launched very recently and whose subs are not yet recorded by WCIS, brings the grand total to nine MNOs vying for business in a country of just 14.2 million people.

To me, this feels like a vastly excessive number, particularly in light of the fact that mobile market consolidation has been a recurrent theme here at DevelopingTelecomsWatch this year - we've discussed whether even a relatively large African market such as Tanzania can possibly sustain the numbers of licensed mobile operators currently competing there - and have asked the same question about much smaller markets such as Burundi and Gabon. Moreover, we have discussed this issue in broader terms, i.e. whether/when we should expect a wave of market consolidations across Africa, prompted to do so by the stated belief of MTN CEO Phuthuma Nhleko that this is set to happen.

Mobile penetration in Cambodia currently stands at 34.41%, according to WCIS. So there is room for growth. How many of this large number of cellcos, though, will be equipped to take full advantage of that opportunity? I suppose that will partly depend on their resources and the quality of their management teams - but even very solid companies could struggle if there is any truth in the Millicom allegation about the effects of new players' disruptive market entry strategies. As Steve Finch of the Phnom Penh Post explained, these strategies involve the distribution of free SIM cards and airtime - very nice for quickly building a subscriber base, but taken to its logical conclusion this can seriously erode overall market value for all players.

Has this kind of strategy worked for any of the new players in terms of rapidly building market share? The answer seems to be a resounding 'yes' in the case of one particular new entrant, Metfone, which is the Cambodian subsidiary of Vietnamese MNO Viettel. According to WCIS, Metfone has quickly carved out an incredible 17.47% of the market since its launch late last year. The current WCIS estimate for Metfone subsriber numbers is 900,000. There may be precedents elsewhere in the world for an operator arriving in an already fragmented market and amassing subscribers at something like that rate - but none spring immediately to mind for me.

How is Viettel able to do this? The answer might be that the company is simply not working to the same commercial logic as its rivals in the Cambodian mobile market. Viettel itself is owned by the army of Vietnam, a state officially committed to the creed of socialism and where all organs of government are controlled by the country's Communist Party. In a March essay here on the global links between the telecoms organisations of countries with left-leaning regimes, Metfone got a mention. That piece referenced a Saigon Times article on Viettel's foray into neighbouring Cambodia, which indicated that the new cellco would target low-income subscribers with a wide range of low-priced services and packages. Viettel Deputy General Director Nguyen Manh Hung was quoted as saying that this approach is not only about customer acquisition but is also intended to "contribute to society". Perhaps we should take that to imply a quite different interpretation of the for-profit motive than the one most of us in market economies have to live with in our jobs and lives.

Have any of Metfone's fellow recent market entrants been able to build a subscriber base at anything like the same speed? There answer here appears to be a resounding 'no'.

In terms of market share and subs, the other newcomers have fared as follows:

• Star-Cell (GSM) - 3.27%, 168,400 subs; part of the TeliaSonera group; commercial launch in 2007
• qb (W-CDMA) - 1.20%, 62,000 subs; commercial launch in 2008
• Latelz (GSM) -0.97% 50,000 subs; launched in 2009; owned by Time Turns Telecom, which is also an investor in telecoms operators in Burundi, Tanzania, Nepal and Sierra Leone
• Excell (CDMA) - 0.31%, 16,000 subs; launched in 2009
  

