Food is the new Oil

In a world where oil is the new gold and food is the new oil, Shaikh Nahyan of Abu Dhabi group who has recently received the ‘Largest foreign investor of Pakistan’ award from the privatization ministry of Pakistan is now eying the agriculture sector of Pakistan. Here is what he had to say about opportunity in the agriculture sector in Pakistan.

Addressing the forum, Shaikh Nahyan said agriculture is crucial to Pakistan’s economic prosperity. “Investment opportunities in agriculture sector are attractive. I encourage all potential investors to take a long-term view of Pakistan’s economy as one of the emerging markets of the world — a market where astute investors should want to establish and sustain a long-term presence.”

p.s: My grocery store bill just nodded in agreement with the Shaikh when the price of a 5 kg rice bag took a straight jump of Rs 100 from Rs 375 to Rs 475.

PakistanTelecom & Economy Indicators

Amir Rajput has posted an interesting analysis of the ‘Telecommunication Indicators’ recently published by PTA. The figures (economic_growth.pdf) in the analysis conclude that most of the economic growth being recorded in Pakistan is attributed to the Telecom sector.

Juniper mulling Backoffice in Pakistan

Update: I have been grossly mistaken in putting up this blog post. The company in this report is NOT Juniper networks but a start up called ‘Paxterra’. Paxterra has been formed by a senior Juniper Networks staff who recently left the networking giant to form the new company. The company, among other things, will be getting contractual work from Juniper Networks and intends to get it done locally in Pakistan. So while the headline of this post has proven to be grossly wrong, there is still some original excitement in the news. The confusion was caused because my contact at Juniper Network broke this news to me and the way the dialog progressed, I mistook Paxterra for Juniper. I am sorry. 

p.s: The openings are still there and local Pakistani resources are welcome in this new venture.

Juniper Networks Some senior Juniper Networks’  staff might end up opening a technology back-office in Pakistan. The project, very small right now, can prove to be a great news for the nascent but budding IT and Telecommunication industry of Pakistan.

It is interesting to note that despite considerable sales that Juniper Networks has recently made in the otherwise invisible-on-the-sales-map Pakistan, this is NOT a sales office. Some patriotic and situation-aware Juniper guys have managed to convince the company to have a back end technology office in Pakistan. This is reportedly for the stress testing and other iterative testing jobs for which good engineers are readily available in Pakistan.

If this goes through and continues to grow, from a strategic view point, Pakistan will move upwards the value chain of the BPO business. Let us hope for the best!

Mobilink embraces data

The long on-going, almost over-due project was declared signed and closed with Alcatel-Lucent. Daily time has the full story here. This is going to be the second major countrywide Wimax project, the earlier one being deployed by Wateen and uses Motorola’s gear. The project, whose financial size or commercial availability dates has not yet been publicly disclosed, reportedly makes extensive use of the strong channel sales partners that Mobilink has developed in the rewarding cellular market of Pakistan over the past many years.

The next similarly sized announcement should come from PTCL which is still talking to a number of solution vendors in this domain. Apart from these three large scale projects, a number of other entities, some of which are in the security infrastructure of the country, are deploying Wimax technology for their respective requirements.

There are till a number of players like Telecard and Cybernet who won the 3.5 Ghz frequency in the open auctions during deregulation but are not moving ahead with their Wimax adventures for want of some business case precedence and internal priorities.

Etisalat might double stakes in PTCL

In what seems like a signal that the party night is still young, Etisalat is said to be considering an increase in its shares in PTCL from 26 per cent to 51 per cent. A repeat order, after all, is a sign of the ordering partying enjoying the value of the stuff ordered!

DUBAI (Reuters) – Emirates Telecommunications Corp. (Etisalat) said on Sunday it was considering doubling its stake in Pakistan Telecommunications Co. to 51 percent.

“We are evaluating that option and once we’ve arrived at the decision that this is positive, we will talk to the (Pakistani) government,” Chairman Mohammed Hassan Omran told Reuters. He declined to say when the decision might be made.

Etisalat had earlier bought 26 per cent shares and management control in a privatization deal with the Government of Pakistan. The deal has been repeatedly attracting objections, criticism and bad press for a number of reasons ever since it was struck in 2006.

Industry fellows at  PTCL regularly disclose that change in the organization so far is skin deep. The absolute mess in fields of customer services, presentation and heck, even the corporate website is the reason that a makeover in these areas appear to be so ‘image changing’. The first batch of change-makers that the company is said to have hired are all from non-technology sector and the middle management at PTCL criticize that ‘no one is addressing the technical issue that actually deserve the real attention’.

