Desktop Thinking

Three years ago, when Aurora first covered CSR in its May-June 2007 edition, the concept was an emergent one, its workings not really grasped by most organisations. Three years later this remains largely true, with CSR more often than not misrepresented as a cheque writing exercise for corporate philanthropy. Certainly most companies are aware of the buzzwords which call upon them to observe the triple bottom line of people, planet and profitability. However, not all that many are willing to move from mere acknowledgement of the buzzword to actual implementation, a state of affairs that is unlikely to change given that Pakistani consumers remain mostly unconcerned regarding the internal practices of the companies they purchase their products and services from. For the moment their priorities remain fixated on quality, and inevitably these days, price.

From a unique Pakistan perspective, a fundamental aspect of CSR would be a willingness amongst all organisations to put their books in order and pay their taxes. Unfortunately Pakistan has yet another dubious distinction for being a country with a ludicrously low taxation base. The argument that the government (past, present and future) cannot be trusted to utilise this revenue honestly not only puts the cart before the horse, it also does a huge disservice to this country. The fact that many people around the world have responded to our repeated pleas for aid for the 20 million Pakistani citizens rendered homeless by the recent floods, by questioning whether the unaffected Pakistanis are doing enough for their fellow citizens is cause for some serious introspection. Pakistan needs a tax revolution and socially responsible companies need to advocate this.

This would certainly be a moment for organisations to ramp up their CSR strategies or initiate one if they don’t. The magnitude of the consequences of the floods are still unknown, but clearly the task is huge. It is not simply a question of providing shelter and rebuilding homes, roads and bridges (though that too is daunting). There is the question of rebuilding the agri-economy and getting serious about constructing those dams, dykes and barrages and implementing all those other disaster preventive measures required to ensure that this country does not succumb to any other catastrophe in quite the same way it just has.

Civil society has clearly reacted and the number of initiatives to provide relief continues to grow, albeit on a helter-skelter basis. The problem is one of scale. Even with foreign funding coming in, the deficit in terms of coordination ability and organisational capacity is huge. Pakistani companies need to make concerted and focused efforts to first of all provide relief, rehabilitation and reconstruction services to those of their employees and their families who have been affected and then extend these efforts to the larger communities in which they operate. No part of Pakistan has remained unaffected by the floods; no Pakistani company can remain indifferent to their consequences. In the coming issues we look forward to reporting on some excellent and far reaching initiatives.

Vote for your favourite Aurora cover from 2010!

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January-February 2010

Pied pipers or pretty faces

March-April 2010

The new value seekers

May-June 2010

Experience Matters

July-August 2010

Lahore special

September-October 2010

Deciphering the DNA of the do-good company

Granta... pop idols... and Rohail Hyatt

In the latest issue of Granta (112), based on Pakistan, Kamila Shamsie writes about Pakistan's pop idols and has this to say about Rohail Hyatt:

"The somewhat reclusive and much sought-after producer Rohail Hyatt, who, twenty-three years ago was one of the four boys in jeans singing ‘Dil Dil Pakistan’ in my living room. More than any of his Vital Signs bandmates or Junoon rivals, he seems aware of one simple and persisting truth: in Pakistan, as all around the world, what we most crave from our musicians is music."

To read Shamsie's insightful essay, click here - http://www.granta.com/Magazine/112/Pop-Idols

Read on to find out more about Rohail Hyatt - this article was first published in the September-October 2009 issue of Aurora.

Life, the universe and Rohail Hyatt

By Jahanzaib Haque

Where to begin talking about Pakistan’s leading music producer, Rohail Hyatt?

From pop star fame in Vital Signs, to one-time CEO of Pyramid Productions; from writing the musical score for Shoaib Mansoor’s film Khuda Ke Liye, to producing names like Rahat Fateh Ali Khan and of course, creating the musical phenomenon that is Coke Studio; Hyatt is an enigma – and I am duly warned that he is ‘media shy’.

But as I sit back in Hyatt’s studio surrounded by flat screen monitors, recording equipment, musical instruments and organic trinkets, I am greeted with warmth, courtesy and the odd sensation of visiting an old friend. I cannot help asking Hyatt the clichéd stuff first – I want to know all about Vital Signs.

“In terms of exposure, I owe everything to Vital Signs,” says Hyatt.

