Apichart Weerawong/AP

Afghanistan’s Rising Export Is Not Opium – It’s Telecoms

Roshan Telecom is Afghanistan’s newest growing export, giving hope that the war-torn nation can move beyond opium and rebuild its economy. By Leo Mirani

The largest mobile network operator in Afghanistan is not a multinational company. Or it wasn’t until this month, when Roshan Telecom took its network to Uganda, Burundi and Tanzania. That makes telecoms Afghanistan’s most high-profile export after opium .

Roshan Telecom was born in Kabul in July 2003. Its headquarters remain in the Afghan capital. Its name, Roshan, means “light” in Dari and Pashto, Afghanistan’s two biggest languages. Altaf Ladak, the firm’s operations chief, says the plan was to call the network balle, the term people use when they answer the phone. But when they asked people to name the network, the overwhelming response was roshan , which can also connote hope.

It is a name that has lived up to both its meanings. In 2001, the year the war began in Afghanistan, some 80,000 of Afghanistan’s 21 million people had access to a telephone (pdf), and 25,000 of those used satellite phones, Roshan estimates . In 2002, when the first mobile company started operations, a SIM card cost $250, according to a USAID report on Afghan telecoms (pdf).

Roshan’s network now covers 60% of Afghanistan’s population. A third of the country’s subscribers are Roshan customers, giving it the largest market share of the five mobile network operators in the country. And there is plenty of room yet to grow. Though the Afghanistan Telecom Regulatory Authority puts telephone penetration at 72%, Ladak says the proportion of people with phones is probably half that. Afghans, like their counterparts in the rest of the poor world, own more than one SIM card to take advantage of different rates and packages. That should mean there are millions of Afghans yet to connect.

When the money leaves

But growth is slowing. After scooping up big chunks of the market for most of its early life, Roshan has seen its subscriber growth dip to between 2% and 3% a year over the past three years. Revenues are flat. The Afghan economy is in the doldrums. GDP growth has fallen from over 14% in 2012 to just over 3% in 2013. The currency has lost nearly a tenth of its value since the start of 2013, hitting domestic purchasing power and stoking inflation.

Moreover, as international troops leave the country, they take their spending power with them. And the impending withdrawal of the last of the American forces still in Afghanistan later this year, coupled with presidential elections next month, has created a sense of uncertainty about the country’s future. Afghan business people are moving their families out until things settle down, says Ladak. He sees 2014 remaining flat but expects growth to return in 2015, once things have settled down somewhat and the future looks less uncertain. But the company sees this as a chance to expand.

Another way to look at ”business development”

Africa does not need another mobile operator. The continent is full of multinationals attracted by the huge population and untapped opportunity. The result is a crowded, difficult market in which price wars are common. Burundi, one of the three countries Roshan is entering, already has five other operators. So does Uganda. But like in Afghanistan, millions still have no telephony. Real penetration in Uganda is below 50% .

Roshan’s intention is not to go in and barnstorm East Africa. “We are not there to be number one in two or three years. We’re looking at a longer-term play of developing infrastructure and focus on rural parts of the country,” says Ladak.

These are sentiments one hears more often from charities than profit-seeking companies. Roshan is not a charity. It was set up and is majority owned by the Aga Khan Fund for Economic Development (AKFED), the for-profit arm of the Aga Khan Development Network. (The rest is owned by Sweden’s TeliaSonera and Monaco Telecom.) Despite a basic tariff of 2.5 afghanis ($0.04) per minute for a voice call, it boasts an average revenue per user—an industry standard for measuring revenue—of $4-$5 per month, higher than the average in richer countries like India. It is profitable. Ladak says Roshan has contributed over $400 million in taxes to the Afghan government in the past decade. That’s a goodly share of the revenues from the entire telecom sector:

But for the AKFED, and therefore for Roshan, profit and development go hand in hand. The very process of setting up a mobile operator in Afghanistan meant pursuing development: “When we had to go build towers, we would have to de-mine every single location we put towers on. In some cases we had to build roads just to get access to the site we wanted. One of the sites we built was at Salang Pass, in the mountains in the central Afghanistan,” says Ladak.

Operating and securing the sites likewise created development opportunities. Roshan quickly realized that paying for security for all its cell towers across the country would drive the company out of business. “So we went to communities and asked them to provide security to our sites. We pay them bonuses on a quarterly basis. That’s been our strategy and it’s been very successful,” says Ladak. Not counting community security, Roshan now employs 1,100 people, 97% of whom are Afghans. A fifth are women. Indirectly, it employs some 30,000.

Roshan’s development takes other forms too. One example is the high-speed telecoms links it provided between the Aga Khan University in Karachi, Pakistan, with the French Medical Institute for Children in Kabul, which is also overseen by the Aga Khan Development Network. This is the model Roshan wants to take to Africa; Ladak is less interested in immediately capturing big chunks of the market and more focused on connecting the Aga Khan’s institutions—schools, hospitals—in east Africa.

Afghan’s got talent

But Roshan will still need to make a profit. For that it can draw on lessons learned in Afghanistan. Many of them would be good lessons for its counterparts in other parts of the poor world.

Foremost among these, perhaps, is that 3G data and services such as ringtones and caller tunes make money, even in a very poor country. When Roshan launched 3G services last year, the demand took it by surprise. Perhaps it shouldn’t have: Afghans, like anyone else, enjoy entertainment and music.

Some 600,000 subscribers, or 10% of Roshan’s total customer base, now use 3G. Their top destinations are—yes—Facebook, YouTube and news websites. Another 300,000 or so use non-voice services such as music downloads, most of them Bollywood movie songs. (Indeed, there is even an unofficial Apple store in Kabul .) Roshan also offers services like live streaming from Mecca during Ramadan and the Hajj pilgrimage, which Ladak says proved extremely popular.

The company is also diversifying. It provides communications links to banks and and other business; it runs training and call-center services for big organizations such as a local airline; and it is looking into establishing data centers and internet service providers. Even in its core business, voice telephony, it has been gathering more data on usage so it can understand its market better.

Roshan also sponsors Afghanistan’s Got Talent and Afghan Star , the local version of American Idol . “What we’re showing is that we are helping bringing the culture of Afghanistan back and giving people a voice. In the Taliban’s time people were not allowed to dance and sing or listen to music. This was an opportunity for them to go back to their roots and show Afghan culture,” says Ladak. Such moves, though commercially motivated, helped Roshan endear itself to Afghans. They also, he says, helped allay animosity that might arise from the company’s Ismaili roots in a predominantly Sunni country.

Mobile networks cover 88.5% of Afghanistan’s population. USAID

In Africa there are cultural sensitivities too, but of a different kind. For instance, the company will lose the name Roshan in east Africa. While used in Dari and Pashto, roshan is also found in several Indian languages. Historic tensions between the black and Indian population in east Africa mean that it’s best to steer clear of anything that might sound like it comes from the subcontinent. Instead the company once again asked people to suggest a name. The network will be called “Smart.”