The document proposes new growth strategies for telecom companies in developing markets like Pakistan. It suggests pursuing vertical integration by providing value-added reseller (VAR) services to the growing middle class and tailored services for the bottom of the pyramid segment. Specifically, it recommends that telecom companies establish a new unit focused on innovation to develop locally relevant products and business models in areas like VAR, healthcare, agriculture, education and government services. This would help unlock the potential of new markets, increase profitability, and provide a long-term engine for growth to counter threats from over-the-top players.

1. NEW GROWTH STRATEGY FOR
TELECOMS IN THE DEVELOPING
WORLD
USING PAKISTAN AS A CASE STUDY
Zulfiqar Qazilbash

2. Summary
The next phase of growth for Telecoms
will come from vertically integration of
services that leverage the large
population penetration achieved.
This presentation explains the
opportunities that came from two areas:
• VAR services for the growing
middleclass
• Services for the BOP segment
and makes the case that by biting the
bullet and adding new innovation and
collaboration capacity in these areas, the
Corporation can fuel growth for many
decades.
Zulfiqar Qazilbash zqazilbash@gmail.com 2

3. • Develop market models that predict what will happen in next
5-10 years
• Invest wisely and cautiously to take advantage of evolving
trends with new products and business models, if needed
People view connectivity as a basic utility and expect costs to go
down and become free in the near future. But for the operator:
Every telecom operator is searching for a new growth strategy!
WHAT IS FORESIGHT AND WHY IS IT
RELEVANT?
Voice revenues
in decline
(TDM->IP)
Demand for better, faster
data networks (3G, LTE, 4G)
requiring ever increasing
investments
Zulfiqar Qazilbash zqazilbash@gmail.com 3

4. TELECOM BECOMES A UTILITY
Everyone easily profitable is connected
• Many challenges to service last 20% of population due to having to
serve most marginalized segment
Future business strategy options include:
• Horizontal integration model has failed.
Most service providers prefer Internet
• Vertical integration requires dealing with
new paradigms
• New capacity and/or partnerships
Increase revenue per
customer from VAR
services
• Requires local R&D and product
development
• New business models (4Ps become 4A)
• Build ecosystem, collaborative capacity and
nodal organizations
Service BOP
segment separately
as a new market
Zulfiqar Qazilbash zqazilbash@gmail.com 4

5. WHY HAS VAR MODEL NOT MET
POTENTIAL?
• VAR revenue underperforming for most
telecoms
– Driven by holding company product strategy
groups that reside in the developed world and are
not connected to local markets
– Local product groups only customize bundling and
costing functions
– Local market opportunities cannot be understood
and harvested in this “hands off” manner
• Consumers use and sometimes pay for services
that entertain or improve lifestyle
– However this opportunity is going to OTT
– Telecom focus on profitability makes it hard to
fund experimentation that may not yield
predictable ROI and revenue impact for many
years
Zulfiqar Qazilbash zqazilbash@gmail.com 5

6. VAR OPPORTUNITY NOT THE SAME..
Has lessor opportunity in
Developed World
Has greater opportunity in
Developing World
Opportunity to originate many of those services
• Leverage brand value to create trusted transactions
• Connectivity is a accelerator of a
transaction
• Multiple channels of connectivity
• Leverage with existing ecosystem
(legal, financial, logistics, taxation,
insurance etc)
• Very difficult for telecoms to
disrupt existing business models
• Connectivity is the enabler of a transaction
• In many cases, single channel of connectivity
• limited support from existing ecosystem
• In many cases connectivity is providing a
new and more effective platform for these
services -> BIG DIFFERENCE!
• Telecoms can provide information and
serve as trusted proxy during transaction
Often, connectivity offer different value propositions
Zulfiqar Qazilbash zqazilbash@gmail.com 6