“Signs wasn’t just a musical venture for me; it was also a business venture. I was sort of the manager because unlike the others, I had kids and someone had to take responsibility! That experience has since taught me to keep an eye on business.”

Marriage to his wife Umber (his “unsung hero”) and dropping out of high school to pursue a musical career meant having to learn how to balance creative aspirations with life’s everyday realities from an early age. However, when it comes to youthful rebellion, Hyatt was second to none:

“I hated academics. I was an absolute drop out. The institution and the methodology totally strip you of creative thinking. They don’t want to provoke thought, and if you question them, they fail you. I completely rebelled against that.”

However, the skyrocketing success of Vital Signs left the young rebel struggling.

“I should have been the last person to be associated with fame… I needed privacy back in my life and I consciously try to stay away from fame.”

It is here that Hyatt reveals his gripe with the media. Having been at the receiving end of heavy criticism for Vital Signs’ fourth album and seen elements of his personal life enter the limelight, Hyatt found himself demoralised to the point of abandoning the project.

“People should understand the power of the pen. You can destroy careers permanently just by using it.”

Falling off the musical bandwagon, Hyatt then set up Pyramid Productions and for a number of years inhabited a world of, “boardrooms, corporate lifestyles and landing the next client.”

While such an experience gave Hyatt a keen understanding of advertising, a restless period of soul searching saw him reject the philosophy of monetary gain in order to pursue music once more – despite the high risk of failure.

It is here that the tragic state of Pakistan’s artists and the music industry at large truly hits home. With a dearth of record labels and massive music piracy mafias, Hyatt sees little scope for struggling musicians:

“Apart from the few top notch acts who sign up with the major brands, entry level artists are all surviving on their parents. There aren’t even concerts anymore. How are these guys going to go to earn anything?”

Refusing to call Pakistan’s music scene a real industry, Hyatt believes positive steps can either be implemented at the top (including establishing intellectual property rights, proper contracts, more record labels, government controls over piracy, etc.) or through grassroots level investment.

But who is going to provide money to the starving artists at the bottom? Would a brand or a record label be interested in investing in a nobody? Hyatt shakes his head:

“Brands understandably want to exploit music for marketing purposes, but their strategy of milking the top leaves a hollow substance below. They fail to understand that if they feed something, five to 10 years down the line they can milk it in a much bigger way.”

This discussion about grassroots change in music leads us to Coke Studio. Hyatt applauds Coca-Cola’s willingness to take a risk and avoid clichéd formulas (it might have been a game show!) in order to make these free-for-all jam sessions a hit.

“Coke Studio is a natural experience. It is not contrived. In the studio, it’s the same experience for the tea boy as it is for the top acts. All inhibitions are dropped,” says Hyatt, by way of explaining Coke Studio’s mass appeal.

“The idea is to go back to our roots. Our heritage goes back thousands of years, but when you ask people about our culture, for some it stops at 1947; for some the goras destroyed it; for others there was no culture before the Muslim invasion. Actually, we come from a place where music was a language before the spoken word came into being and there is a hint of this in Coke Studio, and the public is taking to it.”

Hyatt’s eyes light up as he narrates his ambitious (if not impossible) hopes and dreams for the project.

“I want to destroy the social divides within our society through music. To have in the same house the parents, the children and the servants enjoying the same show together. How rare is that? A song from the dehat is presented in such a way that yuppie burgers are loving it. You can see that something much deeper is happening.”

I ask Hyatt if he sees himself doing similar projects 10 years down the line. He laughs and says no, probably not. He is hoping to “unlearn” and journey towards a “finer tuning”, and he believes the influence of eastern classical music will take him forward musically and spiritually.

“The more tuned you are, the greater the spiritual journey... I’m off my journey right now (due to Coke Studio) because you have to come down and slowly work your way back up if you want to take others with you.”

As I grapple with the concept of music driving spirituality, I ask Hyatt if this has any bearing on a future solo album.

“No one will be interested in such an album,” he replies as he tries to explain from where his creative inspiration comes.

“At the higher plane, ideas flow. It’s a lonely place which few understand and which I don’t understand myself... You are physically here but you are actually in tune with a totally different set of rules… but you can’t stay there forever, you have to come back and begin all over again.”

I find myself confused yet oddly at home in such abstractions. Perhaps this feeling is rooted in Hyatt’s ability to connect the sacred with the mundane and actually deliver tangible results in the form of his projects.

