Change Management in Paktel (Zong)

INTRODUCTION:
In year 2008, Wang Jianzhou, CEO of China Mobile is anticipating that the new brand is not only a brand of the Pakistan branch, but also an international brand for China Mobile, which aims to provide communication among societies. MR. Liu LiDong, Director PMO states, We are not just mobile operators but information providers for society. The central idea behind this step is to provide optimized network coverage across wide range. The combination of continued rapid growth in Pakistan's economy, rising consumer purchasing power and the acceleration of informatization throughout the country is driving a tremendous demand for communications and information services. Irrespective of competitive edge the company wants to maintain strong relationship with customers by providing value added services. While elaborating market penetration strategies, Mr Jianzhou suggested introduction of more value-added services, like mobile TV, mobile music, news, billing for subscribers specially the young population. "The future of our business and telecommunication is increasingly linked, and our interest in the telecom field is broad" *Steve Ballmer

HISTORY:
China Mobile Communications Corporation also known as China Mobile or CMCC, officially established on April 20th, 2000,is the largest mobile phone operator in China. It is the world's largest mobile phone operator ranked by number of subscribers, with over 380 million customers.

China Mobile is the largest company registered in Hong Kong and it is headquartered on Queen's Road. It is also the largest market capital company listed in the Hong Kong Stock Exchange. After many years of efforts, the company has established a comprehensive network with large coverage, high quality, rich variety of businesses and first-class customer services. It ranks the first in the world in terms of the network scale and the customer base. China Mobile has successfully attracted investment from the international capital market with its sound performance and great development potential. Being included in the Fortune Top 500 for 5 consecutive yeas, the firm's latest ranking is No.224.It also ranks the 4th and 2nd in the Top 500 Chinese Enterprises in terms of its overall strength and service provision respectively by the China Enterprise Confederation and China Enterprise Directors Association in 2005. Looking forward, the company defines its strategic goal of "becoming a worldwide leader in the telecommunications world and achieving leapfrog evolution from excellence to preeminence. In 2006, by seizing favorable market opportunities, the Group further expanded its subscriber base, implemented brand management, enhanced sales and marketing efficiency and innovated its business models. The Group placed emphasis on developing its core competencies for its future development, on maximizing the growth potentials of new customers, value-added business and voice usage volume and on building a low-cost and effective business model in the rural areas. These have greatly enhanced the Group's operational results and led to a rapid, sustainable, steady and harmonious development of the business.
Factors Annual Growth Rate

End of 2006, 22.1%(nearly half of the growth was from the rural areas) Groups subscriber: 301.232 million Aggregate usage volume: 1,252.15 billion minutes 38.6%

No. of value-added business users: 270.384 million SMS usage volume 353.38 billion messages Revenue from value-added business: RMB69.309 billion Revenue from value-added business accounted: 23.5 percent of Group's operating revenue

30.8%

41.6%

38.1%

Increase of 2.9% points from 2005.

CMPak or Paktel Limited:

CMPak or Paktel Limited formed in 1990 is a 100% subsidiary of China Mobile. The pioneering oversea setup of China Mobile came through acquisition from a license from Millicon to operate a GSM network in Pakistan. granted license to carry out cellular phone services in Pakistan, set up by Cable & Wireless. 7 Millicom Corporation, owners of Instaphone, sold Paktel for $284 million to China Telecom. It has invested more than US$ 700 million in the telecom sector in Pakistan and an additional US$ 800 million will be invested till the end of year 2008. The companys edge comes from the experience and expertise of running the world's largest telecom service and the commitment they make to setting quality and customer relations standards. It is determined to make its mark in the Pakistani market and to change the way people communicate. It market its products under the brand name "ZONG"

ZONG:

Zong is the first International brand of China Mobile being launched in

Pakistan on April5, 2008. It is meant to empower and liberate the people of Pakistan in every nook and corner of the country. The core essence of ZONG is to allow people to communicate at will without worrying about tariffs, network coverage, capacity issues or congestion. It will be supported by groundbreaking communications, trend setting customer service and an unmatched product offering, which will redefine rules of the game and establish ZONG as a serious contender for the number one spot. The brand would offer its customers with entertaining & innovative value added services and will empower them by giving a wide variety of products & services.

