Telecoms operators in developing countries are always owned by telcos from richer nations and never the other way round... right?

Bouygues Telecom: eyed by Egypt's Orascom

While the focus DevelopingTelecomsWatch is generally on communications sector businesses in emerging markets and developing countries, a battle between incumbent mobile operators and a proposed new entrant in Canada has been covered here of late.

While events in the vast North American country are clearly beyond the usual remit of this blog, two factors go some way towards justifying the interest of DTW in this particular story.

The first of these is possibly a bit frivolous - simply the observation that despite Canada's G8 membership and status as one of the world's most affluent countries, its mobile communications industry lags behind that of many far less wealthy countries in terms of market penetration. The second factor which justifies spending some time on this story is the fact that the wannabe new cellco in Canada has its roots in Egypt and is affiliated with that country's first multinational corporation. That Egyptian company, Orascom Telecom, has built a global business across a number of developing countries, including Pakistan, Bangladesh, Algeria and Zimbabwe.

I remember sitting in the auditorium at the 3GSM World Congress in 2007 and smiling at the rather direct language used by Orascom Telecom supremo Naguib Sawiris. As Richard Wray of the Guardian also noted a the time, the opening speeches (including those from Orange's then-CEO Sanjiv Ajuha and Vodafone's then-CEO Arun Sarin) were somewhat in line with what conference veterans have come to expect - carefully prepared, lots of positive stuff about mobile communications enriching consumers' lives.

Sawiris eschewed this kind of talk altogether, preferring to announce that he was in the business for the money. While this element of the Egyptian tycoon's speech is what stood out for Richard Wray, it is another remark that interested me and which has informed my thinking about the telecoms sector. Sawiris smiled about three giant multinational mobile groups being represented on stage at the World Congress by two Indians and an Egyptian. The point, I think, was to illustrate the shift of this industry's centre of gravity southwards and eastwards from the developed economies of Europe and North America.

Having grown up with the comfortable notion of European and American countries building operations in developing countries and extracting profits therefrom, it has been interesting to watch Orascom Telecom working in the opposite direction. Weather Investments, an investment vehicle controlled by Sawiris, holds more than 50% of Orascom Telecom, and also owns Italy's Wind Telecomunicazioni and Wind Hellas of Greece.

The current attempt to shake up the telecoms sector of a highly developed economy like Canada is, then, not without precedent for Sawiris.

In Canada, however, as noted here before, however, there is fierce resistance to the arrival of Wind Mobile. For now, the prospect of a commercial launch has been stymied by a Canadian Radio-television and Telecommunications Commission ruling that the company in breach of rules on foreign ownership and control.

Today, in response to this setback, Wind Mobile has launched a campaign "geared at letting Canadians know that when it comes to wireless service, they deserve more." The goal of the campaign, runs the company's press release, "is to raise awareness about the current state of Canada's wireless industry compared to the rest of the world, and to highlight why more choice is essential."

"The heart of the issue is that Canadians pay some of the highest rates for some of the most complained-about wireless service in the world," said Anthony Lacavera, Chairman of Wind Mobile. "This campaign is about focusing the conversation to the need for real wireless competition in Canada in order to lower prices, increase penetration and finally deliver the kind of customer service that has been sorely lacking for Canadians."

Others in Canada, however, have expressed the opinion that while Orascom Telecom has probably been treated unfairly, and while the country's rules on foreign investment urgently need changing, it would be a mistake to allow Wind Mobile to take part in the Canadian market because the other players in the market have to follow the current rules, so the Orascom Telecom-backed company should as well. This is the view outlined in an editorial piece in yesterday's Globe & Mail.

As stated the last time DTW visited this dispute, more twists and turns seem likely. We will continue to watch developments with interest.

In the meantime, Mr. Sawiris has expressed an interest in participating in the telecoms market of another developed economy. TeleGeography reports that the Orascom Telecom Chairman is eyeing France's Bouygues Telecom. A tie-up with the French operator would make sense the said an anonymous Orascom official, adding: "It would reinforce our presence in the Mediterranean, improve our roaming possibilities, there would be many synergies." Watch this space. Will Egypt's Sawiris continue to make inroads into Europe's highly developed and competitive telecoms markets?

Telecoms operators in developing countries are always owned by telcos from richer nations and never the other way round... right?

Unsurprising news of the week

India's Communications & IT Minister: summoned to explain falling revenues at BSNL

To my mind, the least surprising news item so far this week comes from Mansi Taneja of India's Business Standard, who reports that state-owned Indian state-owned telco BSNL is likely to exit a consortium that has been aiming to acquire a 46% in pan-MEA mobile group Zain. According to Taneja, MTNL, the other public sector operator party to the consortium, is also likely to exit since it had agreed to follow BSNL’s lead in the deal.

DevelopingTelecomsWatch has no axe to grind with regard to these two telecoms enterprises, but it won't have escaped the notice of regular readers that this blog has observed some pretty strong criticisms of their performance in their domestic market, most notably in an article written in August.

It was partly with these criticisms in mind that DTW was unsurprised when Etisalat rather than BSNL prevailed in the scramble to acquire the Sri Lankan mobile operator previously owned by Millicom International Cellular. It would, then, cause raised eyebrows at DTW HQ were MTNL to win what looks to be a hotly contested scramble to buy a controlling interested in Zambia's soon-to-be-privatised incumbent fixed line operator, Zamtel. As a recent Cellular News item points out, the list of other interested parties contains some formidable names including Orascom Telecom, Telkom of South Africa and Russia's pan-CIS cellco Vimpelcom, which has recently expanded its footprint into Southeast Asia.