And his parting words on music leave me just as mystified and enlightened:

“We are the evolved consciousness of the Universe, and art and art form is the creative aspect of creation itself. It reveals to us the design and purpose of the Universe.”

Whose line is it anyway?

As the telecom industry hits a customer penetration of 60% and struggles with revenues at an ARPU of less than three dollars, Marylou Andrew talks to the five telecom companies about the challenges and opportunities ahead.

MARYLOU ANDREW: Having acquired 95 million customers, is the telecom market reaching saturation level and if so, how will brands evolve?

Akbar Khan, CMO, Ufone

AKBAR KHAN: The industry is not reaching saturation level. Although telecom penetration in Pakistan is over 60%, it has crossed the 200% mark in the developed world. In a market like ours where a SIM costs between two and 2.5 dollars, there is a long way to go before we reach saturation point. Of the 95 million SIMs out there, many are dual and at best there are 60 to 65 million unique customers. It’s not about how many connections you have, but about which operator has the highest number of primary SIM connections. The industry’s annual revenue pie is US$ 3.2 billion and a one percent shift (up or down) in the BUMO (Brand Used Most Often) indicator is equivalent to US$ 320 million. Our target is to grow that number every month. The revenue growth rate may be going down from triple to lower double digits, but customer base penetration is not. Having said this, brands have to evolve and the focus has shifted from acquisition to moving into untapped segments and markets.

Lars Christian Iuel, VP/CMO, Telenor

LARS CHRISTIAN IUEL: I don’t think the market is saturated; it is becoming more mature. Brands have been very focused on price and on awareness, but they will have to evolve because anyone can match price. To make a sustainable difference you have to connect emotionally with your customers and support that with functional attributes. Price, quality of network and customer service are not sustainable differentiators.

Muneer Farooqui, CEO, Warid

MUNEER FAROOQUI: It is not saturated, it is maturing. There is potential, but realising it is harder because the long hanging fruit has been picked and cashed in. At Warid the differentiating factor is quality. As with any other commodity (and telecom has become a commodity), when customers have options they base their decisions on the best quality and price. The price wars will fade away; price elasticity has been stretched to its limit.

Sadia Khurram, Director Marketing,
Brand and Operations, Mobilink

SADIA KHURRAM: The industry is not saturated, rather growth has slowed down. Given that all five operators are vying for the same customers, the value proposition that we put to our customers needs to evolve. The challenge used to be to make our product available everywhere, expand our coverage and offer the cheapest call rate; now that everyone is on the same bandwagon, differentiation has to set in, otherwise we will become commodities and the opportunity to create value for the company and the customer will diminish. We are at a point in the industry’s lifecycle, when brands will really start playing their role.

Salman A. Wassay
Director Marketing, Zong

SALMAN WASSAY: Saturation is a misnomer; the great growth has slowed down and we need to unlock new

segments; in the past there was an inherent demand for the product, now we have to search for it. Every year, between two to 2.5 million people reach the age bracket where they can own a mobile; the rural market is untapped as are women, hardly 20 to 22% of customers are women. As the product evolves, the brands will evolve as well. 

MLA: How will the evolution of brands impact the way they are marketed and advertised?

AK: Through segmentation, with the focus shifting to service quality and brand equity. This used to be a suppliers’ market, but now the competition has increased to levels where customers have more choice. Promotional headline based pricing is too tactical, advertising will have to become more emotive. Although we are still trying to mix the two, the proportion of the emotive will increase.

LCI: I don’t think there will be any more price-based communication. We will not be able to deliver the same message to everyone; there will be more targeted communication based on micro segmentation and the behaviour and attitude of the customers. There will be less focus on awareness activities and a lot more on direct communication, be it in-shop or one-on-one and it will be much more emotional and value-based. Our products will become more than telecom brands. Five years from now if anyone in the industry sees themselves as being in the telecom industry, their future will be bleak; we will be embracing more than traditional telecom services.

MF: The game has moved into retention mode. This market is still pure vanilla voice, and the question is how to move forward. Providing quality service, more VAS and data solutions is where the changes will be and marketing will reflect that. If we are not promoting price, we will be promoting retention as well as other products.