In September last year, Morten Eriksen, the CEO of the second operator in the above list was interviewed by AsiaLife Guide Phnom Penh, a monthly lifestyle magazine for expatriates living in Cambodia. Eriksen, who also explained that qb is funded by international venture capitalists and local Cambodian partners, expressed the belief that there is a good opportunity created by the country's very limited fixed line telecom infrastructure and the eagerness of its people of "to experience new technologies." He also asserted that rather than focusing on competing, the company is focusing on the people of Cambodia and how it can provide the best benefit to them. Specifically, Eriksen expressed his company's commitment to serving the youth segment with "packages and services to help students in the pursuit of education as they are Cambodia’s future." In an earlier interview - with the Bangkok Post in June 2008 - Eriksen reported that when he was first invited to get involved a 3G project in Cambodia, his initial reaction was that "they must be crazy". He explained that only after reluctantly travelling to Cambodia did he see the potential in a market with three incumbents providing bad, expensive service and where a 256Kbps ADSL line cost over USD 600 a month. The article indicates that the project formally started in 2004, with the company getting a licence in 2006 and then signing a turnkey network agreement with Ericsson in June 2007. Groundwork started in October 2007 and the first test call was made a month later. Finally on March 15 2008, qb was launched "with over 57,000 subscribers signing up on launch day courtesy of a huge concert and free SIM packages."

If that figure of 57,000 initial subs is accurate (and WCIS does reflect this), then further growth has certainly been very slow indeed.

Of the late entrant mobile operators, it would seem, then, that only Viettel's Metfone operation has really made a major impact on the Cambodian market.

So, if Millicom, as market leader, is going to withdraw from this market, which telecoms groups have looked at this seemingly very challenging competitive environment and expressed an interest in acquiring Cellcard? Two names which have surfaced in recent weeks are ones already competing in Cambodia. Consolidation, then, would appear to be on the cards already, even ahead of any of the smaller players potentially having to withdraw.

The first interested party, according to a TeleGeography article earlier this month, is Axiata, the Malaysian-owned mobile group formerly known as TM International. Axiata is said to be considering offering a total of USD 700 million for both Cellcard of Cambodia and Millicom's Sri Lankan operation. Were this bid to be made and accepted, Sri Lanka would also see market consolidation - Axiata owns the island's market-leading cellco Dialog Telekom. According to the TeleGeography article, Axiata has declined to confirm or deny the talks, but said "in-country consolidation is of strategic importance in some of our markets." This does seem to be something of a trend in Asia - and for Axiata - of late. Cellular News reported last month that Aktel, the Axiata/NTT DoCoMo joint venture in Bangladesh is rumoured to be in merger talks with rival Banglalink, which is owned by Egypt's Orascom Telecom. Banglalink CEO Ahmed Abou Doma explained in a statement that apart from the market leader (Grameenphone), "others are continually posting losses" and that "in order to sustain in this fiercely competitive market, and in line with [Orascom's] growth ambitions", his company is "considering many strategies of which consolidation is an option."

In Cambodia, the other potential bidder for Millicom's Cellcard operation seems to be Russia's Vimpelcom. Again, this is another existing competitor, albeit one whose Cambodian launch was very recent. According to a Reuters report earlier this month, Vimpelcom spokeswoman Yelena Prokrova was conceded that potentially the Asian assets of Millicom could be interesting for for the Russian telco because they are located in the region which the company views as strategic in its international expansion. The report notes that Vimpelcom would also be interested in Millicom's operation in Laos.

My sense is that, as we have seen here, Cambodia is one of a number of Asian markets in which mobile sector consolidation seems very likely. I am wary of the notion that low penetration rates alone mean that any given emerging market or developing country offers telecoms groups a licence to print easy money. The low ARPU inherent in serving relatively poor people and the challenges of rolling out infrastructure to under-developed regions, often in challenging physical environments, can make for unattractively thin margins. If destructive levels of price competition are thrown into the mix, it surely becomes difficult for large numbers of competing operators to survive in all but the largest markets. The withdrawal of Millicom International Cellualar from Asia, then, may stimulate much-needed market consolidations in at least two of its three existing Asian territories. Rumours from Bangladesh also suggest that similar developments may be in the offing elsewhere across the continent.

Millicom's withdrawal from Asia to prompt (much-needed?) market consolidations?

Mobile operators - low TCO, smaller carbon footprint: the answer is blowing in the wind?