Lest anyone feel that this blog returning quite regularly to the troubles of India's two major state-owned telecoms enterprises is somehow unwarranted, it is worth noting that concern about their prospects has been expressed in the highest circles in the south Asian country. Monday's Economic Times, for example, reported that Prime Minister Manmohan Singh is likely to meet the BSNL's management along with Communications and IT Minister A. Raja to look into the causes of the company's falling revenues and to find ways to improve its performance.

According to the Economic Times, BSNL says the loss in net profit and revenue is due to huge wage costs and customers deciding to terminate their fixed line subscriptions. The article states that the company has been struggling with the problem of landlines being surrendered for years now, due to a combination of the increasing popularity of mobile phone and its own service levels falling below customer expectations. In the past three years, the article reports, 6.3 million landline connections have been terminated.

This blog has also documented the company's struggles to capitalise on first-mover advantage in the 3G mobile services space or to take make much of a similar head start with WiMAX broadband services.

In light of all this, DTW remains wary of any claims that BSNL makes about ambitions to grow its business into unfamiliar overseas territories.

Unsurprising news of the week

Orascom Telecom: continued resistance to Canadian market entry and changes at the top

Shaw Communications: joining the opposition to Orascom's Canadian market entry

A recent DevelopingTelecomsWatch article reported on the challenges faced by Orascom Telecom-backed nascent Canadian cellco Globalive Wireless as it seeks to intrude upon what its CEO has described as the "oligopoly" of incumbent players Rogers Wireless, Bell Mobility and Telus. We noted that the Wind-branded operator has fallen foul of foreign ownership despite Orascom Telecom supremo Naguib Sawiris having been, in the words of Terence Corcoran of the National Post, "led... into bidding for spectrum and a major role in the Canadian wireless market" only to have the carpet pulled out from under his company.

As debate rages about how poorly consumers might be served by keeping Globalive out of the country's wireless market, Telus, which is estimated by WCIS to account for around 29% of Canadian mobile subs, is urging Industry Minister Tony Clement not to overturn the CRTC ruling which has stymied the prospective new entrant's plans.

According to Steven Chase, writing today for the Globe and Mail, Telus is arguing that a relaxation of the foreign ownership rules would be unfair "because other companies stayed within existing ownership rules when bidding for frequencies in the 2008 wireless spectrum auction." Telus, which also offers wireline telephony, broadband and TV services, has joined forces with another telco headquartered in Western Canada, Shaw Communications, to publish an open appeal to Mr. Clement in the press.

Chase writes that the two operators are asking the Minister to ignore calls to reverse the October 29th decision by the CRTC. It would send "a very bad message to companies that complied with the Canadian ownership laws as they were required to do in the auction and spent over $4-billion bidding - that the rules can be changed at any time in the game," Michael Hennessy, Telus's SVP of Regulatory and Government Affairs, said in an interview.

The CEO of Rogers Communications, meanwhile, has made it clear how the wireless arm of his business would respond if the Orascom Telecom-backed startup is indeed unable to launch. The market-leading mobile operation would look to acquire the unused spectrum.

"Spectrum is a very valuable asset," Nadir Mohamed said last Friday after a speech to the Toronto Board of Trade. "It's the real estate of our business, so Rogers would be for sure interested in picking it up. I'm sure others would be."

I sense a few more twists in this tale before it becomes clear what is to become of Orascom Telecom's planned foray into North America. Meanwhile, the overall expansion strategy - of which entry into Canada's surprisingly under-penetrated mobile market was meant to be a part - will continue to be guided by Naguib Sawiris. Orascom Telecom recently announced changes to the management structure which will see Group COO Khaled Bichara promoted to the CEO role and Sawiris taking on the position of Executive Chairman.

"The telecommunication business is continuing to grow and evolve at a rapid pace, and we're reshaping OTH to be a leader in this transformation. Our strategy leverages our core strengths and capitalizes on vastly emerging trends to drive growth and profitability. Khaled is dynamic, energetic and will be able to draw on his... experience... to gear the Group into a more aggressive period of growth and transform OTH into a more innovative, integrated and agile global company," Sawiris said. "I will also remain involved in the businesses with more focus on steering the Group’s strategic growth while guiding and supporting the activities of the senior management team. I believe that the telecom market will see massive consolidation during the coming years, and with the new structure I will be able to devote more time and effort in this direction," he added.

With Sawiris now free to focus more sharply on growth opportunities, it will be interesting to see if the group will continue the taste for adventurous enterprises suggested by its decision to invest in North Korea. Koryolink is a W-CDMA operator in which Orascom Telecom holds a 75% stake. Having launched services in December last year, the company now has around 70,000 subscribers according to Cellular News.

For a glimpse inside the secretive and isolated country, this clip about the launch of the Orascom-backed MNO makes interesting viewing, even if the commentary is impenetrable to non-Koreans:

Orascom Telecom: continued resistance to Canadian market entry and changes at the top

Canada's 'thirdworldish' policies to stifle wireless competition?

Naguib Sawiris: planning to shake up Canada's wireless market

DTW’s recent article on international ambitions of India’s two major state-owned telecoms operators mentioned that one opportunity they are considering is the acquisition of a controlling stake in Zamtel, the incumbent fixed-line operator in Zambia. It remains to be seen if this joint bid from BSNL and MTNL will succeed and it does look as though some formidable players are also interested.

According to a recent Cellular News article, other interested parties include Telecel Globe (a subsidiary of Orascom Telecom), Telkom (South Africa’s incumbent fixed-line operator) and Russia’s increasingly expansionist Vimpelcom, all of which, the article states, officially began due diligence this week.

