 | Issue: | Asia-Pacific I 2006 |
| Article no.: | 6 | |
| Topic: | Asia telecommunications is all about ‘affordable technology’ | |
| Author: | Naguib Sawiris | |
| Title: | Chairman of the Board, Wind Telecomunicazioni SpA, and Chairman and CEO | |
| Organisation: | Orascom Telecom Holding | |
| PDF size: | 84KB |
About author
Naguib Sawiris is the Chairman of the Board of Wind Telecomunicazioni SpA and the Chairman and CEO of Orascom Telecom Holding SAE, one of Egypt’s largest and most diversified conglomerates. Mr Sawiris established and built Orascom’s railway, information technology and telecommunications sectors. Orascom Telecom Holding (OTH) operates GSM networks in the Middle East Africa and the Indian Subcontinent, and provides Internet and satellite services to 500 million people. Mr Sawiris is a Board Member of the GSM Association. He is also Chairman of the Board of Orascom Technology Systems and the Egyptian Company for Mobile Services (ECMS), commonly known as MobiNil. Mr Sawiris is a member of both the Board of Trustees and the board of Directors of the Arab Thought Foundation, a board of Trustees member and Head of the Financial Committee of the French University in Cairo, a board member of the Egyptian Counsel for Foreign Affairs, the Consumer Rights Protection Association and the Cancer Society of Egypt. Naguib Sawiris holds a diploma of Mechanical Engineering with a Masters in Technical Administration from the Swiss Institute of Technology, ETH Switzerland and a Diploma from the German Evangelical School, Cairo, Egypt. Mr Sawiris speaks Arabic, English, German and French.
Article abstract
Asian markets will drive telecommunications industry growth during the coming decade. The market will grow by making affordable technology available. As technology ages and reaches a mass market, it becomes cheaper. Since mature technology costs much less per subscriber, if service costs can be reduced proportionately, operators can profit even with much lower average revenues. The mobile industry multiplies economic activity and can contribute more than 5 per cent to a nation’s GDP by creating jobs and increasing government tax receipts.
Full Article
The Asian telecommunications market will be the source of industry growth over the coming decade. With that in mind, we are building our strategy and portfolio of services. In fact, our Asian experience has been more than rewarding, with two of our operations in the West Asia and the Indian subcontinent, accounting for more than one third of my company’s total subscriber base. As a market leader in Pakistan or as a challenger in Bangladesh, our experience in these markets stands as an example of how the Asian markets are prone to be driven by technology. The secret for success in developing these markets lies in the ability to manage a win-win operating model, by making affordable technology available. For example, upon entering Pakistan four years ago, mobile penetration was around 1 per cent and has now jumped to 10 per cent. My vision for Asia is that it will be the source of growth in the telecommunications industry during the coming decade. The economies of scale of this large population basin will lower the costs of new technology adoption and hence make it affordable. It is this belief that is driving huge investments into the Asian communications industry, which will make growth in the Asian market a self fulfilling prophecy. Technology oriented segment With customers at the center of the battlefield, all operators in these markets are competing to please a booming mobile population. Operators strive to understand and dissect the markets into behaviorally consistent sub-groups to better cater to their needs. Contrary to what many would expect from two of the poor Asian economies, these markets happened to host a young highly technology oriented segment. Backed by a rich higher income group, this segment could well prove to be a significant group on any company’s radar screen. This unique technology oriented segment exists in a part of the world that hosts the lion’s share of the world’s software developers. This tech savvy segment lives and interacts with technology through their daily lives. Due to this abundance of human capital, some technologies are becoming more affordable in these markets, to the extent that they can make and export them. The challenge however, is to be able to serve this segment in the context of a mass voice-hungry market. To better explain the opportunity, we have to better define the challenge that faces all service providers operating in the developing part of Asia. The point of the game is to make telecommunications services available within the boundaries of a viable economic model. In the light of the ever shortening useful lifetime of technology, as technology ages it becomes cheaper and goes mainstream. This is the same premise that explains the ability of the suddenly awakened developing Asian markets to catch-up with the rest of the world. The falling barriers of technology make mobile communications more affordable by improving operating economics in poorer markets. The challenge that we are now facing is that the hunger for technology in these markets has become so strong that the demand for the latest devices and services, also fueled by competition, may not wait for the mainstream technologies to become affordable. There is a rising tier of early adopters that service providers cannot ignore nor suppress. Instead of getting into the experience with this segment, let us look briefly at the economic formula that drives the market to highlight the importance of “affordability” as a prerequisite for a win-win economic model. Mobile technology With the start of the new millennium, barriers started falling for the aging 2G mobile technology, and as the much hyped 3G technology entered into the formula, the obsolescence of 2G started. Over the past five years, we have seen the average investment needed per new customer using 2G fall to one fifth of its original level. Given this proportion, subscribers, spending at even one fifth of the old ARPU levels can offer a payback and be profitably served. However, the trick is not only sourcing cheap equipment, the real challenge is to create a lean cost structure that reduces the cost of service proportionately. This brings us back to the point of abundance of certain technologies, which, once sourced locally, can cater to this low cost service model. Upon having discovered a way to maintain a low cost model that attends to the service provider’s needs, the rest of the formula is self driven. The boom in the mobile industry has a multiplier effect on the economic activity of these countries; the economic growth could arrive at more than 5 per cent of a given nation’s GDP. The magnitude of jobs created by the supporting industries and distribution channels, in addition to the taxes that feed the government treasury, creates an integrated self driving economic growth engine. The key to getting this economic cycle rolling is the financial feasibility of the network investments by the service provider. With heightened cost consciousness, technology comes to the rescue by providing low cost service provision alternatives. This brings us to the closing note on the experience with leveraging technology to make low cost services available. The challenges faced throughout the value chain are countless, from communications to distribution of handsets and scratch cards, to customer care. If we take distribution for instance, it has always been a challenge as one of the cost-to serve areas that needs to be tackled. E-refill and peer-to-peer (P2P) transfer technologies were pivotal in encouraging penetration and marginal usage with low-cash outlay. The basic concept follows the trends created years ago in the fast moving consumer goods industry and upon which it still survives today. The mobile industry, following this model has other important economic beneficiaries, such as the individual sellers, resellers, village caravans and carts. Due to the mobile industry, operators can finally claim that it is the job opportunities created by these technologies, and not the opportunity costs, that drive economic development. Now, history is about to repeat itself, with the emergence of cheaper alternatives to wireless mobile broadband (UMTS), operators of the developing world are now contemplating alternative technologies versus mainstream. Is this model going to work, will these markets wait until 3G becomes affordable or will they create their own mainstream “affordable technology”?