However, we also need to appreciate that quantum personality changes that go deep below the skin is no easy task giving the size and responsibility – both technical and social – that lies at PTCL.

CMPak’s plans for R&D and Training Center

CMPak (former Paktel) is mixing corporate social responsibility and profits.

On September 2, CMPak won approval from the Pakistani government to secure a 15,000-sq-m plot to build a campus with integrated functions of research and development, training, and commercial use.

Sounds good!

Pakistan Bandwidth Appetite

I had been meeting a lot of fellow friends in the industry in person lately for a number of reasons. One interesting number that I came out with was that of the total transit Internet bandwidth that Pakistan is currently subscribing to. Between PTCL, Transworld, Multinet (the companies) and SMW3, SMW4 and TW1 (the three cables -and a couple of transponders worth of satellite back up bandwidth) we are talking about an aggregated 2.5 Gigs of IP transit bandwidth (give and take an STM-1).

Not only the figure is respectable, the growth trend that my contacts described is excellent. Drivers for increased consumptions, as we discussed and nodded at, included new DSL services, VoIP traffics and the popularity of bandwidth hogging Internet services like Youtube.

A number of other potential bandwidth-suckers that are waiting around the corner include mass distribution alliances that are expected to talk place between bulk bandwidth suppliers mentioned above and the new distribution channels like Niyatel’s (and other similar outfits in Central Pakistan).

This trend is impressive. Additionally, it also presses the managements of the local industry to come forward and think broadly out of the box for some badly needed but missing standard industry practices like local peering and Internet Exchanges and local Data Centers. If the growth trends continue, it can soon become a major foreign exchange eater and the only way we can reign this in is through localization of traffic within Pakistan.

Managed Services

Managed services are thriving well in Pakistan. Ericsson has been reported to be given an extension of three years for the Managed Service that they had been providing to Warid Telecom in Pakistan. Warid’s network is multivendor and the managed service will cover this multivendor environment.

Managed services bode well for the local telecom environment as under these arrangements, a more professional entity takes charge of the engineering (and some times, even some non-engineering) functions of the telecom business house letting the original license holder customer take care on the core business of marketing and managing the local brand.

Generally in such deals, a large number of employees from the parent telecom company also get transfered to the company providing the Managed Services as regular or contract employees. Apart from become part of (normally) bigger and more structured companies, the practice also has the positive effects of enhancing the technical and administrative caliber of the local man power in general.

SK Telecom buying Majority Stakes in Instaphone?

According to unconfirmed but reliable news, South Korea’s SK Telecom and the Arfeens Telecommunication Group of Pakistan have finalized a deal in which the South Korean player will acquire 70% stakes of the Instaphone (& Telecard?) along with management control. SK Telecom’s website states is global aspirations as:

SK Telecom revealed three key business areas to be concentrated on. These are the furtherance of our global reach by expanding internationally, developing the convergence of telecommunications and broadcasting, and searching for new business opportunities. With an aim toward becoming a major player in information communication under an economic umbrella that will be over all of East Asia, we are actively seeking multifaceted business opportunities in overseas markets.

Established in 1984, SK Telecom has a number of interesting networks under its belt including CDMA 2000, HSDPA etc. True to the uniqueness of South Korean market, the company offers a number of wired/wireless and application services. From Wikipedia:

The company’s current services include NATE, a wired and wireless integrated multi-Internet service, June, a multimedia service, MONETA, a financial service, Telematic service such as NATE Drive and even Digital Home service. In 2004, SK Telecom launched “Hanbyul,” the world’s first DMB satellite. The carrier currently provides satellite DMB to its subscribers through its subsidiary TU Media Corp. SK Telecom also offers a variety of internet services, many through its subsidiary SK Communications. Cyworld is one of the most popular blogging services in South Korea and NateOn is one of the most popular instant messengers.

The news further puts the number of new planned base stations to be erected by the revived company at 1500 ~ 1800.

In anticipation of a possible cash injection and to reduce time-to-service, Instaphone’s management had already finalized a hardware supply deal with Huawei for an all IP CDMA EvDO Rev.A  earlier this year.

Arfeen Group manages three major voice and data brands in Pakistan (Instaphone, Telecard and Supernet) with Telecard’s being listed at the Karachi Stock Exchange. The group has been reportedly trying to strike expansion focused international telecommunication players but considered the management control to be most effective if it remained in the hands of the local minority stake holders. With a regulatory environment that has earned kudos in recent months for its consistency and neutrality and success stories of foreign managements (of Warid, Telenor etc), the demand of management control to the local minority partner was the major factor in not getting the previous deals closed.

