Published in Jul-Aug 2021
MARIAM ALI BAIG: When we interviewed you in 2003 you were the CEO of Mobilink. Where has your career taken you since?
ZOUHAIR KHALIQ: I joined Mobilink as CEO in 2003. I was there for five years and seven months. After Mobilink, I was involved in several projects – which everyone today would refer to as fintech and mobile money. I also worked on the restructuring for Warid and brought it to the point where it was in good enough financial shape for Mobilink to buy it out. I also worked for the GSM Association in the UK (the trade and industry body for all mobile operators throughout the world) as their MD for mobile development. I quit that job because I was reporting to 26 board members and it was impossible to get them to look in the same direction. I then did a lot of stints in advisory board and non-executive board positions across many countries and although everything was going well, something inside me kept asking what next? I was in touch with Parvez Abbasi, who is my partner at Teamup. We decided we were at the stage where we wanted to give back and do something that was about teaching people how to fish rather than giving them fish; that was the start of Teamup. It was meant to be an online situation, where we would mentor, coach and incubate people and take them forward. However, at that time, the government wanted to set up an incubation centre. They were receiving funds from the Ignite Technology Fund, which was established in 2004 under the then telecom policy, as the ICT-R&D Fund, later rebranded as the Ignite Technology Fund. All telcos in Pakistan contribute 0.5% of their annual revenues to this fund. Over the years, the telcos had evolved into million-dollar revenue companies and Ignite were sitting on $500 to $600 million, yet nothing was happening in terms of using the funding meaningfully. Then the idea came up of setting up an incubation centre. Thankfully, the government was wise enough to say the private sector should do it. They did an RFP and we put in a bid. As we were relatively unknown, we convinced Jazz to become our partner – we won the bid and the National Incubation Centre (NIC) was established in 2016.
MAB: Teamup is running the NIC?
ZK: Ignite funds it; we have a five-year contract as the service delivery partner and run it on a day-to-day basis. The funding comes in on a yearly basis; it is a reimbursement of what we have spent. A budget was set at the beginning of the five-year period and a quarterly audit is done by the government.
MAB: What is Jazz’s role?
ZK: For example, the Mobile World Congress is taking place in Barcelona as we speak. We select three to five of the best start-ups to attend and Jazz pay for this. The start-ups are exposed to what is happening around the world and it is a great opportunity to showcase Pakistan as well.
MAB: Is Ignite still funded by all the telcos?
ZK: Yes. The important thing is that this is not taxpayer’s money. It is a contribution from the telcos.
MAB: Isn’t there a conflict of interest given that Jazz is a partner in this venture?
ZK: All the telcos sit on the Board, as do government representatives, as well as Ignite and several people from the private sector. Decisions are made independently. If there is a potential conflict of interest, Jazz will not participate in that particular decision as per the rules of the Board.
MAB: Have there been any success stories?
ZK: In almost five years, 77% of the companies we have incubated are still in business, which is a very high success rate; internationally only five to 10% survive beyond the first year. Collectively, they have generated around 10,000 jobs and we have generated nearly three billion rupees in revenues and investments for these start-ups. The funds go directly to the start-ups and if they earn any revenue, all the better for them. Of the funding invested over the last five years, if you add up the revenues and the investments, the return is nine times the amount, which is very satisfying. Five years ago, there was no understanding of what an incubator was. We held investor roundtables and brought together not only start-ups and potential investors, we included the Federal Bureau of Revenue (FBR), the Securities & Exchange Commission of Pakistan (SECP), the State Bank of Pakistan (SBP) and other representatives of the government in order to discuss the issues and how to address them. As a result of these efforts, the SECP has drawn up a new legislation that defines what start-ups are. I would like to believe we had some part to play in the thinking process that led the SPB to launch the Roshan Digital Accounts and the Raast programme.
MAB: So the ecosystem is developing?
ZK: It is. We will not see our first billion-dollar company for another three to five years, but what we see is that they are thriving; generating jobs and revenue and finding new clients. Two years ago, not a single venture capital (VC) firm was focused on Pakistan. Today, over 20 VC funds are operating here; local entities are receiving funding ranging from half to 15 and 20 million dollars. In 2020, VC funds invested $77 million in start-ups in Pakistan. This may not sound like much, but it was 97% more than the year before.
MAB: Why the change?
ZK: The ecosystem has developed and the world is looking at Pakistan in a positive way. This is a country with a population of 222 million people, with 65% below the age of 30. There are 184 million mobile connections and over a 100 million are connected to 3G/4G. By any standards, this is a fantastic market to look at.
MAB: What are the impediments preventing growth?
ZK: The government still insists on taxing smartphones; it treats them as a luxury item, yet they are an absolute necessity in today’s world. Pakistan has one of the highest taxed mobile sectors in the world. That is one part of it – the user’s end. At the operator end, they are working on the same spectrum allocation they had 10 years ago.
ZK: The government thinks that the spectrum is something extremely valuable and they want to charge loads of money for it.
MAB: Would the government not earn more by increasing the spectrum?
ZK: They want to, but they are asking for an exorbitant price – over $400 million. The operators argue that they are one of the highest taxed sectors in the world and they are earning in rupees and the average revenue per user per month is around one dollar – yet they are expected to pay over $400 million for a spectrum. The first spectrum was auctioned for $290 million. Operators argue that 15 years ago, the average revenue per user per month was four to five dollars; today it is one dollar because they have gone down the pyramid to the lowest common denominator. The economics of deploying the spectrum is just one part; the operators have to spend millions of dollars bringing in equipment to make this happen – which is taxed. Another impediment are the fibre optic cables through which the data flows. Whenever a fibre optic cable has to be laid, the concept of ‘right of way’ comes into play and this has to be negotiated with the entity that owns that land, and typically it is a government entity. They decide on the price, making those cables extremely expensive to deploy.
MAB: Why is Pakistan lagging behind in terms of digital literacy?
ZK: We need to declare an education emergency and revisit what we are teaching at schools; the world is moving to subjects that are purely technology based and we need to get our young people to that level very quickly.
MAB: After Easypaisa, it seems that the telcos are lacking in new initiatives.
ZK: You have to look at the evolution inside the telcos. The background of the average chief digital officer is essentially that of a chief technical officer, yet the skill sets required are completely different. Today, the role of the chief digital officer is conceptual and a different ball game altogether – and the skill set is not there. The telcos have not brought in people from other backgrounds to do this – this is not only applicable to Pakistan; it is a worldwide issue.
MAB: Do you see glimmers of change?
ZK: Absolutely. Despite all these impediments, the ecosystem is beginning to flourish. I am an optimist and to me the glass is very much half full. There is lots more to be done and that is the wonderful part of it.
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