SK: Right now most advertising is performing a hardcore selling job. However, the value of a product is not only monetary, it is also a function of the experience; in our case this would be the quality of the network and the signal and the choice of VAS.

SW: Customers have become insensitive to price advertising. In 2010, I see a lot of brand positioning that will not be price centric. Mobiles used to be ‘send-end’ gadgets; people made calls and that was it, but now that we have better data networks, greater awareness and easier to use products, the mobile phone has become more than a talking tool and as a result the product positioning is changing too.

MLA: Will ‘voice’ continue to be the major revenue earner? What other areas will you derive ARPU from in the next few years?

AK: Eighty to 85% of the industry’s revenue comes from voice and this will continue for the next three years or so. However, the mix will change slightly; if on average 15% is coming from non-voice revenue streams, that percentage may go up to 20 or 25%, while new streams, such as mobile commerce, mobile advertising and VAS will start contributing more. However, those numbers will, at best, improve by five percent in the next three to five years.

LCI: Over 90% of the revenue is coming from voice and SMS and even five years from now this is what will be paying our bills; after that we will see growth in other areas. In Kenya, 50% of the adult population only uses services such as mobile accounts and mobile commerce. Other African countries have leapfrogged straight into mobile internet. This is where the growth will come from.

MN: The composition of the revenue streams will remain the same in the immediate future. After voice, VAS comes next with seven to 10% of the revenue share. Warid has the biggest bouquet of VAS, but this can be confusing for the end user because other telecoms have similar services too. The challenge is to figure out which VAS are giving consumers a real benefit.

SK: Voice will continue to be the revenue generator for telecom companies in Pakistan, but ARPUs are stabilising at approximately three dollars, so it is important that we continue to offer other VAS to our customers and build parallel revenue streams.

SW: This scenario is the same around the world, although in terms of data we are not where we should be. We should derive at least 25% of our revenues from non-voice services and the industry has not gone beyond 11%. Zong gets about 15% of its revenue from non-voice. Two things are going to change. Firstly, if the Pakistan Telecommunications Authority (PTA) launches 3G or any other fast data transmitting technology there will then be applications that are easier to use on mobile phones. Secondly, a lot of data savvy younger people are buying mobiles so that end of the customer base is increasing.

MLA: How has the telecom companies’ investment in broadband and WiMax affected their core business and what is the potential here?

AK: We want to work closely with the Pakistan Telecommunications Company (PTCL) in order to offer broadband to our customers. This will complement our core business because if you offer more services the stickiness improves. As a bundle we can offer more to customers because we don’t have to make margins on a single product; the consumer pays less and is retained longer.

LCI: Mobile internet is a generic term for all kinds of technological solutions and the mobile handset is the best terminal to start with because the penetration is very good geographically. The existing GSM-based technology is already good enough and we believe it should be based on a mobile handset.

MF: This area is going to become more competitive. Obviously a mobile phone cannot offer the same kind of data speed that a WiMax connection can, but if you are on the go you probably will not mind having it on your phone even if it is slightly slower.

SK: It is a good complement to our core business. There are handsets that offer WiMax functionality and this is a feature that will make Mobilink a complete solutions provider for the communication needs of our customers.

SW: This is a question that most companies do not have a clear cut answer to, the reason being that typically a GSM organisation worldwide would take the data route through 3G. We have not launched 3G in Pakistan and there is an opportunity here because apart from PTCL, there is no other strong, nationwide broadband provider. WiMax has potential and companies which have invested in it will not see losses, but how it will fare against 3G and other technologies is questionable. Pakistan is not a country where any one technology will make the difference; it will have to be a mix of technologies for different areas.

MLA: What practical measures need to be taken to realise the potential of mobile commerce in Pakistan?

AK: The mobile commerce success stories have come from the Third World and developing countries because they have a huge population of un-banked customers. In Pakistan too, there is a big upside to this in the long run; however, there is no magic bullet that will bring about a change in one or two quarters or even in a year. The State Bank of Pakistan (SBP) is very progressive and that is a blessing and the PTA has been very positive and upbeat in sponsoring change. However, mobile banking is a marriage between telecoms and banks; while telecom is a very flexible and fast moving industry, banks move at a different pace. Their processes are opposite to ours and one of the reasons that movement is slow is because of the different pace between the two.