The last un-taken group of Arfeens Telecom represent a power-house of telecommunication with all licenses tied to a single ownership flag – from the super-duper cellular to the mundane dialup ISP license.

The group has recently inducted new senior management that include Aamir Niazi as Vice Chairman. Aamir Niazi was associated with BOC Group for the past 18 years. A new CFO and a new CEO are being expected to be planted by the Koreans to give effect to the new ownership.

Various Strategies for Infrastructure Issues

Pakistan has a considerable geographic spread and a populous rural footprint. If cellular services are to be taken forward, better, practically working coverage is required. Pakistani cellular operators understand this and are trying different strategies to cope with the challenge.

Back in 2002, Paktel and Instaphone entered into an infrastructure sharing agreement that allowed both the operators to use single civil facilities for putting up their cell sites. Ufone was a government owned concern so they had little incentive to move in any such direction. Mobilink was a GSM entity and was (at that time), the odd-man out from this alliance.

When Warid and Telenor entered Pakistani market, each had deep pockets filled with forex and lack of local industry trends and social domain information. They went ahead with building their own infrastructure initially.

Fast forward to mid 2007 and everyone now knows about Pakistan, its territory, politics and social landscape. Mobilink has emerged as a giant and the rest of the players are desperate enough to forge infrastructure level friendship!

First, Telenor and Ufone sign an MoU (and incorrectly call it ‘the first of its kind’, forgetting the Instaphone/Paktel deal on same lines way back in 2001~2002) to share their infrastructures.

Now Warid is reportedly joining the duo to form a troika which is very obviously set against Mobilink’s impressive coverage of 5,000 towns/locations across Pakistan. From the Daily Times’ report:

Currently Mobilink is covering over 5,000 cities and towns with over 6,000 sites, Ufone is working in over 750 cities and towns with 1,108 sites, Telenor is operating in over 1,100 cities and towns with 2,900 sites, Warid is active in over 210 cities with 1,200 sites and Paktel working in 218 cities with 893 sites. These all operators cover 70 percent of the population with 35 percent geographically. The MoU is the first of its kind between the two leading mobile phone operators in Pakistan. This is a welcome initiative for the industry, as it will help reduce costs of companies in developing separate sites for their networks.

Paktel has a different strategy for itself. With supposedly cash flow issues resolved, thanks to its China Mobile acquisition, the Paktel management is asking its employees to be part of the network in more than once sense. An email circulated to the employees to this effect states:

Dear All,

You are all aware that with a view of Network expansion, CMPak has awarded contracts to various vendors for establishing ‘Base Stations’.  Consequently, we would be establishing sites throughout the country.  To make the employees as partners, the Management encourages their participation in site acquisition process.  If any of the friends / acquaintances is willing ‘To Let’ property (on rental basis to CMPak) for establishing the sites, employees are encouraged to forward details of such property.

Management is pleased to announce that if any of the sites (referred by the employees) is judged as ‘Prime Site’, the referring employee will be offered ‘Special Reward’ by the vendor.  However employees are strictly forbidden to contact technical staff i.e O & M and Roll out Teams.

The MoUs might be a sad news for aspiring three-storied house owners each of whom had been wishing to generate an additional income of around Rs 40,000 ~ 50,000 per month by renting out her rooftop for the cell site (and, in some cases, enjoying free generator-based electricity during the frequent power outages in some cases!) . However, this should bring a sigh of relief to concerned citizens about the deteriorating cities’ landscapes which, now across Pakistan, are littered with such towers with zero efforts made toward any possible camouflaging of the same.

CMPak’s Investements – Insomania for Mobilink?

AFP is carrying a report that mentions CMPak’s resolve to invest another $500 million in its Pakistan operations. Rural penetration is being cited as one of the main components of the expansion thrust:

World’s biggest telecom operator China mobile having 320 million subscribers in China plans to invest another $ 500 million next year as the investment atmosphere is very conducive here. Executive Director China Mobile Pakistan Sikandar Naqvi Thursday told CNBC channel that a sum of $ 1.2 billion has already been invested in Pakistan.

This, read along with the statement from the China Mobile Chairman that China Mobile sees their Pakistan operations as a valuable experience for its subsequent international ventures, will surely put the existing big boys of cellular services in Pakistan like Mobilink and Ufone on high-alert and may be give them sleepless nights.

