Warid Telecom International hit the headlines recently with the announcement of the sale of a 30% shareholding of its Pakistani operations to Singapore telco SingTel for a reported US$750 million in a deal that values the overall Pakistan operator at US$2.9 billion, according to Warid.
Boasting a network of 11 million subscribers, Warid is ranked third in Pakistan's sprawling telecoms market that services a total population of 160 million.
The development seems a natural progression of SingTel's strategy to gain entry into markets with high growth potential. With mobile penetration currently estimated at 35% in Pakistan, the move completes the Singapore company's presence in the Indian subcontinent.
Commenting on the deal, SingTel CEO Chua Sock Koong said: "SingTel has made substantial investments in markets with high growth potential in South Asia, such as India and Bangladesh. Warid Telecom in Pakistan is a natural fit."
Warid Telecom International's CEO Bashir Ahmad Tahir explains how the deal is valuable to his organisation and reveals to CommsMEA that such a move was not taken lightly.
"Prior to the SingTel deal, we had approaches from Vodafone, MTN, MTC Group and Malaysia Telecom. However, what made the SingTel offer more attractive than the others was the company's major presence in the Indian market," explains Tahir.
Warid stands to benefit from the deal as it offers the company enhanced access to the wider subcontinent through SingTel's 31% holding in India's Bharti Airtel.
"We believe that it is only a matter of time before the borders of India and Pakistan open up," suggests Tahir. "When this happens we will be able to leverage our operations in Bangladesh and Pakistan to tie up with SingTel's network," he adds.
He goes on to detail Warid's ambitions to link its existing fibre optic network in Pakistan, as well as its planned fibre deployment in Bangladesh, to Bharti Airtel's giving Warid access to a combined market of approximately 1.4 billion inhabitants. Tahir also notes that mobile penetration should reach 50% in Pakistan within the next five years.
Another bonus for the company is the preferred interconnection arrangements and roaming agreements it will benefit from as a result of the Bharti Airtel network, giving Warid increased access to SingTel's 110 million subscribers across the globe.
"Finally the deal will benefit us through our vendor relations, as with an increase in the numbers for bulk orders we can achieve increased synergies," Tahir states.
Sourcing the bulk of its financing from a consortium of nine core investors, including Sheikh Nahayan Mabarak Al Nahayan, Warid entered Pakistan in 2004, having paid a licence fee of US$291 million to become one of the country's six mobile operators.
Upon Warid's market entry, Pakistan had close to 7% market penetration across the mobile and fixed-line segments, despite the presence of four separate licensees prior to its market entry.
"At that time many people thought the price was too steep given the presence of other companies in the market, although our board was forward thinking enough to see the potential of such an investment," notes Tahir.
"The main motivations for the Abu Dhabi Group's strategy in the telecoms market is the need for communications in developing nations," he adds.
Tahir also maintains Warid's success has been built on the Abu Dhabi Group's belief that customer service is key to maintaining a healthy bottom line, and has been quick to introduce customer service innovations.
Warid set about investing significant amounts of capital in its infrastructure in Pakistan in order to offer the highest quality of service, in much the same way that parent company Abu Dhabi Group entered the country's banking sector.
"We did not want to enter the market with services that would be typical of the emerging world. It was our mission to offer the best services available to the market," recalls Tahir.
With a 900MHz-1,800MHz licence, Warid launched services using its 2G network in May 2005 when the competition was "sleeping", as Tahir likes to describe it.
"Effectively, we were the fifth entrant into the market but we like to believe that our fresh perspective on the market enabled us to outpace our competitors," comments Tahir.
The company maintains that its mobile network rollout at launch covered a "record-breaking" 28 cities at its launch, representing 20% of Pakistan's population, with the company achieving a subscriber base of 1 million inside its first 80 days of operations.
An important part of this market entry strategy was to ensure that Warid subscribers would have coverage in the interconnecting motorways between Pakistan's cities.
"Paying attention to the finer details, such as providing coverage on the road for commuters, is key to our track-record of speedy market entries," says Tahir. He also maintains that Warid's emphasis on high levels of customer services has thus far motivated its pairing with Ericsson.
"When entering a new market it is crucial, particularly as a relatively late entrant, to offer the latest value-added services available," says Tahir. Warid leveraged this approach in order to achieve a healthy segmentation of the Pakistan telecoms market with the operator counting the majority of the country's post-paid subscribers on its network.
"In Pakistan, we focussed quite intensively on the post-paid segment as our competitors are heavily reliant on the prepaid market," Tahir explains.