Interest in Zamtel is by no means the biggest recent news item about Orascom Telecom and might well have escaped the notice of North American readers whose attention has probably been drawn more readily to the challenges the Egyptian firm is facing in Canada.

Globalive Communications Corp. of Toronto was established in 1998, since which time it has offered competitive long distance plans. Ten years later, the company successfully made a purchase in Industry Canada's radio spectum auction, which paved the way for the creation of a challenger - Globalive Wireless - for the country's established mobile operators, including Telus Mobility, Rogers Wireless and Bell Mobility. The joint efforts of these three major carriers and regional players such as SaskTel have failed to drive national mobile penetration beyond 66.65% according to WCIS. This seems very low for a G8 country that ranks among the world's top ten trading nations. In an interview for Huawei's Communicate magazine earlier this year, Bell Mobility CTO Stephen Howe attributed this state of affairs to three factors: the relatively late licensing of digital wireless spectrum in Canada; Canada' s huge geographical area; the country's robust and unlimited-usage wireline networks.

Globalive Wireless, backed by Orascom Telecom and which had earlier this year announced its intention to launch services under the Wind brand familiar in Italy and Greece, has been led by CEO Ken Cambpell since October 2008. Cambell, whose former roles include a stint running the BITĖ Group, the Vodafone partner network in Lithuania and Latvia, would take issue with Stephen Howe's explanation for Canada's status as a wireless industry laggard. Speaking with Michael Bettiol of Boy Genius Report last month, Campbell lays the blame squarely with the country's wireless carriers:

"Here we’ve got a situation where we pay twice as much as they do in the US, our minutes of use are half of what they are in the US, and wireless penetration is at 65%. Clearly it is a market that is under-developed and where customers simply overpay. The other thing is that in Canada our customer saturation numbers are extremely low. We’ve got a very disenfranchised and very frustrated customer base that is really ripe and in need of competition. The other thing you should know is that this country is dominated by three carriers, but if you look regionally, it is typically two carriers that dominate regional markets. Canada is effectively an oligopoly and in many regions pretty much a duopoly. There is definitely an opportunity with consumers and the numbers speak for themselves."

If, as Michael Bettiol contests, Canadians have "long craved for a new wireless carrier to bust onto the scene and break up what is often described as the anti-competitive practices of [the] incumbents", there must surely be much excitement in the country about the market debut of Wind.

For now, however, any excitement must be deferred a while. Globalive Communications has been in a state of limbo since late last month, when the Canadian Radio-television and Telecommunications Commission ruled that the company is effectively under the control of its Egyptian-based financial backer (Orascom Telecom) and is therefore in breach of rules on foreign ownership and control.

Terence Corcoran of the National Post despairs of the resulting "wireless mess":

"Globalive Wireless has just pumped more than half a billion dollars into the Canadian economy. That includes paying Ottawa $442-million last year for the right to new wireless spectrum, cash now already spent by the federal government stimulating road work in Saskatchewan and writing giant cheques to constituents in Nova Scotia," writes Corcoran, who also notes that "Globalive has also invested another hundred million or more preparing a new Canadian wireless network".

"Having taken Globalive's money", Corcoran continues, "Canada is now telling the company the deal is off."

Corcoran argues that the large spectrum auction fees collected by the Canadian Government would have been far more modest had the participation of Orascom Telecom supremo Naguib Sawiris not been authorised in the first place. Corcoran says that Sawiris has every right to feel mightily aggrieved:

"Whether or not it's possible to sue Ottawa over this thirdworldish policy switch and bureaucratic camel-trading, complete with secret meetings and rule-bending approval processes, it certainly looks like Globalive and its owner, Mr. Sawiris, have a case of some kind, politically and morally, if not legally. Ottawa led Globalive into bidding for spectrum and a major role in the Canadian wireless market, and then it pulled the carpet out from under the company.

This wrangle is a fascinating one for me. In the course of my work, I have spent considerable time networking with telecoms executives from Europe, North America and the Middle East who make their living running operations in less developed countries. I have lost count of the number of times I've heard (doubtless justified) complaints about the complexities and pitfalls of doing business in such markets - regulatory agencies that can be erratic and less than even-handed; taxation policies which stifle growth and innovation; foreign ownership rules which can prove limiting. It is with interest, then, that I read of a company rooted in Egypt encountering in Canada some of the problems I usually hear attributed to much less affluent and developed societies.

Canada's 'thirdworldish' policies to stifle wireless competition?

Quick march! Military men storm the telecoms sector

Iran's Mohammad Ali Jafari: Guardian of the Revolution... and telecoms tycoon?

Last week, Nugon Sovan of the Phnom Penh Post reported that the Cambodian Government is set to list three state-owned companies on the country's planned stock exchange. The three enterprises for which IPO preparations are underway are the Phnom Penh Water Supply Authority, Sihanoukville Autonomous Port and Telecom Cambodia, the country's incumbent fixed-line operator. Attracting investment to the latter company is certainly a pressing matter if the Hun Sen Government is serious about improving what I understand to be very underdeveloped wireline infrastructure.

The southeast Asian country has certainly enjoyed something of a cellular boom, with mobile penetration currently standing at 34.23%, according to WCIS. This is up from 23.54% in September 2008 and 14.86% a year before that. In contrast, fixed-line services have not been developed with anything like as much enthusiasm. The 2008 country profile from industry watchers Buddecomm has this to say: "fixed-line services [have] flattened out at around 42,000 [lines] with no sign of any revival in interest in this segment of the market." The report also contends that Internet penetration has remained particularly low, one of the biggest inhibitors to Internet growth in the country being the high cost of online access in comparison to other countries in the region.