CHANGES ZONG:
Marketing

IN

PAKTEL

AFTER

CONVERTED

TO

Zong campaign has taken a fresh, bold and humorous approach to marketing. Its advertisements reveal both the culture of country and feelings of customers. It uses comparative sales and marketing approaches across multiple customer groups. Within each area the sales and marketing force are divided among various customer groups to meet their specific needs. Customer Service The beacon of Zongss impression and torch bearers of a new era in customer interaction, taking customer service into a portal of customer excitement. These are the doors to Zongs first and foremost realization of its promise to excite customers with a new trend in service. Setting the tone and ambiance which is second only to your home, these are Zongs arms across the country to welcome everyone to experience the comfort when a true promise is fulfilled. In order to gain customer attention it has offered amazing and attractive packages.

With ambitious plans to cater to the fastest growing Pakistani market and to win over the ever-demanding Pakistani customer, Zong is trying to offer unprecedented coverage. Zong dont want to be a price killer but focus on providing differentiated plus Quality oriented and Value Added Services (VAS).
Quality in a service or product is not what you put into it.It is what the client or customer gets out of it. *Peter Drucker

Currently the Zong has generated 28% of revenue in the market.

The goal as a company is to have customer service that is not just the best, but legendary. *Sam Walton

Human Resource: Like other organizations, Zongs productivity and performance is based on strong workforce, The Human Resources (HR) Department develops initiatives and provides strategic support to top management with regard to human resources policy. Main areas of responsibility include manpower planning, organizational development, employment and association conditions, recruitment, job classification and salary administration, performance appraisal, advancement, internal mobility, training and development, social services, social security, working conditions, settlement of disputes and relations with the personnel. Infact, they are serving as one of the most valued and respected departments in the organization; their job is people, and people are the company's most important asset.

Telecom
Zong has implemented GSM and EDGE (Enhanced Data rates for GSM Evolution) technologies to provide data transmission technology for high-speed transfer of large amount of information (voice & data services) across mobile networks. For this It emphasis on the need of optimized network coverage for efficient communication. Finance:

Finance Department is responsible for handling all financial matters in the environment of Zong.All these activities are in compliance with Financial Rules and Regulations. The department plays an important role in the decision-making purposes to assist management in the definition of policy and in the running of the organization. It aims to provide the internal and external users of financial statements with timely accurate and relevant information. Furthermore, it also ensures that the necessary financial control is adhered to in order to safeguard the assets of the organization. INTERNAL FACTORS Policies Updation: In organizational culture of Zong, Policies is updated whenever required or a new issue is faced. Meetings are arranged and a circular is issued to inform others about that change. The Companys Long-term strategic issues depends on the results of strategies being implemented. Social Responsibility: After Oct.8th, 2006 earthquake China Mobile has put considerations for the reestablishment of educational institutions in AJK. Now ZONG has planned to actively participate in the projects of society welfare. Communication Gap: Zong wants to constitute a successful working environment and a strong base of communication in an organization so there would be no communication gap between management and employees. Installation: In order to run in dynamic environment Zong has specifically pay heed on innovative ideas to provide the best of their services to consumers. But side-by-side they are facing difficulties to implement Fibre Network because of high installation cost and lack of resources. There is a need for

