Mobile telecommunications: In a stagnating market, Ufone sticks to the basics

Company remains focused on controlling costs and increasing revenues through data services.


Maha Mussadaq July 20, 2011

ISLAMABAD:


Even as the mobile telecommunications sector in Pakistan grows out of its high-growth early stages, Ufone, the third-largest mobile service provider in the country, views data services as the next phase of the company’s growth strategy, according to Abdul Aziz, the company’s president and chief executive officer.


In an exclusive interview with The Express Tribune, Aziz spoke about the company’s focus on increasing average margins per user rather than the average revenue per user (ARPU), which is typically the standard for gauging financial success of a mobile telecommunications firm.

“We were focused on ARPU eight or nine years ago, when we were starting out,” said Aziz. “Now we are focused on raising our revenues while optimising our costs.”

Ufone is the brand name used by Pakistan Telecommunications Mobile Ltd, a wholly-owned subsidiary of the majority-state-owned Pakistan Telecommunications Company Ltd, which had been the monopoly fixed-line phone provider for much of the country’s existence, and still provides much of the infrastructure for the rest of the country’s telecoms providers.

Ordinarily such synergies would be the focus of any company’s cost reduction strategy. Yet Ufone executives remain sensitive to the appearance of any unfair advantage that PTCL might give them, and hence are keen to emphasise that the two are separate companies.

“We have no special treatment from PTCL, even though we are a wholly-owned subsidiary,” said Aziz. “It has to be a harmless relationship.”

The advantages of being owned by PTCL seem to be quite limited. Despite several years in the market, Ufone never came close taking the lead in mobile phone subscribers from Mobilink, the industry leader for the past several years. And in the financial year ending June 30, 2009, the company was overtaken by Telenor, a newer arrival in the Pakistani market, albeit one with several decades of global experience.

Company executives seem to have learnt their lessons about the highly competitive nature of the business, made even tougher by two highly vigilant regulators: the Pakistan Telecommunications Authority (PTA) and the Competition Commission of Pakistan (CCP).

“You have to vigilant all the time in this business,” said Aziz. “Even when they [Telenor] were about to overtake us, we took them very seriously and every possible step was taken to stay ahead of them.”

Yet it is not immediately clear how the company plans on competing with its rivals. Ufone’s array of services is not very different from that of its rivals, though company executives claim that they have been better at holding down their own costs.

The company remains as focused as ever on its prepaid customers, who form close to 99% of the company’s 20 million subscribers. Yet according to industry insiders, most companies make between three and four times as much revenue per post-paid customer as on their pre-paid customers. Ufone executives did not give any indication that they planned on moving towards a larger focus on post-paid customers.

Aziz did, however, hint at the possibility of growth through acquisition, though he hastened to emphasise that while many in the industry expect consolidation, there has been no firm movement by any player in the market on that.

Pakistan’s mobile phone services market is worth approximately Rs250 billion ($2.9 billion) and serves 104 million people, according to the PTA. It is currently served by five players, though Aziz suggests that number may soon go down as far as three.

The most likely company available for sale is Warid, whose owners – the Abu Dhabi Group – have been unhappy with its lack of profitability. Aziz gave no hint of whether Ufone would consider buying Warid, or any other company, if it went up for sale.

“We are constantly evaluating [acquisitions] and if it makes sense, then yes we will go ahead and do it,” he said.



Published in The Express Tribune, July 21st, 2011.

COMMENTS (3)

SK | 10 years ago | Reply

During his Warid days I worked with Aziz, he is a sharp professional and made the right move to uFone at the right time and since then has proved his worth. BTW, I am not sure if he will ever want to get involved with Warid purchase. After all he was Warid's CFO for initial days and knows too well about all that happened during those initial years

Saad Durrani | 10 years ago | Reply The very recent Ufone phone decive the Futura as they named it supports 3.1 EVDO technology of which PTCL has largest implementation in the country. Every now and then, there are offers which allows cheaper PTCL landline calls. PTCL and Ufone have been looking out for each others back.
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