One intention for the telco's IPO, then, must be to extend the reach of the Telecom Cambodia network and broaden the range of services available in the country. That will not happen right away, however, because a September 2009 target for launching the new Cambodian bourse has passed without construction of the planned stock market building getting underway.

Jason Szep of Reuters, writing on Sunday, reports that the global financial crisis intervened to delay the Cambodian Government's plans, ending an unprecedented boom which had seen the country's economy expand 10% annually in the five years up to 2008. Foreign investment collapsed, writes Szep, with tourist arrivals falling by double digits and garment exports, a mainstay of the economy, shrinking by 15%. Now, officials seem confident that these difficulties will soon have abated sufficiently for the bourse construction project to get back on track. "We want to do it next year," Mey Vann, director of the financial industry department at Cambodia's Ministry of Economy and Finance, said in an interview. "It'll be good timing for us with the economic recovery."

Plans for the new stock exchange seem to be quite modest. As Szep reports, the exchange expects to start small with just four or five companies issuing about USD 10 million worth of shares each. Contrast this with the experience of neighbouring Vietnam, whose first stock market launched in 2000 with an initial market capitalisation of USD 43 million, according to Szep. From tiny acorns, reasonably large oaks can grow, however. Perhaps the Cambodian Government will take some encouragement from the fact that today, Vietnam's market is worth USD 27 billion.

Yet, writes Szep, there are risks to Cambodian investors - "in Vietnam, most of the investors were local, often unaware of the risks, and many were burned as the market steered a rollercoaster course. Meanwhile, foreign investors largely sought to dip into the potential high returns of an emerging frontier market while hedging their bets with a highly diversified portfolio."

As in Vietnam, Szep continues, Cambodia is giving state companies priority with a place to sell stock. However, the reaction from inside the companies set to be privatised is not universally positive.

"We don't have any financial constraints. I don't understand the reasons we are going to be listed," said Ek Sonn Chan, who runs the Phnom Penh Water Supply Authority, which employs about 600 people, has about USD 200 million in assets and generates about USD 25 million in annual revenue. He said the company is profitable."If we become a public company, maybe we are more responsible, more transparent and maybe we can help the government allocate financial support to our company. But in the meantime, we don't know much about how it happens. It's very new to Cambodia, very new to me," he said.

I am not aware of any views - positive or negative - being expressed by the current management of Telecom Cambodia about next year's IPO. As Jason Szep writes, though, there does exist the view that the timing of the planned launch of the country's bourse may not be right for some time. Foreign direct investment nearly halved to an estimated USD 490 million from USD 815 million in 2008, writes Szep, who also reports that the International Monetary Fund expects Cambodia's economy to shrink nearly 3% this year before growing about 4% next year.

It seems that it will be in 2010, then, that we should watch for signs of Cambodia's fixed telephony and Internet segments beginning to enjoy the early stages of new growth. Whether this will ever be anything like as impressive as the growth of mobile services remains to be seen. I certainly doubt that the wireline space will, in the near future, be contested by anything like as many players as the mobile market, which, as I've stated here numerous times, has no fewer than nine cellcos jockeying for position. Again, let me take the opportunity to opine that while a good number of MNOs competing on price and innovation are needed to drive the growth of any cellular market, Cambodia seems to be a place were the level of competition may actually be excessive. I've repeated here (almost ad nauseum for regular readers, perhaps) that the aggressive pricing by the likes of Metfone and Vimpelcom-backed Beeline Cambodia has been cited as the reason for global emerging markets player Millicom International Cellular quitting the country.

Another matter given a fair amount of space here has been the fact that the first of those two disruptive later market entrants is backed by a company owned by the military establishment of Vietnam. At risk of excessive repetition, I'll say again that an army-owned cellco from a communist, centrally planned economy is surely not under the same kind of obligations to return profits for shareholders as is the case for its competitors. This affords the operator the possibility of building a mission around extending the availability of services to more remote regions and less affluent people, as Viettel-owned Metfone seems to have done in Cambodia.

Perhaps encouraged by how successful this has been, Viettel is now reportedly keen to buy a stake in Teletalk, a state-ownd GSM operator in Bangladesh, according to a recent Cellular News article.

Teletalk has not carved out a significant chunk of the Bangladesh mobile market. According to WCIS, it is currently estimated to own just 2.31% of the country's 48.7 million subscriptions. However, with mobile penetration at under 30% in the densely populated south Asian country, a nice growth opportunity may exist for any company acquiring the public sector MNO and somehow improving its performance. If Viettel prevails in its bid and is similarly successful in growing the customer base through the application of the same low-price approach used in Cambodia, perhaps a major shake up will affect the Bangladeshi market, where change of some kind has seemingly been on the cards for a while.

Back in July, in an article which was mainly focused on Millicom's exit from Cambodia and two other Asian Markets, I also mentioned that Aktel (an Axiata/NTT DoCoMo joint venture) was rumoured to be in merger talks with Orascom Telecom-backed Banglalink, whose CEO Ahmed Abou Doma had explained in a statement that apart from market-leading 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 was "considering many strategies of which consolidation is an option."

Here, then, we have another market in which the room for growth implied by quite low mobile penetration (29.58% in Bangladesh) does not necessarily mean that a licence to operate a mobile network is also the proverbial licence to print money. If Viettel's bid is successful and if the Cambodian example is instructive, perhaps the likes of Mr Doma at Banglalink are about to find that things are about to get even tougher.