Telecard Joins Stake Sellers’ Group

The News has this story on Telecard considering selling some of its stake to a foreign group:

The country’s pioneer and the largest payphone companies are in talks with foreign groups to sell off its share, what the industry believes is an attempt to attract investment for expansion.

TeleCard – one of few payphone companies in the country has planned to sell out its minority shares to one of the foreign business groups, it is in talks to and is expected to reach deal in the days to come.

“Actually the company has initiated talks with a UAE group and there are several other intentional players, which it eyes to engage in,” said a source privy to the company officials.“Though the company has not reached any conclusion with any group, it is expected to review offer of the different groups it has received.”

He said the company had almost decided total percentage of the company shares to be sold off but it had not yet disclosed the details. However, he said, the company officials believe it took more than anticipated time to strike deal for the desired sell off.

The country has witnessed a series of foreign takeovers in recent months as two foreign groups have already acquired majority stakes in local companies. First Qatar Telecom stretched its wings to Pakistan, entering into final talks to acquire Burraq Telecom with nationwide and intentional telephony networks at $30 million.

Then it was Egyptian Orascom Telecom – parent company of the largest cellular operator Mobilink – that finalised deal with DVCOM, a licensed LDI (long distance and international) and limited mobility telecom operator.

However, source said the TeleCard was more interested in selling out minority shares keeping management control in hand with majority stakes.“It’s a little early to suggest percentage planned to sell out but it would obviously be minority shares as the company wants to keep management control intact,” added the source.

He said the company had plans to expand its fixed line network across the country for which it looked for investment against shares sell off.“Currently TeleCard operates payphone and WLL (wireless local loop) services with also an ISP (Internet service provider in place,” he added.

He said TeleCard was ready to evolve as the most technological advanced integrated telecom solution provider of the country. “The company has successfully launched WLL service (GO CDMA) based on CDMA2000 1 X technology that provides the unique combination of voice and data/internet for the first time in Pakistan,” he added.

The country telecom sector has fast attracted foreign during last three years with main focus on cellular service. However, industry players believe it’s a high time for reputed intentional telecom operators to capitalise on opportunity in Pakistan, which offers one of the best business opportunities in its rural areas.

The country’s telecom sector has attracted $1.41 billion foreign direct investment during the first nine months of 2006-07, retaining top position among all other sectors. Figures released by the Federal Bureau of Statistics suggest foreign investment in the telecom jumped 34 per cent during July-March 2007.

Weird Stats

A news item in Daily Times says that Pakistan imported cellular phones worth around $728,000 in the last nine month which according to the news article is 28% more than what we imported last year during the same period.

Umm..sounds strange. The reported figures are not even close to a million dollars. Either the report used the figures of just one vendor or it really got confused with the facts. With an average cost of $100 (Rs 6,000), this figure means that we imported just around 7,280 mobiles? Quite unlikely.

With the average joe Teefa on the street buying a new cellular phone worth $60 ~ $100, no local production of cellular terminals, PTA complaining about insufficient record keeping of SIM issuance and millions of users being added to the networks month by month, even with tax and paperwork evasion, the figures must at least be in tens of millions of dollars.

The Last Train

Most of the articles that appear about Pakistan’s Telecommunications market are sketchy in nature and leave a lot to be desired in terms of details and perspective. Comnews recent article aptly titled ‘ The Last Train‘ is an exception to this generalization. The 5,000 words article nicely covers all aspects of Pakistan’s Telecoms from Cellular to WLL to Wimax.

In the ‘Manna for Investors’ section, the report describes the current appetite for more fundings by the existing operators:

 For investors there are some opportunities to enter the Pakistan telecom market. Apart from buying shares of DIALLOG Company, which is looking for financing sources for expansion throughout the country, other companies like Worldcall and Instaphone also are looking for partnerships.

“Worldcall needs about USD 16 million just for implementation of its WiMax project. And for implementation of all its development plans, including WLL network expansion, HFC and Metro Fiber network construction, we need around USD 50 million,” says Sardar Ali Wattoo.

“We are capable of borrowing this amount, but if Worldcall is of interest to some well-known partner, then the majority shareholders of the company, Lahore businessman Salman Tassir and Sheikh Suleiman Hokani from Oman, are ready to share its shares in the charter capital.”

Instaphone is looking for partners for construction of its digital mobile network. “We are in the process of searching for an investor, as the first phase requires USD 300 million in investment capital. However, we are not taking a passive stance, and already have prepared 700 fields for installation of new base stations,” says head of the company Javaid Firoz.