At present post-paid customers account for approximately 15% of subscribers on Warid's network, with Tahir noting this number surpasses the number of post-paid subscribers of all its rivals combined.
"Targeting this segment yields greater returns and enabled us to become cash-positive in 17 months," asserts Tahir.
"Obviously there is a greater credit risk involved with targeting this segment of the market but at the time of taking this decision we felt that our [the Abu Dhabi Group's] experience in the banking sector equipped us with the necessary knowledge and resources to successfully implement this strategy," he adds.
Moving forward, Warid is concentrating on enhancing its network coverage in Pakistan's rural areas with Tahir predicting that the operator's network will cover approximately 600 cities and towns before 2008, potentially servicing 75% of the country's population.
Simultaneously, the Abu Dhabi Group's Wateen brand also provides services to Pakistan's carriers. Operating separately from its sister company, Tahir says the strategy of operating under two brands in the same country enables both companies to maintain focus on their core set of customers.
In addition Wateen Telecom acquired a 3.5GHz licence in 2004 for the nominal fee of US$2 million in a move that Tahir recalls as being widely ill-advised at the time given previous failed attempts to utilise spectrum at this frequency range by other operators. However, Tahir suggests that this investment would cost US$20 million in today's market as WiMAX has since been developed along these frequencies.
"Prior to this investment, there had been some half-hearted investment in this sector by the incumbent operators," Tahir comments. "However, this investment enabled us to become the first operator in the world to rollout a nationwide WiMAX network and this service should be available some time in August," he adds.
Wateen uses its gateway to provide long distance international calling services to both the enterprise and end-user segments (including Warid)."This has been an important aspect of our overall operations, as we were often frustrated by the levels of service previously on offer," explains Tahir. "So we took the monumental decision to lay our own cable."
With over 5,500 kilometres of cable spanning the country at present - costing US$98 million - Wateen has earned its reputation as the "carrier's carrier" with rivals Paktel and Telenor both buying capacity from the company.
Tahir also speculates that Warid's investment in its long haul optical fibre, metro optical fibre, optical rings, and FTTx wireless broadband networks is such that it has the capacity to cope with the traffic flow from India, Pakistan and China combined.
"Even PTCL is interested in purchasing capacity off us, and that is a deal we are currently negotiating," Tahir states.
In Bangladesh, Warid launched operations earlier this year after paying US$50 million for a 15-year licence in December 2005, making it the country's sixth mobile operator.
"We definitely learned some lessons from our Pakistan launch and we applied this new knowledge to aid our entry into the Bangladesh market," says Tahir. "While Bangladesh has a similar population to Pakistan, it has a quarter of the landmass and we were better equipped to successfully implement our network rollout there," he adds.
"We are investing in intelligent networks to increase our cost-effectiveness. When we launched in Pakistan we had a network capacity of 1.5 million customers, this compares to our 5 million network capacity in Bangladesh, which is due to our US$450 million investment in NGN technology."
With much the same confidence it expressed upon its entry into the Pakistan market, Warid entered the Bangladesh market covering 50% of the population at its launch in May. The company surpassed the success of its Pakistan launch by garnering its first million subscribers within 70 days of operation.
Tahir also notes that Warid's network is on schedule to be extended to cover 70% of the population by the end of 2007.
With mobile penetration in Bangladesh currently standing at approximately 14%, Tahir claims Warid is targeting a 25% market share within 18 months.
However, the Abu Dhabi Group is not restricting its operations to the Indian subcontinent. At present Warid holds mobile licences in both Uganda and Congo Brazzaville. With Warid scheduled to launch its GSM and WiMAX services in Uganda during November 2007, the Abu Dhabi Group shows no signs of slowing its expansion drive.
Warid's strategy in Africa is set to emulate the company's developments in Pakistan and Bangladesh, and will see it look to enter markets with low penetration levels (typically sub-Saharan African markets with penetration levels of 8-13%).
"An important factor is volume, as it is in any businesses, any country with a population above 25 million is a good potential market," states Tahir.
However, Tahir also points out that different investment criteria apply in different markets, claiming that the main attraction in its Congo Brazzaville investment, in a country of just 3 million inhabitants, is its wealth of natural resources and market maturity, which would produce high ARPUs.
"Other criteria we examine before we decide to enter a market, are the economic and political conditions," Tahir says.
"We recently finalised a deal for a GSM licence in Cote d'Ivoire but we are still in the last stages of founding the company and setting up the offices, and we are looking into establishing operations in two other African markets."
If all goes according to plan, Warid's expansion strategy will see the company with a presence in five African markets in the near future with the DRC, Angola, Ethiopia and Nigeria all identified as potentially viable markets to enter.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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