LCI: This service has huge potential because only 12% of the population has access to, or use, financial services. The SBP is very proactive in promoting mobile commerce. With the high penetration of mobile handsets and SIM cards in Pakistan, we are equipped with all the resources, be it to pay bills, transfer money, seek information or have cash in a mobile account. The most expensive part of running a bank is the branch network. Today every branch in Pakistan has 20,000 customers which makes things very inefficient because there are long queues, etc. With easypaisa we already have 150,000 outlets and this makes the footprint for us and for our customers much wider and less costly. Since we launched easypaisa we have had more than a million transactions worth over three billion rupees, so we see potential for ourselves, for Pakistan and the Pakistani people.

MF: M-commerce used to be a buzzword only, now it is a reality. It will make a difference to the economy because it will serve the un-banked population. We see a clear demarcation in mobile commerce between mobile banking and non-banking services such as utility payments, point of sale payments, etc. It will take time to evolve because the end users have to be comfortable with the technology, so education is required. It also has to be industry neutral. It helps that we have Bank Alfalah as a sister concern and we are working with Alfalah and other banks on the platforms that serve these products.

SK: The regulators on both the financial and telecom side are gung-ho about the opportunities that mobile commerce can unfold. Only 12% of the people in Pakistan have access to banking services, whereas the penetration for cellular services is about 60%, so there is a gap of at least 48%. It might take time to reach the same level as telecom penetration because this is a technology-intensive product and people here are not very tech savvy. The uptake of SMS was quite slow in the earlier years, however now even illiterate people are using it. Once a critical mass builds up for mobile commerce it will take off very quickly.

SW: The problem is that this is a huge un-banked economy with only 17 million unique accounts. For a number of reasons – one of them is religious – people do not open bank accounts. If we can convince the huge mobile community that opening a branchless bank account will benefit them, that will be a paradigm shift in terms of banking. The other thing we are trying to address is carrying cash, because plastic is not very successful here. We would have preferred for the model to be telecom-led but the model we see today is bank-led, and with good reason because the SBP did not want to open up everything. The industry spent too much time fighting over whether telecom companies could open banks – there is obviously a good case here as well because these telecom companies have invested billions of dollars in this industry. Currently the customer ownership in mobile commerce belongs to the bank and not the telecom company. These are the nitty gritties that need to be resolved. PTA and the SBP are trying to bring in third party transaction processing companies and the telecom companies and the banks will be asked to connect to those third parties. This will expand the market.

MLA: There are widespread rumours of a possible merger. Does the telecom industry need a merger and if it does happen, how will it impact brands?

AK: This market needs consolidation because that is when economies of scale come in, which enable investments to remain healthy. Margins and ARPUs are decreasing while costs are going up in terms of manpower, electricity, load shedding, fuel, taxes, etc. If there is a consolidation, the interconnect cost between the two merging networks will be eliminated and that will benefit the industry and ensure that it stays healthy.

LCI: Pakistan is one of the most competitive telecom markets in the world, with the lowest prices and margins. However, with so many operators, this will not be sustainable in the long run, therefore consolidation will be healthy from both the operator’s and the customer’s point of view; maintaining the quality we have today requires having margins to both defend and sustain continuous investment.

MF: As portrayed every now and then by industry analysts, consolidation is inevitable. I cannot say whether it will be good for the industry at this stage because it depends on how it happens and the companies involved. The price wars in the past have brought us to a stage where Pakistan’s tariffs are amongst the lowest in the world, which has in turn, also brought down the revenues.

SK: This market is overly competitive; if we compare similar markets worldwide, there isn’t enough room for five active players, so consolidation would benefit the industry. In terms of brands, it is difficult to answer that question because brands are fickle entities and one cannot predict how they will behave in the face of change; once perceptions are formed in people’s mind it is very difficult to alter them. It depends on the kind of merger that will take place; whether it is a merger or an acquisition, what are the objectives of the merging as well as the acquiring company. If the objective is to minimise or to synergise the cost of operations, the brands will follow one path and if the plan is to identify and exploit other marketing opportunities they will follow another path.

SW: Consolidation will be good for the market as it will mean less price competition. But it will also be a challenge because every brand has its own equity; there will be questions about whether you keep two brands or merge them because there is so much equity built up in each brand. On the other hand the real synergy in merging comes when you merge everything – if you keep two brands that will mean two separate companies.

First published in the July-August 2010 issue of Aurora.