Naeem Zamindar, Wateen CEO

May 12th, 2012

Question 1: A year and a half ago you joined Wateen, when Wateen was going through a crisis. Some say that this is the beginning of a turn-around script for Wateen and you personally. So what were the challenges being faced and how did you overcome them?

Ans: The previous management made a significant achievement iby deploying widespread fiber optic and WiMAX networks across the country in a very short period of time. This massive network covers all of Pakistan and enables telecom operators, government, banks, and other large businesses as well. However, because FDI (foreign direct investment) was in a slump around the world – and since telecom operators are heavily dependent on FDI – the company was facing a financial crunch. The FDI in telecoms in fiscal 2009-10 was USD 378m and shrunk to USD 78m by 2010-11. During this period a lot of talent from within the organization left for other opportunities – the brand’s reputation was already suffering and the company had lost direction. Sales were down and the market was non-responsive to us although Pakistan presents huge opportunities for growth in the broadband market, since the government and consumer markets are virtually virgin territory. Also, at the time the Wateen brand-name was suffering and sales were affected because of the negative brand perceptions in the market. The organization was disconnected from the brand and didn’t believe in the products they were selling.

That’s the time I was asked to lead Wateen Telecom and I took the position because of the interesting opportunities the organization offered for someone interested in the evolution of broadband technology in Pakistan. The first thing I did to stabilize the company was get the right people to build and lead the team. We hunted out the best talent in the country to join us and began re-building Wateen from the bottom up. As the sages say, “build it and they will come” and I think our success in rebuilding the brand can be seen in the exceptional talent we have recruited in the last 2 years.

I believe in an open work culture and it’s something we have tried to cultivate at Wateen – a culture where even the most junior person in the company can make a difference. As an example, we hold ‘town-hall’ meetings between staff and management, where anyone can speak and give us ideas on how to improve Wateen or give their opinions on problems the company faces. This helps us learn about the challenges employees face and take quick action to remedy problems. It also helps us focus on initiatives that deliver immediate positive results for the company.

Talented and competent employees won’t stay unless they are improving themselves at their place of work. So we went about improving the organizational outlook by rolling out one of the largest training programs in the country. My Chief Transformation Officer, Asad Rezzvi, has developed training programs for improving both the technical and soft-skills of our employees to help them grow and to motivate them. The results speak for themselves. Wateen’s services have improved so markedly that we were ranked the #1 broadband operator in the country, in terms of quality of service, by the PTA. We recently won the Consumer Choice Award for the best internet service provider from the Consumer Association of Pakistan. Our re-launch campaign recently won the award for the best advertisement in the ‘Computer and Internet’ category at the Pakistan Advertisers Association awards. These are testaments to the improvements we have made in the organization.

When I joined Wateen, another major problem was delays in payments to our creditors and also in recovery of payments from our clients. The financial crunch had literally stalled the organization and we weren’t moving forward. The Abu Dhabi Group remained firmly committed to Wateen and the country helped us in this challenging time by injecting over $50 milllion in the company via our IPO. The CFO and I also worked with the crediting banks and restructured our loans over the next 4 years to help stabilise our leveraging.

We are now taking the first steps down our evolutionary road, starting with gradual growth in our nationwide infrastructure. Over the last year, we have deployed over 2000 km of fibre and our WiMAX base has shown considerable growth and improvement, with more people joining and remaining on the network.

Our media network is also growing. We’ve signed up distributors in Lahore and Islamabad to provide more people with quality cable television. Our cable TV section now covers more than 500,000 households in Lahore, Multan and Islamabad. Our business model was based on getting to areas that have high population density – like the old city in Lahore – thus covering more households. I know that there is still a lot of unmet demand, but expanding coverage takes time. You need to have right-of-ways from the government and a huge investment to deploy fibre. I know the expectations of us are huge and I would like to thank the people who want our services. I would request them to be patient as this is a gradual evolution, not a revolution.

However, life happens when you’re busy making other plans and that’s exactly what happened with us. As I’m sure you heard, our office was completely destroyed by a fire and this has affected our cash flow for the time-being. Although we were fully insured, the claim will take some time to process and in the meantime it’s a challenging phase for us. But we know that by focusing on the business at hand, we will deliver to our clients and investors.

Question 2: So how did the fire happen and how has it affected your business?

The fire started at Wateen Telecom’s office on February 10, 2012. We know that the alarm went off at about 7:20pm when there were about 100 people at the office, mainly our call-center staff for the night. It started in our server room and rapidly spread to the adjacent offices despite the best efforts of our staff to control it while they waited for rescue services, which they called immediately. By around 7:30, the fire was out of control and had spread onto the main floor. Fortunately, our staff is trained for such emergencies and they managed to evacuate in time and there was no loss of life. This was my biggest concern when I first heard about what was happening.