So, the Vietnamese army may be set to march into another market and inflict damage on more private sector telecoms operators.

This meandering article will conclude with the observation that Southeast Asia is not the only battle zone for military men with an eye on the telecoms market.

Another is at the western edge of Asia, where, in Iran, the state-owned incumbent fixed-line telecoms operator, TCI has been the subject of a fairly exotic form of 'privatisation'. A 51% stake in the company has been acquired by a consortium controlled by the Islamic Republic's Revolutionary Guards, a move which, according to the Guardian newspaper, is "fuelling suspicions that the organisation is quietly staging a military takeover." The Guardian article also mentions claims that a rival enterprise had been unfairly excluded from the bidding process because it lacked appropriate "security qualifications".

Also reported are warnings from critics who worry that the deal "exposes ordinary people, especially political activists, to intensified spying and electronic surveillance." The article goes on to report that this news came days after the governor of Iran's central bank, Mahmoud Bahmani, announced that a finance company owned by the Revolutionary Guards, the Ansar Institute, had been cleared to become a fully fledged bank.

The Revolutionary Guards, formed in 1979 to safeguard the Islamic revolution, writes the Guardian's Robert Tait, have built a financial empire with interests including oil and gas fields, airports and eye and dental clinics during the presidency of Mahmoud Ahmadinejad, himself a former member. Tait writes that this "empire" has been awarded lucrative building and engineering contracts "and is thought to control the smuggling of contraband into Iran."

The telecoms takeover, reports Tait, has provoked accusations that the Government's privatisation programme – required under Iran's constitution – is a sham designed to sell state assets to the Revolutionary Guards.

Journalist Mohammad Nourizad has warned that the Guards' control of TCI would be used to step up monitoring of the Government's opponents, Tait reports.

"Getting access to telecommunications management has always been vital for the security requirements of the Revolutionary Guards and the iron men behind the scenes," Nourizad wrote in a blog. "It means control over the country's entire telecommunications system, including landline telephones, mobiles, text messages, the internet and any other stuff linked to telecommunications. After that, it's a piece of cake … to trace people."

Scary stuff, if true.

At ease. Dis-MISS.

Quick march! Military men storm the telecoms sector

Telenor: good news from India; troubles continue in Russia/CIS

Telenor HQ: India, Pakistan and Russia issues on the agenda

A recent DevelopingTelecomsWatch article went into the likelihood of mobile market consolidation in Pakistan. I was prompted to write this by a rumour doing the rounds, according to which Telenor is considering selling its operation in Pakistan to China Mobile, which already has a presence in the market in the form of the MNO Zong. I noted that Telenor's presence in Pakistan was worrying the authorities in neighbouring India - worrying them to the extent that it could make it impossible for the Scandinavian telco to increase its stake in start-up Indian cellco Unitech Wireless. Such is the level of tension between the two countries, it seems.

I moved on to speculate (wildly, I admit) that Telenor's thinking might be along the following lines:

• We can't play in India and Pakistan...
• India (population 1.15 billion, mobile penetration 34.47%) presents massively richer opportunities than Pakistan (population 173 million, mobile penetration 55.58%)...
• so, if being in Pakistan prevents us from maximising the opportunity in India, let's get out of Pakistan...
  

Last week, however, came news of a possible way for Telenor to maintain a presence in both markets. An Economic Times article of 30th July indicates that India's Home Ministry is set to give security clearance for Telenor's hiking its stake in Unitech Wireless up to 74%, but on the condition that none of the staff who have worked at the Norwegian firm's Pakistan operation, are employed in India.

The Indian authorities are not only concerned about Telenor's Pakistan connections, it seems. Security agencies apparently also had reservations regarding the Norwegian company's presence in Bangladesh, where Telenor is the largest shareholder in market-leading cellco Grameenphone. The Economic Times article notes that both the neighbouring countries not only have a history of strained ties with India, "but have also served as a launchpad for various terror attacks". In the case of Bangladesh, investigations into serial terrorist blasts that killed 80 and injured 216 in the northern Indian tourist city of Jaipur last year pointed to the involvement of Bangladesh-based terrorist group Harkat-ul-Jihad-al-Islami, according to local reports.

The Economic Times piece notes that Indian authorities have had to take into account the concerns of the security agencies while also keeping in mind the reputation and stature of the Norwegian firm and how it has revolutionised rural telephony in Bangladesh via Grameenphone. The Bangladeshi MNO takes its brand name from that of Telenor's local partner Grameen Telecom, a non-profit sister concern of the internationally acclaimed microfinance organisation and community development bank Grameen Bank. A Grameenphone-Grameen Telecom partnership operates the national Village Phone programme, which puts mobile phones in the hands of very poor women who then operate a business, offering access to communications services to their neighbours.

This programme is not purely altruistic and has been an important component of an encouraging growth and profitability story for Grameenphone - and in a market where other cellcos have struggled to succeed. In this blog's most recent previous article, we heard from the CEO of rival Banglalink, which is owned by Egypt's Orascom Telecom. Ahmed Abou Doma explained in a recent statement that apart from the market leader (Grameenphone), "others are continually posting losses".

The Economic Times article also states that the Indian Government is keen not to send out the wrong message to foreign investors and has therefore "come around to the view that the Norwegian giant should not be held back from picking up up to [a] 74% stake in Unitech Wireless simply because it has a successful presence in Pakistan. " Keeping the human assets of the Indian and Pakistani arms of Telenor separate is expected to take care of risks such as spying and subversion, the article suggests.