more customer services channels and call centers to provide maintained & improved level of customer services. COMPETITORS: Current and potential competitors in telecom sector include local operators that are providing services prior to Zong. Several of these companies have a strong market presence, brand recognition and strong customer relationships. All these factors derive market competition and infact all of them are in highly competitive climate. Mobilink: ZONGS one of the largest competitor is Mobilink. Its a subsidiary of Orascom Telecom, started its operations in 1994, and has become the market leader both in terms of growth as well as having the largest customer subscriber base in Pakistan - a base of over 30 million and growing. They are providing state-of-the-art communication solutions to the customers. It offers exclusively designed tariff plans that cater to the communication needs of a diverse group of people, from individuals to businessmen to corporates and multinationals. Both the postpaid (Indigo) and prepaid (JAZZ) brands are the largest brands of their kind in the Pakistan cellular industry. In addition to providing advanced voice communication services that makes the lives of millions that much easy, it also offers a host of valueadded-services to customers. Mobilink places high importance to its coverage in almost 8000+ cities and towns nationwide as well as over 120 countries on international roaming service. Ufone: Ufone (Established in 2001) is also a cellular operator. Despite the stiff competition in Pakistan telecom market which has led to reduction of prices to bare minimum level, due to its aggressive policies and exercising strict control over expenses the Company managed to improve its revenue and after-tax profit by 87% and 54% respectively.

It provides services with wider coverage, superior connectivity, clear signals & voice quality. Covering over 3475 key destinations it allows seamless roaming through the network providing the best nationwide coverage. Ufone, being one of the leading cellular service provider has recently launched its service in many new cities. Keeping up with its pace it is rapidly expanding its network. It keeps on adding new cities with same superior network that continues to expand. Warid: Warid Telecom is the fastest growing GSM mobile company in Pakistan with over 13 million subscribers and coverage in more than 245 cities all over Pakistan. As per company policy, Warid Telecom's cities are only included as a coverage destination when cell sites along with a fully functional sales and service center or franchise is operational in the area. This results in premium connectivity and the optimal experience for users. Telenor: Telenor Pakistan launched its operations in March 2005 as the single largest direct European investment in Pakistan, setting precedence for further foreign investments in the telecom sector. The company has covered several milestones over the past twenty eight months and grown in a number of directions, grown to become a leading telecom operator in the country. In fiscal year 2006, they achieved nearly 200% growth in subscriber base the highest in the industry by a wide margin. Its the fastest growing mobile network in the country, with coverage reaching deep into many of the remotest areas of Pakistan. In the most difficult terrains of the country, from the hilly northern areas to the sprawling deserts in the south. Its keeps on moving ahead by investing heavily in infrastructure expansion. It is spread across Pakistan, creating 2,200 direct and 20,000-plus indirect employment opportunities. They have a network of 15 company-owned sales and service centers, more than 200 franchisees and some 100,000 retail outlets.

EXTERNAL ISSUES: Zong has payed high taxes (per activation require Rs.500) due to Government regulations and policies. Day by day market strategies are varying where regulation in telecom services, directly affect commercial and bilateral relationships of partner countries. On the other hand, it is striving hard to understand consumer psyche as they are key target of the company. Infact, due to lack of transmission resources company is facing hurdles at the first step but being optimistic it is much focused on future. One of the main hindrance is an electricity shortage. The operations are getting effected due to these shortcomings; somehow, its on the way of prosperity. Pakistans Economy: Pakistan is a nation with a diverse economy that include agriculture, textiles, chemicals, food processing and other industries. The economy has suffered in the past due to internal political instability, mixed levels of foreign investment, orbitrary and non transparent applications of government regulations, inadequate infrastructure, and a costly, ongoing confrontation with neighboring India. GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06. In 2008 estimated GDP growth rate is 6.9% .Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 & 7.9% in 2006. These economic factors has strongly influenced on consumers and business. Consumers buying power got confused because of the economic challenges that the coutry faces CUSTOMERS: According to customers Zong has great potential in the market if it adopts a flexible and clear policy in cost and ensures quality services to the customers. Any hidden charges/rates should be discouraged and customers should be kept aware and inform of all facilities and their rates. They are expecting more from ZONG than other cellular companies. Customers are aware of Zongs motive to resolve the complain instead of competing other mobile companies. It also seems to be the embassadar of China-Pakistan friendship.