7. MASLOW’S HIERARCHY OF NEEDS
Old Paradigm
• Developed world:
lifestyle &
transactional
efficiency
• Developing world:
access to essential
services and security
New Paradigm
• BOP also aspire for
lifestyle products but
at affordable price
points
• BOP spend money
when they have it,
forego services when
they don’t
Self
Actualization
Esteem/Respect
Love and Belonging
Safety/Security Needs
Physiological NeedsMarriage
Agriculture
Healthcare
Police
Legal
E-Gov
Chic Flics
Disneyland
Religion
Fashion
News
Associations
Lifestyle
Education
Trade
Maslow’s Pyramid of Needs
Product development requires detailed customer profiling, research and engagement
followed by multiple market trails but R&D costs << first mover revenue benefits
Zulfiqar Qazilbash zqazilbash@gmail.com 7

8. HORIZONTAL INTEGRATION HAS FAILED
Local Startups – will take time to mature if left to organic growth
Foreign OTT players - make limited investments in local markets
• Cookie cutter approach global business models feasible for narrow elite
• Limited understanding of market for new business models
Zulfiqar Qazilbash zqazilbash@gmail.com 8

9. VERTICAL INTEGRATION GETTING
INCREASING PLAY
• Reluctantly, Telecoms have started moving towards vertical integration
• Some trying to manage this at a global level with limited opportunity for
customization
However my argument is that Pakistan (and similar markets)
are unique environments that requires its own solutions
• Huge discontinuity in markets
• Elite segments focused on global trends
• Peri urban focused on urban trends
• Rural areas focused on getting access to services
• Revenue opportunity for developed world type services
limited
• Limited number of global OTT players are doing well in such
markets (revenue wise)
• Web ads market in development and open to innovation
• Easier to part customers with time or effort (traffic junky)
Zulfiqar Qazilbash zqazilbash@gmail.com 9

10. THE IMPORTANCE OF BRAND
The Telecom Balance Sheet*
Assets
• Network & licenses
• Brand value
Liabilities
• Owners equity (<20%)
• Debt (>80%)
The importance of brand cannot be underestimated – locals may not trust
insurance from XYZ but will trust it if they see the Telecom brand
Time is the enemy
• cost of debt is
increasing,
• network is
depreciating
• only growth is
brand value
Zulfiqar Qazilbash zqazilbash@gmail.com
*simplified minus cash flows
10

11. SERVICING THE BOP MARKET
New business models are emerging:
• Low priced single service packaging for
luxury items (FMCG)
• Mandatory community involvement for
post paid programs (micro finance
schemes have lower default rates than
Urban consumer, SME or Corporate
lending)
• Prepaid cards and cash transfers through
micro entrepreneurial networks (Telecom)
• Info-training and demonstrations from
trusted micro entrepreneurs in same
community (Avon Lady)
• Economics only work in large rollouts
• Extremely attractive ROI - marginalized communities pay a premium to access
services
• The “I” curve vs. “S” curve
Zulfiqar Qazilbash zqazilbash@gmail.com 11

12. THE NEW LEAN “NODAL” ORGANIZATION
• The Nodal organization provides
the Intellectual capital
– Design
– Operations and quality
management
– Customer care
• Decentralized origination
– outsource to SMEs, quality
managed by rigorous certification
and audit process
• Decentralized logistics and
marketing
– Micro entrepreneurs
VAR
Business
Distributor
DealerCustomer
Call Center
Zulfiqar Qazilbash zqazilbash@gmail.com 12

13. HARVESTING OF OPPORTUNITIES
Near Term
• Segmentation and profiling of markets from the business model and opportunity
perspective
• Co branding of globally or locally sourced OTT products selected for market in lab
• Creation of new products and services supported by ecosystems, collaborations
and new business models
Mid Term
• Corporate VC that establishes grounds for M&A
• Market estimation, due diligence, post M&A business strategy and integration
plan
Long Term
• Seed Incubator with selected A teams targeting execution to identified
opportunity
• Limited grants to academia in collaboration with other funding to promote
research on Telecom agenda
Zulfiqar Qazilbash zqazilbash@gmail.com 13