Wind/solar hybrid powered base station deployed by Avea: pic from Cellular News

By March this year, according to Informa Telecoms & Media, there existed over 4.1 billion mobile subscriptions globally. At the start of this decade, the number of global subs was just 482 million. Ten years earlier than that, there were fewer than 5 million subscriptions worldwide.

I feel proud to be associated with an industry that has grown so impressively, but am mindful of the challenges ahead as mobile operators seek to connect the next billion customers. These prospective subscribers are poor people with very restricted spending power. A popular argument put forward to explain factors responsible for keeping such people locked into poverty can be exemplified thus:

• The earning potential of a semi-skilled handyman living in a shanty town on the fringes of a large African city is hampered by his not being able to advertise how he might be contacted by anyone wanting his services. He spends more time walking the streets asking for work than he does working and getting paid.
• A farming community lives a largely subsistence lifestyle, growing crops to meet its own needs and selling the surplus to buy other vital goods and services. The farmers routinely fail to get the best price for this surplus because they have no way of finding out at which markets they they will find the highest levels of demand.
• A person living in a remote community needs to register a birth or death in the family. The state bureaucracies have no touchpoint in the community so completion of this routine paperwork involves taking time away from productive activities to travel to a bigger population centre.

All of these problems can be resolved through access to telephony and/or the Internet. The handyman can write his mobile number and details of the services he offers on signs, placing these at road junctions or other prominent locations. I saw a lot of this kind of hand-made advertising on my recent trip to Kenya. With (mobile?) Internet access - or even just by making a few calls - the farming community can review market information and send its produce to where the best price can be commanded. In a small, isolated community provided with some form of Internet access, e-government solutions may obviate the need for long, expensive, time-consuming journeys.

Communications services, then, look set to have a vital role in alleviating this poverty. This role has been quite neatly explained by The Next Billion Network, an initiative incubated at the MIT Media Lab. The phrase used in the this group's mission statement is about deploying innovative mobile technologies which help poor people in developing countries to "reduce friction in their local markets from the bottom up". The Next Billion Network's founders believe that these new waves of mobile subscribers will make their voices heard—and connect to the global information network. "This will unleash a wave of entrepreneurship, collaboration and wealth creation, turning the newly connected into a powerful force in the world economy," the founders say, adding that "the kind of world that emerges from this transformation will depend on our ability to recognize it as an opportunity."

For mobile operators to continue to act as a catalyst for developments of this kind, they will need to resolve a number of challenges around keeping the total cost of service ownership low for poorer people in developing countries. These challenges are many and varied. The one referred to in the title of this post is around powering mobile networks in locations lacking reliable electricity grid infrastructure.

In emerging markets, cost-conscious operators have long been concerned about the OPEX implied by running diesel-powered generators to power off-grid base stations. The fuel itself must be bought and operators must also take fuel transportation costs into account - significant costs when fuel must be supplied to remote areas with poor roads

Solar power and wind power look like good alternatives - the power sources themselves are free and inexhaustible. Added to that, CSR-conscious telcos can bask in positive press coverage of their reduced carbon footprint.

In September last year, however, I read that trials of these technologies have largely been quite disappointing. My former Informa Telecoms & Media colleague Matthew Reed, the editor of Middle East and Africa Wireless Analyst, reported disatisfaction on the part of the GSM Association with the trialing of base stations powered by the sun and wind. The GSMA's Development Fund Director Dawn Haig-Thomas said: "There have been a number of trials that have failed, and we've been digging into the reasons," adding that "we've seen trials where the geography hasn't been correctly considered – where solar panels and wind turbines have been placed in inappropriate places, or not in optimum places."

In addition, Matt Reed reports, "many sites are also missing electronic control devices that manage power fluctuations or alert systems that tell operators to switch on backup diesel generators, if the base station is low on power, perhaps because it has not been windy or sunny enough."

