TELENOR PAKISTAN... OPERATING WITH A REFORMING ZEAL

Sadaf Aurangzaib, Senior Correspondent
Aug 14 - 20, 2006

Telenor is Norway's largest telecommunications company and one of the fastest growing providers of mobile communications services worldwide. Telenor is an international provider of high quality telecommunications, data and media communication services. Telenor ranks as one of the biggest GSM service providers in the world with over 96 million subscribers. Widely recognized for its financial success and business performance, Telenor ranked 25th in Business Week's survey of the top 100 global performers in the technology industry recently.

In 2005, 57% of the group's revenues were derived from the mobile operations. Telenor has mobile operations in some of the world's fastest growing markets, and the home market, Norway, is one of the most advanced in the world today. Telenor is one of the largest mobile operators worldwide with ownership interests in 12 mobile operators across Europe and Asia, constituting a total subscriber base of 82.7 million at year-end 2005.

Telenor's wholly owned subsidiary Telenor Pakistan launched GSM mobile services on 15th March 2005, and at year-end the company had acquired a market share of approximately nine per cent. Telenor acquired the license to build and operate a mobile network in Pakistan in April 2004 with an investment of USD 291 million. Telenor has become the second largest cellular network in Pakistan by launching over 500 destinations in just over a year. We got the chance to meet Mr. Tore Johnsen, the CEO and President of Telenor Pakistan, who has been working with Telenor for 32 years. Let's share what he says about the Telenor.

PAGE: Give us a little background of Telenor, how does it started working, how successful it remained and what made it expand its network to other world markets?

TORE JOHNSEN: Telenor is a Norwegian company. We mainly deal in mobile sector. Telenor was already active in Asia, in Malaysia, Thailand and in Bangladesh when Pakistan government announced to improve the competition that they were likely to give licenses through an auction, Telenor decided to take part in that. The main reasons that Telenor saw to come to Pakistan were that there was a healthy economic growth and acceptable political stability. Pakistan also has a good telecom policy that is lacking in many other countries but in Pakistan it's very good, very open for foreign investment. Everyone who is a financial investor wants to have an operational charge too, which we got in Pakistan. The last thing is that Pakistan population is huge, in 2004 when we set up our operations, there was an open environment and a huge growth potential and that is obviously something interesting to take part in the telecom sector. Those are the main reasons that we decided to take part in the auction.

PAGE: Why it took so long to come to Pakistan as you reached Asian region quite earlier?

TJ: Well, there was no opening to get into Pakistan. There were already four companies, Mobilink, Ufone, Instaphone and Paktel and there were no new licenses available in Pakistan. Obviously Telenor could have been effective by buying one or two existing operators but PTCL was not ready for this decision and Mobilink remained the majority shareholder of Pakistan telecom sector. As there was no opening for new licenses so that's the reason that Telenor reached late in Pakistan.

PAGE: How many mobile companies do Telenor posses and what is your subscribing base world wide?

TJ: Telenor is involved in 17 countries but concentrated in mobile sector in 12 different countries. We have almost one billion customers. Our markets are in Asia, Scandinavian countries, Central and Eastern Europe. Quite recently Telenor also took part in an auction to take over one or two operators in Serbia.

PAGE: If I ask you to define Telenor, what would you say?

TJ: Telenor is a telecommunication company that is mainly involved in all sorts of communication activities inside Norway but outside Norway we are attached mainly with the mobile business. You have seen that we have changed our visual identity and branding. When we came we have one logo, one set of colors, now we have changed that and that is a corporate change in Telenor. Telenor tries to put the customers and serve the customers in the most important way. And this change of logo is also an expression that we have changed this dynamism that is happening in Telenor to put the customers in priority. In parallel, with this logo change and visual change we have been inside Pakistan and also in other Telenor companies with a vision and values that Telenor as a company put the customers in front. Obviously you can always improve your relationship with customers so we are continuously working towards it. We are moving in the right direction and that's the direction we want to go, customers are most important to us. People in marketing and sales meet customers all the time but the rest of the staff in technical, in finance, in H.R don't see the customers but we have serious activities with which we are able to see what they do in turn for the company as what they do has had an impact on the customers because they are the ones who are paying their salaries, it's not Telenor, that's obviously the customers at the end who are paying our salaries.

PAGE: Now tell us a little about yourself, how did you come across Telenor?

