Over 15 years ago, we looked at the viability of partnerships with Pakistani telecom companies. It was a time when telecom companies were eager to grow their market share by expanding overseas. Tech companies saw Pakistan as a huge potential market just because of the country’s large population. What they neglected to look at was simply the ability of that population to read or afford the consumer devices that the telecom infrastructure would enable.
Sadly, these U.S. telecom companies neglected to do a full SWOT analysis on the opportunity before investing. Where did it end? Well, exactly as we predicted below in 2006.
What is the take-home message? Don’t leap before you stop to consider what you are doing or you will end up losing a pile of money. Just that simple.
At the end of May 2006, Motorola made a landmark announcement of the deployment of a mobile WiMAX (Motowi4 network) system in Pakistan with the goal of a million subscribers in the initial uptake and a subsequent nationwide rollout.
This effort by Motorola is in partnership with Wateen Telecom, one of the largest telecom companies in Pakistan. After only a year after launching its service, Wateen Telecom has roughly 4 million mobile GSM customers. Given the fact that only 50% of the population is literate, that women are nearly omitted as customers due to their secondary status in the country, and that less than 20% of the addressable population lives in urban areas, the total addressable market for mobile communications devices is only a bit over 7 million units. The government of Pakistan is indirectly or directly boosting these efforts; President Musharraf promised power, gas, and water for all by 2008. This will undoubtedly include and create development dollars for many pilot systems. Looking at the market situation in Pakistan, it appears that Wateen has already identified and captured more than half of its addressable market. While it is quite a feat to achieve 50% market penetration in a year, what happens in 5 years?
How will the addressable market grow in Pakistan, to justify Motorola’s investment? It appears unlikely that this country, which boasts the 7th largest population in the world, is capable of reforming its socio- economic system sufficiently to live up to the education base line that would create the demand for a wireless technology products boom. For now electrical power supply is haphazard in Pakistan, theft of power by means of illegal taps is abundant (25-40% in most areas), and even in the urban centers there are frequent outages and line breaks. Also, Pakistan is expected to experience real power shortages. With only 18 GW of electric generating capacity, population growth, industrialization, infrastructure weakness, and theft rampant in the country, it is likely that even current customers will be left in the dark by 2008. Without steady power, the growth of WiMAX in Pakistan becomes severely limited.
In conclusion, putting the Motorola Mobile WiMAX enterprise in perspective leads us to the conclusion that the addressable market Motorola hopes to garner is less than that of South Africa. Yes, it is interesting that the network utilizes only mobile and roamable WiMAX nodes, however, that is an understandable strategy given the systemic corruption and power theft common in the country.
Contrary to the idea, that the Pakistan deal is proof that industry players are throwing their weight behind mobile WiMAX more strongly than they have with fixed WiMAX, recent developments in other, more secure socio-economic countries around the world, support the case for strong fixed WiMAX market development.
Tune back in next week for another insight from the team at High Ground Markets. . .