March 1 (Bloomberg) -- Telenor ASA, the Nordic region’s biggest phone company, is increasing its Pakistani unit’s reliance on mobile banking to make up for growing competition in cellular services in the country.
Telenor Pakistan Ltd. plans to expand Tameer Microfinance Bank, which it bought in 2008, to gain customers among the rural population in Pakistan, where less than 10 percent of the adult population has access to financial services, division Chief Executive Officer Lars Christian Iuel said in an interview.
“We are not going to be a pure telecom company in the future,” Iuel said at Telenor Pakistan’s headquarters in Islamabad. “If you consider yourself just a pure telecom, you will be out of business in the next five years.”
Telenor has invested about $2 billion in Pakistan since 2005 to become the second-largest operator with 28.5 million active customers, Iuel said. The division’s offer of banking services via mobile devices is helping it respond to competition from four other phone operators in a market where revenue per customer amounts to $2.70 a month, among the lowest rates in the world, he said.
The mobile-banking unit handled 3.5 million transactions in January through 16,000 outlets, which offer microloans, money transfers and bill payments, mostly in rural areas where about 80 percent of the country’s 177 million people live, the CEO said. Financial services generate about 2 percent of Telenor Pakistan’s revenue, a figure that will probably jump “many-fold” in the next two to three years, he said.
‘Just the Beginning’
“This is just the beginning,” Iuel said in the interview yesterday. “This will be a major and integral part of our business and our profits.”
Telenor Pakistan is also seeking to expand its mobile-phone operations by taking part in the auction of 3G-technology bandwidth on March 29, when the government will sell one 2G and three 3G licenses to new and existing operators.
Competitors in the auction will include Ufone, a cellular unit controlled by Pakistan Telecommunications Co.; Pakistan Mobile Communications Ltd., which uses the Mobilink brand; Warid Telecom Ltd.; and China Mobile Communications Ltd.
“We will definitely participate,” Iuel said. “But we won’t buy at any price. We have our limits. We will seek other opportunities if we don’t win through the auction.”
The Pakistani division of Fornebu, Norway-based Telenor accounted for 5.1 percent of group revenue in 2011, compared with 4.9 percent the year before, and 4.4 percent of its operating profit, after earning a little more than a break-even figure in 2010, according to the company’s fourth-quarter financial report.
Earnings in Pakistan are being squeezed because of higher costs to provide security and deal with the nation’s power blackouts, Iuel said. Economic growth was 2.4 percent in the 12 months through June compared with 9 percent six years earlier.
“The economic slowdown hasn’t affected our revenue growth, which is still in double digits,” Iuel said. “But about 15 percent of our operational spending goes to provide power backup when we have 16 to 18 hours of blackouts. We have 12,000 guards to secure our infrastructure.”
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