TJ: I have been in Telenor for 32 years. I completed my education in 1974 and spent one-and-a-half years with the air force as that's a compulsory thing in Norway. My background is mainly technical; initially I worked in the technical areas. Later, I got the chance to become involved in economical, marketing and additional things. I have had the responsibility of broadcasting in Norway, the technical side of programming on cable TV. In 1988, I started working for mobile communication so it was 18 years ago. That was the initial phase of G.S.M; this was happening in Europe where they were trying to put together this system theoretically and practically, they also want to market it. I was mainly working in Norway but in 1994 it was my first international experience. During the coming period I was working in different capacities. In 1998 I came to Singapore, I worked for Grameen phone of Bangladesh and Digi of Malaysia. They appointed me the CEO of Digi and it's exactly two years ago that I came to Pakistan.

PAGE: Will Telenor only concentrate in developing mobile network or would you also work for other areas of telecommunication like broadcast or internet?

TJ: The main area for us is the mobile cellular service but services are being integrated using same platform so broadcasting is not very likely to happen and we are already in the internet because you can use your mobile phone into internet. We have also launched high speed dial data service based upon the GSM network. We have also had LDI license meaning long distance international so we are having international gateway. We have kind of reconnect corporate customers all through domestic calls and international calls so its high low fixed network activity. Of course it does not mean that we want to beat PTCL but we are indirectly involved in fixed corporate business. We are also looking at activities to try to make solution for our customers so that they can value their mobile networks. As we already have this LDI license, we don't have any competitive plans to roll over the fiber optic network in Pakistan as was stated in our discussions that we still use PTCL but we are obviously working on other options too.

PAGE: How do you see the competition in the mobile sector?

TJ: Going back a couple of years, the main reason that the government really invited to have an auction to have different players for the market in Pakistan was that the competition among the four mobile players didn't really work. When these licensing has happened and we started to prepare, we felt that the companies in Pakistan were trying to improve and trying to make it more difficult for the newcomers in the market. When we launched operations in 2005, we saw that the competition was really heating up, we came initially with a very simple concept, one price - any network and we have local price, international price, interconnect charges and now you can see even different pricing levels. Prices have obviously come down as a result of this competition. Competition in general enhances the quality of a newcomer and improves the quality of the existing one. There will be a tough competition going forward. Six players that's too many players for a population of 160 million people, it's a high number. Competition can work with fewer operators also but now it's six, also going forward. May be in future three or four will join hands together and run a company that may have happened. Competition will further reduce the prices although the prices are very low in Pakistan as compared to other markets and the reason is that the operators want to make sure that at the end there will be small payback on these grow-ups and they are expecting acceptable returns. As of today, we are in a long term investment and we have said in our financial analysis and information to the market also that we have the possibility of earning revenues higher than the operational cost, and then we need to start pay back the investment that is there. As a customer you can say that we have a lot of money, of course we get revenue but also have cost and huge investment so it's a long term investment but obviously we believe to go ahead as it is a huge market with good prospects. In long run it will pay back.

PAGE: If any sort of political instability arises in future, will Telenor still remain here or will it be gone?

TJ: I don't want to speculate about the political situation but as I said in the beginning one of the reasons that Telenor saw to come to Pakistan is that the political stability was acceptable. Obviously this can change over time. For the time being Telenor is happy with the present situation and we believe and hope that the stability will continue.

PAGE: Telenor remained a pioneer in introducing the concepts like interconnect agreements etc. How do you see the future of telecom sector?

TJ: We can refer to 2004, since then the growth has been enormous. It is really amazing in 2004 when there were more than 30 million rupees SIM cards obviously some customers have more than one SIM card so the number of people is not exactly the same as the number of SIM cards but if you add this together you get the penetration of more than 30 to 35% of Pakistan and this will increase with time. Today it's a good progress, a good economical development, GDP growth, inflation is pretty high but acceptable and telecommunication will continue to develop.

Secondly, we also know that today people who are using telecommunication services are mainly living in urban areas but that is only 1/3rd of Pakistan; the rest is living in non-urban or rural areas, obviously we need to bring our coverage out to these areas and we have already started to work for it. The government is working with this universal service fund where all the operators are contributing a small amount of revenue to make infrastructure to reach out to these areas and I feel it's just few months ahead that it will start to happen. This system is quite close to be in pipeline in Pakistan.

