Zong sails to leverage telecom advancement through tax iceberg

LAHORE: Lui Dianfeng, Chairman and Chief Executive Officer China Mobile, which operates Zong in Pakistan, talked about telecom sector and mobile financial services during an interview.

Q: How do you see the telecom growth?

A: China Mobile has invested $3 billion in Pakistan. Out of $2 billion that the government of Pakistan earned from the auction of 3G and 4G broadband auction last year my company provided half the amount. You see that every mobile operator is investing in Pakistan because they think that the market has a vast potential for growth. Currently, only 30 percent of the subscriber base is on smartphones; out of which only four percent are using 4G. In the coming years, the 2G technology would become obsolete and superior smartphones would take their place.

What worries mobile operators is that the growth of the sector is being inhibited by high incidence of government taxes. Last year, 41 percent of our total revenue went to taxes. Recently, Sindh and Punjab have imposed another tax on mobile services. Initially, there was only a sales tax now there is a data tax and on top of that handheld tax. Some provincial governments have offered to waive data tax provided the telcos invest that amount on welfare of the people. Currently, there are negotiations going on between the provincial governments and the telecom industry. The provincial governments want to benefit from the tax breaks in their own provinces with special tariffs, and want to know how much telcos would invest in their provinces if there is a tax break.

Q: Did you get any benefit from 4G licence?

A: Since 4G provides seamless streaming, top subscribers in Pakistan prefer our connection. However, we have not been able to exploit the actual potential of our technology. Now that more and more customers are demanding 4G-enabled smartphone the import of this technology is increasing. Our 4G subscriber base is only 600,000 which we intend to double in the next one year.

Q: What’s your take on 4G coverage in remote areas?

A: We provide matchless quality in all the big cities of the country as most of the 2,700 towers of 4G have been installed around the major cities. The logic behind this was that data use is highest in these regions and 4G enabled smartphones are used in these cities. In remote areas, 80 percent of the phones are 2G technology and they cannot benefit from our superior technology.   Traffic growth in data is 70 per cent but the revenue growth in only 25 percent.  In future, the traffic growth in data is expected to be much higher. Revenue per subscriber in Pakistan is $2 per month for high-end subscribers and $1.5 per month for low-end subscribers. In China, the average revenue per subscriber for China Mobile is $15. Moreover, the broadband spectrum in China is provided free of cost by the government.

Q: How’s Zong moving in the mobile financial space?

A: We are adding value to what other operators are doing to facilitate unbanked segment of the population. We would provide our small account holders e-commerce platform that could be used for buying and selling. Askari Bank is our partner for mobile financial services. We also have our new agreement to invest more in this segment of the business, in the coming months; we will see progress in this sector. Our model is different, we use Askari’s platform for financial payout, so it’s a revenue share model. Our direction is very clear and we will fully support e-commerce.

We are working with many partners like Cheez Mall. We will continue to use our 3G/4G technology to understand our customer behaviour. The real challenge is that no operator has done e-commerce successfully yet.

We will support China-Pakistan economic corridor projects through providing the communication as well as end-to-end solutions for better and more advanced management.