I had already left the office but as soon as I found out about the fire, I immediately rushed back to the scene to calm my employees and help manage the crisis with my team. We had to ensure that our customers businesses were not affected by the fire and that business went on as usual. We immediately contacted our stakeholders and communicated to them that we were committed and here to make sure that their businesses continued to receive service. Luckily for us the fire happened on the weekend and we had two days to setup new offices for our employees. They say tough times truly show you the character of people and it was inspiring to see the resilience and spirit of my team in making all of this happen because by Monday we had our teams working from various locations and full service provision online. Our investors including H.H. Sheikh Nahayan Mabarak Al Nahayan, our group partners especially Bank Alfalah and Warid, gave us tremendous support at this time.

This was no small feat. I am also thankful to all our clients who have supported us with their business in this time.

The real challenge for the business has started now. Although we managed to ensure that our services continued as normal, our cash-flows were hit because of the damage caused by the fire. We had to rent out new locations and setup new offices. This required immediate cash outlays and so we aren’t in as comfortable position as we should be. Since our business runs on credit, our main concern now is to ensure on-time recovery of payments from our clients. We know that we are restricted for now but since we were fully insured, we hope that we will recover from this shortly.

Question 3: What are the major problems and challenges confronting the broadband business in Pakistan?

Like I said before, the broadband market in the country is growing at a gradual pace. There are a total of 1.7 million broadband connections in the country, which is only 7% of the households. This represents a huge opportunity for growth and the promise of large returns for investors. The government is also going digital route with all major government departments now coming online. This will gradually grow to all government offices and the trend will likely spread to the private sector as well.

All of this will be enabled through cloud computing. Businesses will require secure web-hosting facilities, domain names, virtual or dedicated servers, hosted emails, online backups and of course, broadband services. Wateen is ideally placed to make this happen because we partner with some of the top names in digital information delivery, such as Cisco, EMC and Huawei among others. The market is showing promising trends particularly in the growth of online businesses. The banking sector has taken the lead in this with the State Bank of Pakistan requiring all bank branches to come online within the next year. This has enabled online banking transactions to surge by 19% in the second half of FY2011 to Rs.19 trillion.

Communications are already booming and mobile services are now available throughout the country. Again, mobile operators require fiber optic networks to enable their networks. They also require long distance and international minutes for their customers to call their loved ones abroad and receive calls from them. The LDI market faced a particular challenge with grey-market traffic which the government is cracking down on. This market faced a dilemma as the grey-market made the business uncompetitive. Margins had shrunk and the Access Promotion Charge were high. Therefore, we worked with the other LDI resellers and requested the regulator, PTA, to revise the APC so that we could offer better rates. PTA acceded to this request and lowered the APC charges, saving the entire industry.

The government is also pushing the growth in security and surveillance services and have rolled out extensive safe-city projects, which require a network of broadband enabled monitoring and recording facilities. With the proliferation of media, they too offer a huge market. They require up-link facilities and equipment to archive their data. This market is also growing and Wateen is enabling large media groups within the country in their businesses.

Question 3: WiMAX has been considered both a boom and a bane for Wateen’s business. How do you see WiMAX growing?

in developing it since when I was with Intel Capital in Silicon Valley. WiMAX technology is a saviour for the Pakistani market. Imagine that less than 5 years ago, people didn’t have any choice for broadband internet except PTCL. Most people relied on either cable internet or dial-up. When Wateen launched its services, it offered everyone another option to serve their broadband needs.

Pakistan offers a unique opportunity for this [WiMax] technology. Most of the population is un-served by the internet. To deploy fiber is very costly and time consuming, therefore, for operators, WiMAX is an affordable and easily scalable solution for providing broadband Internet. The solution is really what the market needs. Wateen was the first to invest heavily in this technology and was the first in the world to rollout a commercial WiMax network on a countrywide scale.

Our job now is to sustain the business and ensure that the market grows through WiMax technology. Over the last year, Wateen has redeployed over 200 sites from areas of low network utilization areas to areas where there was congestion. This has enabled us to improve our services considerably. Another challenge we faced was meeting the ever evolving needs of customers. There is a big market out there that requires internet on the go. The country is also going through an energy crisis and we needed devices that worked when there was no electricity. So the first device that we got was a small palm sized USB device that works anywhere you want to take it and doesn’t need electricity. Secondly, research showed that consumers needed one device that would provide internet as well as Wi-Fi to the entire home and we found and developed two devices that offer just that. One of them also has the ability to provide voice services to which consumers can connect any cordless phone and start using it as their landline. We revised the packages and prices to meet market expectations and we offer multiple packages that are tailored to suit the needs of customers. They can have broadband speeds up to 2MB for as low as Rs599 on WiMAX.