For Telenor, good news from India comes at the same time as much less encouraging news from Russia. Within the last few hours, Reuters has reported that the Norwegian group has lost another round of its legal battle over its stake in Russian cellco Vimpelcom. The latest development in a long-running and acrimonious saga sees a Moscow appeals court rejecting Telenor's latest attempt to delay the enforcement of a USD 1.7 billion fine owed to Vimpelcom. Telenor faces the prospect of losing its stake in the Russian company after bailiffs ordered the sale of its shares to cover the fine that a Siberian court imposed for allegedly holding back Vimpelcom's expansion in Ukraine. Maria Kiselyova of Reuters writes that the case is being closely watched as a guide to the climate for foreign investors in Russia, coming after the shareholder battle last year that forced management and personnel changes at BP's Russian oil joint venture, TNK-BP. Kiselyova asserts that analysts watching the case, brought by Farimex, a small shareholder in Vimpelcom, say the forced sale of Telenor's stake in Russia's second-biggest mobile phone company by subscriptions "would further undermine confidence in the rule of law in Russia." She continues by saying that Telenor views the case as part of a protracted dispute with the powerful conglomerate of Russian billionaire Mikhail Fridman, Alfa Group, the other strategic investor in Vimpelcom. Alfa, as Kiselyova notes, has denied any links to Farimex.

These developments follow a Q2 performance which beat the expectations of analysts polled by Reuters. The Norwegian telco posted a bigger-than-expected 6.8% rise in Q2 core earnings and curbed investments to protect against a potential fall in mobile revenues amid global economic hardship. EBITDA rose to USD 1.24 billion.

Telenor also cut its CAPEX target, excluding investments in India, to 13-15% of its revenues from an earlier prediction of 15-17%. An impairment charge for its Serbian operation, linked to a poorer outlook for that country, hit its bottom line, driving earnings per share down from last year's figures.

It remains to be seen, though, how a bigger stake in India's Unitech Wireless and possibility of losing its foothold in Russia and the wide CIS (where Vimpelcom has numerous subsidiaries) will affect Telenor going forward.

Telenor: good news from India; troubles continue in Russia/CIS

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?

Pakistan: 5 (really 6 [or 7?]) becomes 4 (or 5 or 6?)?

China Mobile: keen to drive consolidation of Pakistan's mobile market?

With a population of around 173 million and a mobile penetration rate of just 55.01% (according to WCIS), Pakistan would appear to be an attractive place to be for multinational telecoms groups. Some very significant individuals, however, have recently expressed the belief that market conditions are too tough to support the current number of mobile operators competing in the country. A specific suggestion about a possible merger between operators has also surfaced in the last few days.

According to Pakistani news portal Dawn.com, Telenor is considering selling its operation in Pakistan to China Mobile, which already has a presence in the market in the form of the MNO Zong. The Dawn.com article contends that the Norway-headquartered international telcoms group has been deliberating a withdrawal from Pakistan for some time because of "security issues".

Shortly after this report surfaced, Reuters was carrying a 'no comment'/denial from Telenor. The Reuters snippet notes that ARPU at Telenor Pakistan was the lowest of all its operations around Europe and Asia but that the number of subscribers grew by nearly 20% year-on-year. Why, then, would the Norwegian group consider this move?

Let me put forward a possibly outlandish theory, which also relates to security concerns - but security concerns in India rather than in neighbouring Pakistan.

A few days ago, the Economic Times ran an article about how the Indian Government has withdrawn approval for ByCell, a company "promoted by Russian businessmen", to offer telecoms services in the country. The company had planned to set up as a GSM mobile operator in areas including Assam, Bihar, Orissa and West Bengal, but seems to have endured a long struggle to get the green light to do so. As far as I can make out from this and other articles, the Indian Foreign Investment Permission Board (FIPB) has been concerned by the security implications of ByCell's ownership structure and its sources of funding for some time.

The same Economic Times piece also indicates that the FIPB is uncomfortable with the idea of Telenor increasing its stake (currently 49%) in cellco Unitech Wireless. Again, "security concerns" are the cause of the problem - in this case to do with the fact that Telenor operates in Pakistan, with which India has long had an uneasy relationship.

This, then, is my possibly highly simplistic and implausible theory: Telenor sees India as a far richer prize than Pakistan and therefore considers selling its Pakistani operation to China Mobile in order to pave the way for establishing a full controlling stake in Unitech Wireless. Crazy? Maybe. Or maybe I'm onto something. This is just a wild stab in the dark, so who knows?

Either way, China Mobile certainly seems keen to accelerate the growth of its share of Pakistan's mobile subs (currently estimated at 7.20% by WCIS) by acquiring a rival player and consolidating the market. Well, certainly if the Dawn.com article is to be believed. This contends that "before the merger talks with the Telenor group... China Mobile had offered to buy the management shares of Warid Telecom Pakistan" but could not settle on an acceptable price.

The article also claims that Pakistan's five leading mobile operators - Mobilink, Telenor Pakistan, Ufone, Warid Telecom and China Mobile's Zong - have reportedly all told the Pakistan Telecommunication Authority (PTA) that there is room for only four players. The further claim is made that a PTA official has said that by 2010 the country may indeed have just four mobile operators.

I have no idea of the source of this assertion, but it does now seem clear that Telenor Pakistan, at least, feels that the market is currently split too many ways. According to Mehtab Haider of the Pakistani newspaper the News, writing today, the cellco's CEO Jon Eddy Abdullah predicts market consolidation. In an interview with the News, Abdullah said Pakistan had the lowest call rates in the world and a continuous reduction in charges, as seen in the past, to attract customers was no longer viable. "This means that in the long term, having five operators in a market with intense competition and low prices may not remain feasible anymore," said Abdullah. "This can result in anything from mergers and acquisitions to [players] dropping out of the market," he added.