What is necessary for the operators to really cover these areas is to cooperate as we can't build six parallel infrastructure to reach there as it will be too costly and prices have already gone down and the average spending of the customers is very low, so to make it a more acceptable business we have to share infrastructure. Going forward, we are trying to work with other operators; so far we have not been very successful because they feel that in that way we can grow much faster. We have been fastest than many networks. The day people start realizing that they have to reduce cost and there is a growing need then you have to work on the shared basis, you just can't build six different parallel structures. This is going to be realized in the coming year and I am sure that is going to happen.

PAGE: What market share and subscribing base does Telenor have in Pakistan at the moment?

TJ: We have 10% of market share but there is no common method in Pakistan to count the customers so that makes it more difficult to have an exact number of customers. We are using an official method to count customers and that is if a customer has not been active for three months we take him out and then he won't be counted as a customer and we count the customer only when the first call has been made by him through his mobile. I am not sure that all the other operators are doing it the same way so therefore I think the total figures in the market as you can see it on the PTCL website, they are too high. We don't have a common method but we have our method which is an international method being used in Europe. PTI is working with operators to define a common methodology and I look forward to it.

PAGE: Telenor has quite a strong footing on good corporate governance. Would you like to tell us a little about it?

TJ: Telenor has strong corporate governance, we have made rules and regulations that have to be signed by each and every employee who is a part of our team, we have our code of conduct and employees have to confirm to it. We are quite strict on our rules and regulations and we restrict to it as it is the right thing in the long run. Our customers and our partners can only trust us as we are not into any side businesses and we follow our values by heart and one of it is to respect our customers.

As a part of our good governance we also take care of the social responsibility and we did quite a lot. During Earthquake we did a lot of relief fund and distribute our SIM cards so that the areas could be reached easily, we did a lot of things in short term for the people who were affected by the earth quake. Telenor Pakistan is involved with the local community through many initiatives. The company has recently launched a program called Dua with the SOS Children's Villages of Pakistan to provide support to a hundred earthquake orphans. This initiative is a natural offshoot of Telenor's earlier contribution of Rs. 65 million to other relief efforts by the International Red Cross and the President's Earthquake Relief Fund last year. The company has also started a program by the name of Telecom Futures with Nokia, Siemens and TEVTA to develop advanced human resource in the telecommunication industry through industry-academia collaboration.

PAGE: How promising do you think will Telenor remain giving simple and easy solutions to customers and what are the recent packages that are introduced by you?

TJ: We started very simply with one package partly because when you compete you have to be quite simple and make it easy for people. But in Pakistan like in any other country you have different customer needs, you have a kind of pyramid also where some people can afford to spend a lot of money on communication and there are people who cannot spend much so we can say that in principle every customer has his own set of individual needs but we can't make packages for each and every one so what we have done is that we have tried to introduce packages for different segments in the market. We have an offer for young people - djuice - which is mainly an SMS, MMS service where you can have many nice offers. Djuice is basically focused towards the young people.

Then we have solutions for our corporate customers like prepaid roaming etc. Most of our customers are prepaid, we have options for them too like talkshawk etc. We also have a segment where customers can't afford to spend too much over a short period of time so we offer them unlimited validity and easy load options.

PAGE: What is it that gives Telenor an edge over other cellular services?

TJ: I guess we have some areas where we have an edge over others. We are growing our network in the fastest pace; we have a good quality in our network. From day one we have given data services. We have launched in few cities the speed dial for people who use internet to make things positive for them. Then relatively our coverage, capacity and quality are much better.

We also have segmented offerings for the segmented market. These are the main things for us for the time being. We have been the first one in giving a number of innovative solutions so we feel ourselves that we are in the right direction and hopefully our customers are also happy with us.

PAGE: How do you see the people of Pakistan, their response and overall behavior towards the telecom sector?

TJ: I think when people of Pakistan saw that the competition is happening and making things possible and affordable for them then they grabbed this chance. Obviously with time they saw that prices have come down. Pakistan has different set of behaviors, few are using the services for calling and few are using for just incoming calls. We have all categories of customers but we are satisfied and giving right packages for each segment. We respect each and every customer of our network.

PAGE: What is your message to Pakistan on its Independence Day?

TJ: Independence Day is a special day. Even if we are owned by some other group we are Telenor Pakistan, 99.56% of our employees are Pakistanis so we celebrate the day as any Pakistani company can with all the traditional values attached to it.