Published in Nov-Dec 2014
This year has turned out to be an extremely eventful one for Pakistan’s telecom industry, thanks to the technological leap taken with the introduction of 3G and 4G. In parallel with these developments, there have been changes within the MNOs. For a start, Mobilink, the industry leader for over a decade, will soon be overtaken by Telenor in terms of number of subscribers, while Zong has already taken the number three slot from Ufone, and predictions are that the environment will remain favourable for Zong in 2015, given that the MNO is the only 4G operator in Pakistan so far.
However, Zong will need to drive 4G adoption through market innovation, especially in terms of developing good value propositions. At the moment there are only 250,000 devices in Pakistan capable of supporting 4G technology, which is peanuts given that Pakistan’s telecom subscriber base stands at over 134 million; Zong will therefore have to tie up with device manufacturers and develop an aggressive 4G device penetration programme.
Since the commercial launch of 3G in April this year, customer response has been good; an implied indicator being that by end of November, 3G’s active base (unique users who used 3G at least once in 90-day period) will be over 3.5 million.
In fact, far more than for the operators, the launch of 3G has spelled a boon for device manufacturers. The arrival of 3G was handled well by those manufacturers who had prepared for it (mainly Samsung and QMobile) by having a relevant product portfolio, spending significantly on marketing 3G devices and developing high impact partnerships with mobile operators. Even so, what is available now in terms of smartphones is only the tip of the iceberg and smarter devices will soon flood the market.
The potential of the smartphone market is huge. Currently approximately 92% of the market is using 2G devices, which may be alarming for the MNOs but is good news for mobile device vendors and new entrants such Huawei, Lenovo and Voice.
While the two-year delay in bringing 3G to Pakistan (the date was initially set to be in 2012), helped MNOs build momentum for this next generation mobile technology, increasing smartphone penetration is the most essential component in driving 3G and 4G adoption. Those MNOs which are able to increase smartphone penetration on their networks will enjoy better 3G network ROI in the long run.
Here are some trends:
Established players like QMobile need to look into the possibility of going beyond Android devices and moving into the Windows platform as well.
Apple will be coming to Pakistan with a complete after- sales service support structure. This is the ideal time for Apple to make an official entry given that 92% of the market is still on 2G despite the fact that five MNOs are now offering high speed internet services. According to market intelligence, Apple has signed up local distributors and the next step might be for the company to adopt an operator led distribution model.
The potential of the smartphone market is huge. Currently approximately 92% of the market is using 2G devices, which is good news for mobile device vendors and new entrants such Huawei, Lenovo and Voice.
Samsung enjoys the largest share in the $150 plus handset category and the company is looking at making ecommerce an active channel (an indication is its recent partnership with Daraz, whereby the website is Samsung’s official online retail partner). Given that Apple is not active in the $300 to $500 category, Samsung will continue to enjoy supremacy in this category. The battle between Samsung and Apple will be in the $500+ category.
Huawei has taken the 3G challenge head-on. The company has shut down 2G feature phone manufacturing and is concentrating on developing 3G enabled devices. As a result, Huawei has increased its media spend in 2014 (which had so far been limited to trade marketing) and is strengthening its distributor network.
In terms of new entrants, the most prominent is Lenovo. A huge name in laptops, Lenovo’s smartphones have been backed by favourable product reviews internationally. In order to have a strong market entry, the company’s first move was to hire Arif Shafique, one of the top people from Nokia for its device business.
In line with its global strategy, Microsoft is in the process of consolidating by focusing on Windows-based Lumia devices. In the light of past experience, Microsoft will be very aggressive in terms of leveraging partnerships with device manufacturers, telecom operators and app developers.
Here are some of the opportunities that device manufacturers will be leveraging, either on their own or in partnership with other industry players.
Device theft and loss coverage will become a highly attractive new sales proposition, although if theft validation is not handled properly, there is a huge probability of fraudulent claims.
The launch of instalment based smartphone/data bundled plans either via financial institutions or with MNO support.
MNO led low-end 3G devices and device data bundled propositions will continue.
Device manufacturers will use their strong footprint of experience centres to facilitate after sales support services.
The launch of innovative local apps with R&D support by device manufacturers.
Integration of operator billing with device manufacturers’ app stores. As an example, Mobilink has partnered with Nokia and Android.
Khurram Mahboob is a telecom professional in Pakistan. firstname.lastname@example.org