Further, Matt writes, a big reason for the lack of take-up of alternative energy sources is that although operating costs might be low, the solar panels and wind turbines have historically been too expensive. In addition, notes Matt, "lots of solar panels were needed to power a base station, which would force operators to buy more land on which to site them." Wind generators, until recently, he notes, "were only manufactured with massive turbines that were more appropriate for wind farms than for small base stations."

Matt observed, however, that better solutions are becoming available. A number of deployments of wind and solar powered base stations have been announced in the month's following Matt's article. I have to assume that these deployments involve solutions to the kinds of problems Matt raised.

The most recent one that I know about is the deployment by Turkish mobile operator Avea of what it claims is the first hybrid wind/solar powered base station in the country - manufactured by Scottish firm Proven Energy. A Cellular News piece on this story this week quotes Erol Barendregt, Director of Turkish reseller Girasolar Türkiye, which installed the equipment: "The hybrid solution is the best option because the sun and wind resources have opposite cycles and intensities during the day. Wind and solar power are understood to be among the best natural alternatives to fuel based electricity generation. By using both in a system that is designed to supplement each other you get a continuous and reliable power supply."

Major telco sector vendors want a piece of the action in this space. In October, Ericsson, for example, unveiled a wind-powered 'Tower Tube' base concept developed in partnership with Vertical Wind and Uppsala University in Sweden. According to a Global Mobile Daily article at the time, vertical rotor blades work silently, minimising the load on the tower during operation.

A more recent announcement by the Swedish vendor, made in February, concerns its involvement in the development of solar-powered base stations. A GMD article dated February 18 notes that the Orange-branded mobile operator in Guinea is to deploy 100 solar powered base stations across the African country, in partnership with Ericsson. The base stations, says the article, make use of Ericsson's energy-efficient hybrid diesel-battery solution and solar panels, which will replace one of a base station site's diesel generators with a bank of specially designed batteries capable of handling a large amount of charging and discharging.

Chinese vendor Huawei also has solar powered solutions on offer. GMD reported in September that the company had deployed Pakistan's first solar powered base station for Warid Telecom, thereby enabling the operator to extend its network reach into remote areas of the country with limited access to the electricity grid.

Sri Lanka's Dialog Telekom has opted for a mix of solar and wind-powered base stations in trials designed to investigate the uses of several forms of equipment from eight different vendors. This was reported by GMD in February.

So there seem to be a few renewable energy developments going on in emerging markets worldwide. I could not comment to what degree these recent deployments and trials have addressed the concerns raised last year by the GSMA.

Mobile operators - low TCO, smaller carbon footprint: the answer is blowing in the wind?

South Asia: cellcos contend with tough trading conditions but continue to record subscriber growth

According to a short note published by Telecompaper this week, the mobile market in Pakistan returned to growth mode in January, with overall subscription numbers rising to 90.703 million vs. the 89.907 recorded in December. I am not sure where these numbers come from. The WCIS databsase maintained by Informa Telecoms & Media logged a slightly different figure for December, 90.162 million, so it seems reasonable to think that estimates for January may vary as well.

WCIS did record a fall in subscriptions from November to December, although the exact numbers did not match those mentioned in a brief Global Mobile Daily report of 20th January, which noted that Pakistan's total mobile subscription base declined 0.6% at end-December to 89.9 million from 90.4 million in November, according to the telecoms regulator the PTA.

I looked around for an explanation for the contraction in market size late last year. The neatest seems to be the one outlined briefly at the Pro Pakistani telecom & IT news blog earlier this week. The reason given there for that fall in numbers is the loss of subscribers who had failed to register and verify their SIMs. SIM verification is currently quite a contentious issue, the MNOs apparently contending that a new system could compromise privileged information and "hurt the credibility of the cellphone industry."