14. SOME EXAMPLE OF MISSED
OPPORTUNITIES
All these opportunities will go to private enterprise unless Telecom extends
role beyond that of a connectivity provider
Healthcare Poor segment spends up to 3-5,000 on healthcare a month/household
Agriculture Input financing often exceeds 100% APR
BOP
Education
Surveys show many willing to spend up to Rs 500/month for guaranteed
mother child literacy on easy to use m-platforms
Vocational
training
Very difficult to find quality training programs that employers trust
Surveillance Enterprise owners in Pakistan list employee and asset surveillance as a
bigger need than access to finance
Donor
partnerships
Government cannot meet MDG commitments without leveraging m-
service platforms – donors ready to fund
E-Gov If educated, Politicians can get lots of leverage from promoting e-Gov
platforms and should be ready to fund it
IoTH Smart metering and other projects (attendance in education,
government offices), quality tracking(WASH & health)
Zulfiqar Qazilbash zqazilbash@gmail.com 14

15. DERIVATIVE OPPORTUNITIES
Lobby for government tax credits to support creation
of R&D in industry
• In cooperation with other telecoms
• Mitigation of heavy taxation issue
• will create many new jobs
Open up new advertisement channels for secondary
services
• As Telecom establishes its primary channel into
markets
Monetize market research
• Easy to build database of detailed segmentation and
customer profiling
– Limited marketing research services like Gartner,
IDC in such markets
– Will further attract foreign co-investments
Zulfiqar Qazilbash zqazilbash@gmail.com 15

16. PROPOSAL
Focus on business case not technological excellence
Zulfiqar Qazilbash zqazilbash@gmail.com
Explore setting up a new unit focused on
innovation starting from the areas of new
VAR and BOP opportunities
• Market research
• New product sourcing
• Business models
• Lean operating models
• Minimizing go to market costs
– outsource functions
– Create self sustaining ecosystems
– Micro- entrepreneur networks
– Private-public partnerships
16

17. THE REWARDS
Unlock the true potential of
the VAS market
• Should become 50 percent
of revenue in 5 years
• Increase profitability in 2
years
• Block OTT threat
• Engine of growth for next
decade - In 10 years may
surpass connectivity revenue
Corporate profile becomes that of leader in innovation rather
than developing world laggard in global markets
Zulfiqar Qazilbash zqazilbash@gmail.com 17

18. POTENTIAL RESULTS
• Six month organization buildup
• Results MUST come in year 2
• Example returns to expect (Revenue)*
Year 1 Year 2 Year 3 Year 4 Year 5
$0.1M $10M $25M $80M $300M
Market goodwill from high growth translates into higher market
valuation
• IPO for subsidiaries (or Corporation)
• ability to raise more debt from market
Many new business opportunities come your way
Zulfiqar Qazilbash zqazilbash@gmail.com 18
* Illustrative only

19. NEXT STEPS
3-6 months to establish business
plan and targets
• Detailed market profiling
• Ecosystem mapping
• Partnership analysis
• Business model development
• Opportunity ranking
• Revenue and profitability
estimations
• Staffing and operations plan
• Pilot plan
Zulfiqar Qazilbash zqazilbash@gmail.com 19

20. RELEVANT EXPERIENCE
• Leading resource in launching new products and developing new
markets
• new product roadmaps, new business models, setup and manage
global R&D, direct P&L responsibility in US and Pakistan
• Chief Strategy Officer in two large startups i.e. iVivity ($81M) and
TWA ($100M+)
• Chief Commercial Officer in two mid size growth stage companies
• Leadership in Technology foresight and product management in
two large US corporations
• Leadership in Product development, test and quality management
in two previous companies
• Senior ICT and Development sector consultant for leveraging IT in
many new economic sectors
Zulfiqar Qazilbash zqazilbash@gmail.com 20

21. THANK YOU!
www.isbconsult.com
Zulfiqar Qazilbash zqazilbash@gmail.com 21