Yasmin Malik on why mobile penetration in Pakistan has become a resounding reality.
It took a little over five years for us to go from less than one percent to close to 30%. Officials are terming it a ‘dramatic’ increase. And it is. Mobile broadband penetration today (2018) is a resounding reality in Pakistan. It is only growing stronger with our base of mobile subscribers crossing the 150 million plus mark and a clear upward trend in the take-up of 4G subscriptions reported by all three MNOs that offer 4G services (Zong CMPak, Jazz and Telenor).
According to a definitive Arthur D. Little survey carried out on businesses in countries where 4G has been used for the last few years, organisations have seen a 67% increase in productivity, 47% have been able to cut costs and 75% agree that 4G has helped their organisations to “innovate and jump the competition.” The technology potential of 4G LTE (Long Term Evolution) offers higher bandwidth, low latency, lower idle-to-active times and high spectrum efficiency. In simpler terms: higher data speed (richer media, larger files), improved network responsiveness for real-time communication (WhatsApp, Skype, Slack) as well as better reliability of a ‘fast’ connection.
Experts, including Arthur D. Little, agree that the successful adoption of 4G requires certain ‘enablers’. These include: mobile device compatibility, availability and choice; even-handed pricing; awareness in usage of 4G’s capabilities and widespread network coverage. When the first 4G network in the world was rolled out in 2009 in Norway and Sweden, the first-mover advantage was severely hampered due to the limited establishment of the afore-mentioned enablers. Compatible devices were few and initial network coverage was limited. For example, two-and-a-half years after launch, penetration stood only at 1.4% and network coverage was a little over 50% (source: Informa). Not to mention the ‘premium’ pricing. As 4G became available in 10 more countries by 2010, some of these issues were addressed positively. In particular, South Korea’s 2011 4G launch was an accomplishment when they achieved 100% coverage and a penetration of 17.9% within a short 14 months since launch (source: ITC) proving that widespread coverage is vital for faster take-up rates. Similarly, Japan’s 4G launch in 4Q 2010, focused on making the new service more affordable. Japan’s NTT Docomo charged their new 4G subscribers 16% less per month for the same mobile data allowance on 4G than they did on the equivalent 3G package, which encouraged rapid adoption. NTT Docomo, at the time, became the by-word for 4G innovation and trend-setting.
According to industry estimates, the number of mobile subscribers who owned a smartphone by mid-2014 had doubled to 17% with QMobile easily capturing more than 50% market share. By 3Q 2014, when Zong launched the first 4G LTE service in Pakistan, one in five mobile subscribers could afford to replace their feature or low-end phone with a smartphone.
The almost decade-long lesson in 4G since its initial launch in Scandinavia has been a good one for Pakistan. So how do we measure up in terms of the four above mentioned ‘enablers’? We score highly on the first, i.e. device availability and choice. In the run up to 3G services launch in 2Q 2014, QMobile drastically changed the market by introducing smartphones under the Rs 10,000 price point. The brand was highly successful and contributed greatly to smartphone adoption in Pakistan. According to industry estimates, the number of mobile subscribers who owned a smartphone by mid-2014 had doubled to 17% with QMobile easily capturing more than 50% market share. By 3Q 2014, when Zong launched the first 4G LTE service in Pakistan, one in five mobile subscribers could afford to replace their feature or low-end phone with a smartphone. On the second enabler, Pakistan again scores well. This is because both 3G and 4G pricing have been kept affordable. However, on the third enabler, results have been a mixed bag. Although pricing was favourable and pre-launch promotions of both 3G and 4G were focused and well carried out, initially none of the operators did well at technology awareness building and were heavily fixated on the hype of brand building. Hence, affordable pricing, data bundles and packages did not translate well into take-up as many subscribers were not aware of what exactly one could do with 3G or 4G. Educating prospective customers on the actual use-case scenarios of both 3G and 4G took its time, though in the last two years especially, this aspect has become much stronger. The MNO that outclassed the competition in this regard is, hands down, Zong.
Aided by an aggressive re-branding campaign, innovative use-case focused 4G advertising and a highly-driven 4G sales team (especially in the South Region), Zong became the clear leader in this category by 3Q 2018, despite ranking third in the overall industry. Wang Hua, CEO, CMPak, is recently quoted as saying in an interview published in China Daily: “We have more than eight million 4G users, edging out all other operators in this area and taking 75% of the market.” The company has also strongly committed to widespread coverage (our fourth enabler) beyond the 300 cities they already cover with the announcement of building 5,000 base stations over the next three years. Recently, the company became the first MNO to cross the 10,000 4G sites mark.
4G also had a significant impact this fiscal year on mobile phone banking transactions. The State Bank of Pakistan (SBP) reported that these transactions had crossed the Rs 410 billion mark, translating to a growth of 195%. According to the SBP, there are approximately 3.4 million registered users of mobile phone banking apps, with the bulk of the transactions falling under intra- and inter-bank funds transfer.
CMPak CEO further highlighted how the third ‘enabler’ depends on 4G technology: “We have collaborated with popular ride-hailing apps such as Uber and Careem to facilitate transportation for people.” No doubt the impact of ride-hailing apps has been one of the very successful use-cases that have helped in experiencing the immediate application of 4G for the general public for all the 4G service providers, not just Zong. Furthermore, Google maps and image-and-video-based social media and mobile TV apps (PTCL SmartTV, iFlix, Netflix, Tapmad) all gained traction once 4G became available. Other business use-cases that have benefited from 4G include mobile sales force automation, the ‘connected’ office, mobile patient data access, in-car media (or ‘connected’ cars), retail applications like mobile broadband-enabled vending machines and Point-of-Sale (POS) terminals.
4G also had a significant impact this fiscal year on mobile phone banking transactions. The State Bank of Pakistan (SBP) reported that these transactions had crossed the Rs 410 billion mark, translating to a growth of 195%. According to the SBP, there are approximately 3.4 million registered users of mobile phone banking apps, with the bulk of the transactions falling under intra- and inter-bank funds transfer. However, usage seriously needs to move beyond the funds transfer category to the mobile commerce and retail sectors, especially with the enabling widespread access of 4G. The commendable groundwork that Easypaisa and UBL’s Omni have done with respect to mobile remittances needs to become firmly entrenched in mobile wallets, particularly as public awareness is growing.
This awareness now extends to 5G, especially with the new government hinting at a possible 5G launch in Pakistan by next year. At the centre of this new technology lies the promise of the Internet of Things (IoT). Already present here in the form of ‘connected’ TVs, house appliances and cars, the introduction of live 5G services will take the IoT to the next level. Smart cities, especially in the wake of climate change and ‘green’ sustainability will be looked at as tangible solutions. The concept of ‘smart buildings’ for work will gain traction and virtual/augmented reality will become more popular in the retail and entertainment industries. Oh, and did I mention that you will be able to download a full HD movie in just 10 seconds?! ‘Dramatic’ indeed!
Yasmin Malik is Senior Partner & Consultant, Global Management Consultants.