Profiting from good

When Roshan launched mobile services in Afghanistan in 2003, its goals extended beyond achieving a profit and satisfying shareholders. Today, the country’s leading GSM operator provides indirect employment to 25,000 citizens and takes a pioneering position in improving the development of economic, educational and social services. Proving it is possible to do ethically-sound business in Afghanistan and make a tangible social difference, CEO Karim Khoja shares how corporate social responsibility has not stood in the way of Roshan becoming a viable commercial operation. Michelle Mills reports

Just five years ago, if a local wanted to make a phone call in Afghanistan, he either used one of the 30,000 Thuraya satellite phones that were available and which cost US$12 per minute to use, or he walked to a neighbouring country,” recalls Roshan’s CEO Karim Khoja.

“When we came into the market as Roshan, we were the third operator in a country of 80,000 subscribers. Today Afghanistan has 17 per cent penetration, with more than 5.8 million people having access to a telephony system. There are no fixed-lines in Afghanistan, because we have more landmines in Afghanistan than anywhere else,” he comments.

The journey for Roshan to reach 2.6 million subscribers and become the leading operator with a 41 per cent market share has been a bumpy one. The company competes with three mobile operators – Afghan Wireless Communications, UAE’s Etisalat and South Africa’s MTN, yet its most significant obstacles have little to do with telecommunications or market dynamics. Roshan has had to contend with the Taliban blowing up 19 of its base stations in the Taliban-controlled southern half of the country, the threat of frequent kidnappings, a heavily landmined countryside, tribal fighting among the five main ethnic groups, and a predominantly unskilled and uneducated labour pool.

However, these challenges have been met by Roshan with ingenuity and a desire to empower the local population and appeal to their entrepreneurial spirit. Roshan means ‘light’ and ‘hope’ in the dominant languages of Dari and Pashto, and the company’s corporate social responsibility extends well beyond corporate giving to an active philosophy that inspires and energises Roshan staff and the people they interact with. One example is engaging villages to protect their local base station sites from Taliban attack, and in return Roshan building a well or a health clinic for the community, renovating a mosque, providing public call offices (PCOs) to widows as a means of income, or building playgrounds.

“We have seen in the hundred or more sites that we have given over to the villages, that today they are our most protected sites. They don’t get blown up  even though they are in the heart of the Taliban area. We are building a civil society; we are not trying to engage the Taliban head on. We also no longer have to spend US$12 million a year on security trying to protect our sites, which were not that well protected at all, anyway,” states Khoja.
 
CEO Karim Khoja says Roshan’s priorities for 2009 will be further market segmentation, and improving network coverage and accessibility

As a result, Roshan now runs the most extensive network in the country with 56 per cent population coverage and presence in 222 cities and towns.

Working in partnership with Vodafone and based on the M-PESA mobile payment product that has proved highly successful in Kenya, the Afghani version – M-Paisa – was launched in October 2008. It caters to the 97 per cent of Afghanistan’s 34 million inhabitants who do not have access to formal banking services. M-Paisa provides secure and immediate transfer of money nationwide via a mobile phone, and also allows customers to buy airtime, disperse salaries and repay microfinance loans. This service is even more significant when viewed in light of the cash-in-transit robberies occurring in the capital city Kabul, which have been valued at US$30 million in the past six months alone.

“We launched M-Paisa in October and believe this is going to be a phenomenal product. It’s going to help us reach the ultra-poor, the unbanked, and we think that’s a big deal. However, what we found was that because 70 per cent of the population cannot read or write; users were having trouble filling in the SMS form. We launched an interactive voice response update in early November, where users are now guided through the steps using voice, in either the Dari or Pashto languages,” Khoja comments. “Our M-Paisa service has since been ramping up and we are now receiving about 1,000 registrations for the service each week.”

In addition to further enhancements to the M-Paisa product, Roshan’s priorities for 2009 will include a further segmentation of the market, with a greater emphasis placed on the female and youth segments. The operator is also set to improve network quality and extend coverage to 90 per cent of the population by 2011. So far the cellco has invested US$352 million in its operations, making it the country’s largest direct investor.

By the end of 2008, Afghanistan had almost 33 million people and a mobile penetration rate of 17 per cent, compared to only 800,000 subscribers five years ago.

“If we want to succeed  and continue to grow at  200,000 subscribers per month, continue being the number one operator, and keep driving the business and wealth of the country, we really have to address network coverage, accessibility and availability. It’s our challenge in a hyper-competitive market to maintain market leadership, give back to the community, improve profitability of the business, and to continue to care for the people who are marginalised. We are not just a telephone company,” Khoja says.

This month, Roshan is set to introduce 10,000 laptops under the One Laptop per Child (OLPC) programme, in partnership with Afghanistan’s ministries of education and communications. Each laptop costs US$100 and has been specifically designed for children in developing countries. About the size of a small textbook, the laptop has built-in wireless and a unique screen that is readable under direct sunlight.

“The total number of laptops in the country is about 50,000 – so you can understand why ISPs don’t do very well. Now 10,000 children will have access to these laptops everyday. They offer peer-to-peer communication, have solar panels to recharge the batteries and are drop proof. It’s Linux-base and it has the whole Afghan curriculum in Dari, as well as the Holy Quran on there. We have also customised the keyboard for the Dari language,” Khoja reveals.

He believes that the OLPC programme will seed the youth with a positive association with Roshan, as well as offering the opportunity to bridge the digital divide.

“We paid US$107 million in tax last year, we account for six per cent of Afghanistan’s tax budget. Roshan has a responsibility in rebuilding this country. The light that we bring to Afghanistan is that we can succeed without bribing anybody and without paying the Taliban for people being kidnapped. We can still succeed in giving EBITDA margins back to our shareholders and caring for the people that we are here to serve,” Khoja concludes.

Roshan key facts

Shareholders:
Aga Khan Fund for Economic Development (AKFED): 51 per cent, Monaco Telecom International: 36.75 per cent, TeliaSonera: 12.25 per cent

Subscribers:
2.6 million (November, 2008)

Coverage:
222 major towns and cities, 33 provinces, 56 per cent of the population

Employment:
1,035 employees, of whom 90 per cent are Afghan nationals and 20 per cent are women. Each employee receives US$1,500 in addition to their functional training to receive English or IT training. Staff also receive health, life and disability insurance. In total 25,000 people receive a legitimate means of employment through Roshan’s outsourcing ethos. This includes all dealer shops that operate as franchisees and drivers that own their own vehicles. The average breadwinner supports 15 family members.

Channel development:
Eight flagship stores, 18 national dealers, 2,217 retail outlets, seven nationwide scratch-card distributors, 3,375+ public call offices

Taxes:
US$107 million taxes at end of 2007, equating to six per cent of government’s overall domestic revenues

Investment:
US$352 million as at end-September 2008