FUTURE: Describing future plans of Zong, the Companys CEO said, Pakistan is the right choice for international expansion and we will continue to improve and strengthen our network and our future investments will depend on our financial performances. As investors, he highlighted, We will be investing another $800 million and hope we can get preferential policy as foreign investors. Zong will focus on innovations and new business model development. It will direct itself towards the next generation mobile telecommunications network and technology, including close monitoring and tracking. The firm is looking for highest position in market by opening new channels & improving network quality with larger coverage areas. They are also planning for network expansion programs for swift communication. Key Words: Zong, Ufone, Telenor, Warid, Mobilink, Pakistan,GDP Growth,
Customers, Competitors, Business, Quality, Communication

ZonginPakistan:FailureorSuccess?
ByBabarBhatti|June7,2011|6Comments

If we cannot succeed in Pakistan, wed better not go anywhereelse.ChairmanWangJianzhou,ChinaMobile afterPaktelacquisition I spotted this article by Zhao Hejuan of Caixin at CNBC website. According to this detailed and wellresearched article,ZonghasnotbeenassuccessfulinPakistanasChina Mobile wanted it to be. Zhao attributes the problem to

business strategy and issues with handling of human resources. ItmaybetooearlytotellifZongisasuccessornot.Aswe know,ChinaMobileisinthisforthelongrun.Aslongas theylearnfromtheirpastmistakes,theyhaveachanceto turnthingsaround.Whatdoyouthink? Heresthefullarticle. China Mobile has been struggling to build a Pakistani business since buying the domestic carrier Paktel, today knownasCMPakandthebrandnameZong,inearly2007 four years after Pakistan opened its telecom market to internationalcompetition. TheacquisitionmarkedaproudbeginningfortheChinese carriers global expansion, which continues today. China Mobilepaid$560millionforwhatwasthenPakistansfifth largestmobileoperator. Buttoday,Zongisstillinfifthplaceatthebottomofthe heapamongmobilecarriersinPakistan,wherethemobile phonepenetrationratehasstabilizedatabout60percent. Zongsuserbasehasincreasedfromlessthan1.5millionin 2007 to 6.92 million by the end of 2009, but its major competitorshavepickedupfarmorecustomers,according tothePakistanTelecomAdministration(PTA). Amongthe 97.6 million Pakistanis with mobile phones in 2009,PTAsaysnearlyonethirdwereservicedbyMobilink, asubsidiaryofEgyptsOrascom.ThePakistanisubsidiary

ofNorwaysTelenorcounted22.5millioncustomers,while Warid Telecom had 18.8 million users and Ufone 18.5 million. NeitherisZonggettingthekindsofrevenuesenjoyedbyits competitors.Amongallcarriers,PTAsays,averagerevenues per user are about $2.50 per month. But a Zong user generatesonlyanaverage$1.50fortheChinesecompany. DoorKnocking PTAdataobtainedbyCaixinsaysPakistansmobilephone usercoverageratewasonlyaround8percentin2004and22 percentthenextyear.ChinaMobileboughtintothemarket when the coverage rate had reached 54 percent. The rate continuedgrowingrapidlyastheChinesecompanysettled intoitsnewterritoryand,in2008,launchedtheZongbrand. BythetimeZongarrived,itsfourcompetitorshadalready securedmarketpositions,andthecoveragegrowthratehad slowedconsiderably. ChinaMobilefirstknockedonPakistansdoorin2005,after thePakistanigovernmentofferedtosella26percentstakein Ufone,asubsidiaryofPakistanTelecommunicationCo.,to thehighestforeignbidder. China Mobile was one of 13 international players that participated in the auction, but lost with an offer of $1.4 billion. The winner was Etisalat of the United Arab Emirates,whichpaid$2.6billion.