The Pakistan telecom market is on the radar screen of major industry players. A source in Warid Telecom said that its shareholders, led by Sheikh Mubarak Al Nahaiyan, are in the process of negotiations with Vodafone for selling their share in Warid.

The gradual process of change in ownership of Pakistan telecom assets began last year, and no one is ready to evaluate the effectiveness of these investments.

Recommended reading for outsiders who want to get a good summary of local market as of 2007.

Omantel: Me too!

Omantel is reportedly also interested in buying stakes in a yet unnamed telecoms company in Pakistan.

‘The company is currently studying plans to enter into competition to purchase a share in a Pakistani telecom company,’ Omantel said in a statement. ‘The deal … would give Omantel an opportunity to expand its investments’. Gulf Arab telecom operators have been hunting for foreign assets as competition increases at home, and Asia has been a priority.

Warid Intends To Sell Part of Equity

Reuters is reporting that Warid is talking to a number parties to sell a minority stakes. The company, it says, is not ready to give up control or change the brand. Along with MTC (which we reported earlier here and here), the report cites the names of Singtel and Vodafone of UK as the parties that are talking to Warid on the issue.

Paktel’s Continued Transformation

Cellular News is reporting that Paktel’s stakes were acquired by China Mobile Communication Corporation which is the parent company of China Mobile. China Mobile is a listed company and the move is intended as the investors were cautious on the profitability of the venture in Pakistan due to fierce market competition.

Insiders are reporting that the new company, now renamed as CMPak has started a fresh wave of hiring employees.  The company is also engaged in talks with a long-haul optical network with Malaysian roots to acquire dark fiber pair on long term lease for its nationwide traffic requirement.

Sans Wateen, MTC-Warid Deal Nears Closure

The MTC-Warid deal we discussed earlier, is reported to ‘near closure’. A high ranking ex-employee of Warid with close insiders contacts confirmed the rumors floating in the market since the morning. The interesting twist is the fact that the would-be owners are only interested in Warid and have shown no interest in Wateen, the data and telecommunication infrastructure wing of the Abu Dhabi group.

Wateen is deploying Wimax services in major cities of Pakistan on a Motorola platform, has laid thousands of kilometers of optical fiber across Pakistan and is building a large number of carrier hotels to serve, besides Warid, other telecommunication entities in Pakistan that have traditionally suffered from the monopoly of PTCL for these services.

Towards Encouraging Entrepreneurship

Organization of Pakistani Entrepreneurs & Computer Society of Pakistan, with platinum sponsorship by Mobilink, are arranging a repeat visit of Kenneth Morse and Bill Aulet in June 2007.

Last time, in March 2007, KENNETH P. MORSE, Senior Lecturer & Managing Director, MIT Entrepreneurship Center and colleague  WILLIAM K. AULET, led a workshop titled ‘Global Sales Strategies for Ambitious Pakistani Entrepreneurs’.

The event on 14th June 2007 is titled Driving Strategic Innovation and Change (event fee per participant is $1,000) and the event on 15th June 2007 is titled Financing Your New Venture: Driving the Process to a Successful Conclusion (event fee is Rs 17,000).

Detailed event programs and brochures are available here.

Find The Candy

The long tipped off Mobilink-DVCOM deal is finally making it to the press. The News is reporting that deal with transaction value estimated at $12 million.

DVCOM obtained an Long Distance International (LDI) and WLL license in 2004. Under the LDI license, the company was operating a popular brand of calling card services called Big Time. The brand was the first one to start the price war on Pakistan-US calling destination @ Rs 5 per minute. The market rates (on fixed, WLL and cellular networks) have now dropped down under Rs 1 per minute, thanks to the fierce competition, popularity of the destination and tons of cheap terminating operators in the US.

DVCOM never really put the WLL license to any physical use despite acquiring 1900 Mhz licenses in 9 out of 14 telecom regions of Pakistan.  And so was the case with the 3.5 GHz allocation where the company acquired licenses in 10 out of 14 telecom regions.

So what could be the candy in DVCOM for Mobilink given the fact that Mobilink now has a full-blown PCO business wing? Real Estate? Human Resource? Customers?  None of these exist in the case of DVCOM. The only appeal seems to be the 3.5 GHz allocation that DVCOM has under its belt.

And perhaps this could explain the Wimax homework participations of the 23 million heavy cellular company in Dubai and (up coming) Singapore.

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