Abdullah mentioned two other significant challenges faced by operators in Pakistan - double-digit inflation affecting consumers' ability to afford services and the "overall law and order situation" limiting network expansion, restricting maintenance activity, increasing security-related expenses and dampening investor confidence.

The security situation in the country certainly does seem to present challenges for cellcos. Orascom Telecom-owned Mobilink, for example, has suffered damage to its network due the military opetation in Swat and Buner, where the army has been fighting with militant insurgents.

The Telenor Pakistan CEO was a little more upbeat about recent tax measures made by the country's Government - lower General Sales Tax; SIM activation tax slashed by 50%; the elimination of regulatory duty on handsets; lower customs duty on imported handsets.

"Although we consider these tax measures positive," said Abdullah, "we feel that there is more to be done. We are all aware of the impact of high tax rates on the industry, which depress growth in subscriber numbers, divert investments and ultimately discourage mobile usage."

"We also understand that when this industry flourishes," he continued, "it helps the economy by attracting foreign direct investment, contributing heavily to the national exchequer, generating employment and increasing productivity of almost every sector. Therefore, it is imperative that the taxation structure for the mobile industry is rationalised further."

Another telecoms industry leader seeminly keen to see cellular sector consolidation is Walid Irshaid, President and CEO of PTCL, Pakistan's incumbent wireline operator, in which the UAE's Etisalat owns a minority stake (but with management control), and of which MNO Ufone is a wholly owned subsidiary.

Farhan Sharif of Bloomberg, writing late last month, states that PTCL is in talks with several domestic companies to make acquisitions this year. "We’re already in discussions with various carriers and operators," Walid Irshaid said in an interview with Bloomberg News on June 16th during the CommunicAsia 2009 conference in Singapore. "The market must surely consolidate", continued Irsaid because he feels that Pakistan doesn’t need more than three GSM operators. He declined to name the companies with which he is in talks.

Between the Zong-Telenor takeover rumour and the comments of the CEOs quoted here, there does seem to be a body of evidence to suggest Pakistan's mobile market is set for consolidation.

So, how many cellcos would that leave? Thus far, this article has mentioned five currently in operation. There is, however, at least one more doing business in the country (which is why this article has a title that looks like a confusing equation).

One of these is rather unusual - the Special Communication Organisation (SCO), set up by the Government of Pakistan to provide services in Pakistan-occupied Kashmir and Northern Areas. According to one article I found, Pakistani army officers, both serving and retired, hold critical positions in the SCO.

One other cellco confuses me. Instaphone, a US TDMA network operator, was once part-owned by Millicom International Cellular (as was Paktel - sold to China Mobile and rebranded Zong). A slew of articles going back at least as far as January 2008 suggest the MNO had its licence terminated some time ago by the PTA for failing to make outstanding payments. However, the operator's website remains live and it still seemed to be fighting the PTA as recently as April this year. According to WCIS, the US TDMA operator currently has around 50,000 subs on its network - a market share of just 0.05%.

Pakistan: 5 (really 6 [or 7?]) becomes 4 (or 5 or 6?)?

Bridging the digital divide between the provinces and regions of Pakistan

Pakistan is the world's sixth most populous country. It is also one which features regularly in TV news broadcasts that remind us of the country's strategic importance - as a state armed with nuclear weapons; as a country whose long history of troubled relations with neighbouring India took a new turn after the Mumbai terrorist attacks of November 2008; as a country with a porous border with troubled Afghanistan.

The country, however, has not featured very heavily here at DevelopingTelecomsWatch - before today, just five of the our first 100 stories even mention Pakistan. Today's short essay will, I hope, go some way towards making up for that glaring omission.

That I was able to round up a few interesting recent stories from the country is due mainly to my knowing of a very useful blog/news site - TelecomPK.net, set up and maintained by Babar Bhatti, a a senior IT professional now based in Dallas, Texas. Most of the news items, articles and reports referenced here today came to my attention via Babar's site and his tweets.

One item I found interesting was written by Babar himself, and concerns how the takeup of mobile telephony in Pakistan has been very uneven across the country's different provinces and regions. Mobile penetration in Pakistan currently stands at 54.11%, according to the World Cellular Information Service from Informa Telecoms & Media. Babar cites figures from the country's telecoms regulatory agency, which indicate a wide variety of cellular penetration rates in the four provinces:

• Sindh - 64.28%
• Punjab - 59.35%
• North-West Frontier Province (NWFP) - 35.37%
• Balochistan - 25.01%

Sindh, in the southeast of the country, is a major centre of diversified economic activity - heavy industry, finance and agriculture. The second best performer in terms of mobile penetration, Punjab, is the county's most populous region and its most industrialised. The two other provinces, where mobile penetration is well below the 50% mark, are places whose share of the national economy is much smaller.

Babar writes Balochistan's low cellular penetration rate is most likely attributable to the province having few urban areas and, as a result, high costs for the roll out of telecoms infrastructure. He feels, however, that recent Universal Service Fund (USF) projects may improve the situation in the provinces. I assume these include the three contracts recently signed by the USF and the country's incumbent fixed line and broadband provider Pakistan Telecommunication Company Ltd (PTCL), as reported on 3rd July by TeleGeography. These include arrangements to bring fibre-optic connectivity to all tehsils (administrative divisions) in southern Balochistan, involving the installation of 1166km of fibre-optic cable in the region.