Afterward,Wangsaidhehadnoregrets.Marketpressure wouldhavebeentoogreathadweofferedapricethatwas toohigh,hesaid. Nevertheless,Ufonesstrongperformanceinthefollowing years brought Etisalat satisfactory returns. According to PTA,Ufonessubscriberlisthasgrownnearly11foldsince 2004,stabilizingataround20millionin2010. Negotiations with Nasdaqlisted operator Millicom gave China Mobile another opportunity in 2006. The Luxembourgbased company then had about 10 million subscribers in 16 emerging countries in Latin America, AfricaandAsia,includingPakistan. Andatthetime,PaktelwasaMillicomsubsidiaryaswell astheworstperformerinthemultinationalsportfolio. China Mobile hired China International Capital Corp. (CICC), Chinas largest investment bank, as a financial advisortoprepareabidforMillicomincollaborationwith BainCapital,aprivateequityfirm. The deal was close to signing, a source told Caixin, and Millicoms market capitalization was around $5.6 billion when CICC suggested China Mobile offer $4 billion. The advisor had valued the Paktel portion of the company at zero. TheChineseeventuallyabandonedtheMillicomdealdueto concerns about political risks in emerging countries and

potentialmanagementissues.Butintheend,ChinaMobile gotPaktel. More recently, minus Paktel, the market capitalization of Millicomhasrisenashighas$15billion. NoPlaceLikeHome ChinaMobiletriedtoopenthePakistanimarketdoorwith thesamekeythatworkedinChina.Butthekeydidntfit becauseeachmarketfunctionsunderadifferentregulatory framework,withadifferentbusinessenvironment. For example, Chinas telecom market is monopolized by stateowned China Mobile and two other carriers, while Pakistansmarketisopentopricecuttingcompetition. APTAreportsaidthePakistanimobileindustrygenerated $2.8billionintotalrevenuesinthe20092010fiscalyear,up 11percentfromayearearlier,eventhoughtariffsdecreased upto20percent. Pakistanisalsooneofthefewcountriesthatheavilytaxes telecomoperators.AndPakistanimobilephonesubscribers are typically priceoriented, say industry experts, with a habitofchattingonthephoneforlongperiodsoftime. Anotherdifferenceisthatmobilephonenumbersarefreely transferable in Pakistan, allowing customers to switch serviceprovidersatwill.SoifZongtriestoraiseprices,its subscribersarelikelytoleaveforanotheroperatorwitha bettertariff.

This business environment means user coverage rates are crucial for operator profits in Pakistan, and so far Zongs ratehasfallenfarbehinditsrivals. China Mobile tried to win more Pakistani customers by applyingaruralmarketstrategythatsucceededinChina.It was Wang who had won China Mobile a huge rural customerbasestartingin2004amovethatsunderpinned thecompanyshighgrowthrateforyearssince. But the strategy failed in Pakistan, partly because rural landneededfortelecombasesandequipmentisnotcheap. RuralpropertyinChina,ontheotherhand,costsfarless thanurbanparcels.Inaddition,carriernetworkoperations andmaintenancehavebeenimpededbyweakinfrastructure inPakistan,especiallyinruralareas. ChinaMobileslacklusterperformanceinPakistancanalso be attributed to human resources. An investment banker familiar with the company told Caixin that China Mobile executives rejected the advice to retain a Pakistani management team after buying Paktel, and instead dispatched a team of Chinese managers to oversee operations and control critical areas such as human resourcesandfinance. The first batch of people sent to Pakistan came from domesticprovincialbranchesofChinaMobile,thebanker said.Theydidnothavegoodlanguageskills,andtherefore encounteredseriouscommunicationproblems.

China Mobile gradually withdrew its Chinese managerial staffstartingin2009andswitchedtoalocalizedapproach. TheZongmarketingstaff,whosejobincludesoverseeingan armyofsignboardsinIslamabad,isnowentirelyPakistani.