In terms of network development, Wateen last year won a major bid from the Universal Services Fund to provide subsidized connections to people living in under-served parts of the country. Consumers in these areas now have the same access to information, communication, entertainment and education as people living in any other part of the world.

Wateen hosted the World WiMAX Forum – the global approving body for WiMAX standard – in Pakistan earlier this year and we are the first Pakistani organization to represent the country on the board of the Forum. We wanted the WiMAX world to come to this country and have a first-hand look at the opportunities this country presents. It was a very productive conference, partly because it was endorsed by the PTA and we were joined by the CEO’s of all the major WiMAX companies and their teams. The conference promoted applications of WiMAX technology for businesses as well as device strategies for consumers.

We’ve recently started deploying Wi-Fi hotspots using WiMAX technology at various places such as hospitals, restaurants and cafes, malls, colleges and universities, shopping malls and shops among other places. We‘ve also signed a contract with the Government of Punjab and the Punjab IT Board to deploy Wi-Fi hotspots at educational institutions to enable students in their educational and research needs. Wateen is committed to its vision of enabling every man, woman and child in the country through cutting edge technology and this is a promise that I intend to fulfil.

However, there are still challenges associated with this technology. In order to enable WiMAX, you require a modem that costs around USD 100 to import. This device is highly subsidized by us and provided to consumers for a Rs.1500 one-time security payment. The recurring line rent is as low as Rs.599. This means that the payback for each device is around 10 months. Since this was a new technology and there were no defined parameters for sales, consumers initially faced a great deal of hassle, because a number of sales were made outside the coverage area. This led to the technology gaining a bad name with consumers cost for the organization a great deal. The devices are our bread and butter and people who had bad experiences never returned their devices. We had to spend on marketing campaigns for device recovery to keep the business flowing. I’m sure our competitors also faced similar problems and this is exactly why we have spent heavily on training our human resources. All of our employees are trained to be responsible and treat this business as their own. This will further help in educating customers as well.

Question 4: What is your biggest CSR activity?

Telecommunication is all about building communities. Our marketing campaigns are built around raising awareness about social issues in the country. Wateen took the lead in this through traditional and digital marketing. Our message to Pakistan has been ‘Jo Chaho’ – whatever you desire. Since I am a follower of the ‘Art of Living’, I am a believer in the philosophy that you are responsible for your surroundings. You have the power to change anything, if you possess the will and desire to do so. We took this message online and developed Wateen Scouts. These ‘Scouts’ are students in colleges and universities and they were asked to create awareness in their communities on various problems they face in society. Our scouts helped clean up the beach and plant trees in Karachi and clean up trash from the streets in Islamabad. We do not believe in marketing the traditional way – every campaign must make a positive impact on our society. Wateen Scouts was derived from the same idea, of playing a bigger role in Pakistan by overcoming challenges and odds and making a difference to society at large.

In under-served parts of the country, Wateen is developing Educational Broadband Centers (EBC’s) and Commercial Broadband Centers (CBC’s) which will help bridge the people in those areas to new opportunities. The majority of the population in this country is below 30 and they need to be up to date with the latest trends in order to be at par with the rest of the world. This is why we are working with the Government of Punjab on deploying WiFi hotspots across the province and especially at all major educational institutions. We are also committed to enabling an online learning portal for students through which they will be able to access past papers, solved past papers, examination tips and more. Wateen is also working with the Higher Education Commission on the PERN2, which is a high speed data transfer network that will connect universities across Pakistan with each other and with universities abroad to enable the transfer of data at high-speeds between them. The project also brings online and makes accessible all the research and theses of PHD students published in the country. So as you can see we invest heavily in education as a way to enable the future of this country. This is not exactly CSR, but these activities will have an important impact on our society to move the country forward and enable us to achieve the global standards and reputation that we are capable of.

Question 5: What does the future hold for Wateen?

The future promises to be bright for us. The industry is only in its infancy and there is a great deal of potential for growth, development and the potential benefits associated with increased education, awareness and the ability to harness the full potential of what the future holds. We are about to witness a boom in consumer broadband as broadband becomes more accessible and cheaper and as people become more comfortable with the technology. The day isn’t far when everyone will need a personal broadband connection and Wateen is committed to enabling them to do that.