Mobile operators in Pakistan may not sell active ready-to-go SIMs. Instead, new users purchase an inactive SIM and must then register their details. What is newer is the requirement for operators to furnish the National Database and Registration Authority (NADRA) with their subscribers' mobile phone numbers before the activation of SIMs. The operators reportedly had no objection to providing other data about their customers, e.g. parents' names, address, place of birth etc. This newer requirement, however, has not gone down well with the MNOs, whose leaders are reported to have said that the new clause clashes with their contracts with the PTA, which had allowed them to keep their clients' information secret.

When the Dawn newspaper contacted senior executives of Mobilink, Telenor, Warid Telecom, Zong and Ufone, the responses were strongly worded. "Why does NADRA need our customers' numbers? It's ridiculous. This information is privileged and is only to be provided to the government...if there is a (credible) national security concern as mentioned in the terms and conditions of our licences," said a Mobilink executive. "How will this information be used? It is equally detrimental for companies and subscribers," said another top executive, adding that the new clause might jeopardise the entire mobile industry.

"This was not part of the agreement when we paid Rs291 million licence fees," said a Zong executive. "Licence terms cannot be changed just like that. We are providing [a] public service. We hired more than 300 people, trained them, set up new call centres and brought in expensive new equipment just to make the SIM verification system a success," he said.

From Telenor Pakistan, Dawn's reporter learned that both the PTA and NADRA came down hard on the cellcos, leaving them with no choice but to sign the new agreement. "We were told that this agreement was not negotiable. Without signing it, we will not be allowed to sell SIMs. It's a question of compromising an industry that generates Rs2 billion annually," said a source within the Norwegian-owned MNO

"Unjustifiably, NADRA had earlier raised the verification fee by almost 200 per cent," said a representative for Warid Telecom.

After all this fuss in January, the operators appear to have been working quite hard to win back lost custom. Reduced rates have been a quick remedy.

Naeem Pani Wala, a Pro Pakistani contributor, wrote last month about the resulting 'Paisa war', taking note of Zong's especially aggressive undercutting of market-leading Mobilink. "Despite the fact that current economic situation doesn’t allow low pricing," writes Naeem, "we know that this doesn’t matter much for [the] Chinese and they beat the competition with low rates."

Naeem analyses the various TV advertisements run by Pakistan's MNOs. His view seems to be that, being unable to compete with Zong purely on price, Mobilink has decided to focus on coverage and quality of service, as in this ad:



Naeem feels this is a good approach, enabling Mobilink to remain highly visible to consumers "without investing much on packages." According to Naaem's article, Telenor Pakistan seems to be staying out of the hottest price war action and focussing its efforts on dominating the high value post paid space, as explified by this advertisement:

Over time, I assume we will see figures indicating that while Pakistan's cellcos have managed to get back onto the subscriber growth path, the price war reported by Naeem is affecting earnings.

A South Asian market where there already seems to be confirmation of this is Sri Lanka. Cellular News reported earlier this week that market-leading Dialog Telekom has suffered a sharp drop in prepaid ARPU, which fell by 22.6% from Q4 2007 to Q4 2008. "Sri Lankan consumers may have been unpeturbed by local or global economic circumstances in 2008", says the Cellular News artcle, "but Dialog was not. Despite the strong customer growth, annual revenues grew by just 1.0% to SLR 33,108m. A 48.4% rise in costs saw gross profit down 26.0% to SLR 15,478m, while EBITDA fell 41.6% to SLR 8,370m. Fourth-quarter EBITDA was even worse hit, a massive 75.6% decline taking the figure to SLR 740m from SLR 3,027m in Q4 07. This was partly due to exceptional items, but even on a normalised basis there was a fall of 51.6% to SLR 1,466m."

While subscriber growth looks good in principle, it does seem that South Asian markets are at the stage where operators have realised that extending the availability of services to ever less affluent population segments will mean higher costs and steadily declinding ARPU. Let's see how many of the region's operator suffer significant hits to EBITDA as a result.

South Asia: cellcos contend with tough trading conditions but continue to record subscriber growth