Much of Pakistan's population is denied access to the range and quality of vital services taken for granted in highly developed countries. Two obvious examples are the provision of health care and education services. Canada-based technology journalist Jerry Blackwell, a regulator contributor to Wi-Fi Planet, wrote an interesting article earlier this month about how communications technology is making an impact with regard to the first of these.

Blackwell's article quotes Phil Cruver, President of KZO Education, an American company that develops content and technology for online interactive learning, who points out that "the literacy rate in Pakistan is only about 50%, and for girls, it’s lower. The country has about 1.3 million teachers now, but it needs double that number in order to meet the standards [in education] that are needed."

The article is part of a series which examines the state of the worldwide WiMAX industry in 2009. According to Phil Cruver, WiMAX will be "absolutely critical" in ongoing efforts to pull Pakistan's public education system up by the bootstraps. Cruver's plan is to deliver interactive streaming video-based learning over WiMAX networks and KZO has already launched pilot projects in Islamabad. This has involved connecting two schools to a WiMAX network operated by Wateen Telecom, a provider of telephony, broadband and multimedia services that is part of the Abu Dhabi Group, which also owns Pakistani mobile operator Warid Telecom.

Comments about technical issues and allegedly poor service for Wateen Telecom WiMAX customers were aired by Chris Cork, a British social worker settled in Pakistan, in September last year. Writing in Pakistani newspaper the News, Cork provided a personal history of the frustrations of getting a reliable Internet connection in the country during his time working there. This concludes with a none-too-complimentary account of dealing with a company whose "name begins with a 'W' and ends with 'n'" when he asked for an externally-mounted receiver to get full benefit of their service.

One Pakistani blogger, writing in December, also reported that the Wateen Telecom WiMAX service, the first such offering for consumers in the country, was facing bad press and suffering reliability problems. That writer's feeling seemed to be that this created opportunities for the providers of two other WiMAX-based services. One of these is Infinity from Orascom Telecom-owned mobile operator Mobilink, the market leader in the cellular space with an estimated market share of 29.74% according to WCIS. The other is wi-tribe Pakistan, part of an international collection of wireless broadband operations owned jointly by Qatari incumbent telco QTel and Saudi firm A.A. Tukri Group of Companies (ATCO). According to TeleGeography, wi-tribe Pakistan began commercial operations earlier this month.

Gerry Blackwell writes that according to the WiMAX Forum, at least two other operators, including Supernet (owned by Telecard, a fixed wireless operator known for its CDMA service) and Burraq Telecom, also plan to launch WiMAX services in Pakistan. The Supernet/Telecard offering, however, may be in doubt if nothing has changed since Babar Bhatti wrote in March about a dispute between wi-tribe and Augere, a European company that was planning to offer WiMAX services in Pakistan via the acquisition of spectrum in the 3.5Ghz band from Telecard.

Although some have raised concerns about Wateen Telecom's WiMAX service, Blackwell reports that Phil Cruver of KZO Education has no complaints: "It was so quick to get service," says Cruver. "We paid for it, and it was up and running within 24 hours."

Blackwell writes that when KZO first got involved in Pakistan, WiMAX wasn't on its radar. "To be very honest, we didn't know there was a WiMAX," Cruver says. "It's just serendipity that Pakistan has the first nationwide WiMAX network."

Cruver's last comment might not be accurate. Gerry Blackwell writes that Pakistan is really just "on its way to having a nationwide network", with service is only available in major population centers, and coverage spotty outside city centres.

As discussed, the second area of vital services in which WiMAX could potentially make a very valuable contribution in Pakistan (and other developing countries) is healthcare.

Earlier this year, Monica Paolini of Senza Fili Consulting (from whom I once sought advice about the agenda content for a Fixed-Mobile Convergence themed conference I hosted in Miami many moons ago) wrote a paper on the theme of expanding the reach of healthcare in developing nations with WiMAX. Sponsored by Intel and Cisco, this paper notes that today, in developing nations, patients have to travel to their nearest clinics or hospitals to receive even basic treatment and to more distant institutions for specialised or emergency care. Monica argues that this model does not provide comprehensive and efficient access to healthcare and suggests that reliable, always-on broadband wireless connectivity makes a new healthcare model possible -medical professionals reaching out to patients where they live and when they need care, bringing access to a range of medical resources through voice, data and video applications.

In her paper, Monica discusses an example from Pakistan - a Cisco trial combining satellite and WiMAX connectivity to mobile units that provide early oncological screening for patients in rural areas.

Overall, Monica uses her paper to make a case for why WiMAX stands out as an ideal technology to support telemedicine initiatives. Rather than focus on the capabilities of the technology, however, I'd like to consider the business models needed to make such initiatives a success.

Monica quotes Debra Sloane, Global Healthcare Solutions Partner Manager at Cisco, who says that "extensive cooperation among public agencies, health care providers and [telecoms] operators is necessary for the creation of new business models that can address the specific
needs of communities."

Just as we have noted that WiMAX networks in Pakistan are currently confined to urban centres, Monica notes that wireless networks tend to be initially deployed in high population-density areas and suburban business districts where the highest-paying subscribers can be found. Monica argues, therefore, that governments, health care agencies, and NGOs need to work together with network operators to ensure that operators see a business opportunity in under-served urban and rural areas. Perhaps Pakistan's Universal Service Fund could be used to intervene in this way. As far as I can tell, however, the USF's activties do not yet include any such initiative.

To conclude, while it seems that a number of worthy initiatives are improving the currently uneven access to telecoms and Internet services and to other vital services, Pakistan continues to be notable for a marked digital divide between its various regions.

Bridging the digital divide between the provinces and regions of Pakistan