Roshan Telecommunications (Afghanistan) – Private Enterprise Winning where Developmental Aid has Failed

Within the massive numbers of development project failures in Afghanistan since 2001 Roshan Communications stands out as one of the only success stories. It is even more impressive since it has made a profit since its sixth month in operation. This essay examines how this private enterprise’s success stems from a well aligned long-term business and operational model.

Since the fall of the Taliban in 2001 developmental aid to the country of Afghanistan has been one of the most expensive failures in history. According to the US Special Inspector General for Afghanistan, from 2001-2012 the United States Agency for International Development alone had spent 100 billion dollars for economic development. Despite this influx of capital, Afghanistan remains ranked at the bottom 5% of the world in per capita Gross Domestic Product . More significantly, this massive use of resources has failed in its primary objective of generating popular support for the Kabul-based government. Within this morass of project failures Roshan Communications stands out as one of the only success stories. This essay examines how this private enterprise’s success stems from a well aligned long-term business and operational model.

Roshan

Uniqueness of the Roshan Telecommunications Business Model
Roshan, Pashtu for “light” and “hope”, was founded by Karim Khoja in 2002 with the express purpose of “to spearhead economic development and to facilitate greater social cohesion in Afghanistan through the introduction of accessible telecommunications technology.” Under the guidance of its major investor, the Aga Khan Fund for Economic Development, the firm’s business model aimed to achieve profitability and also to serving as a long-term driver of economic development. Over the past ten years the company has expanded to 230 cities and villages in all 34 provinces and has been profitable since their sixth month. In this process they have become the single-largest private investor and taxpayer within Afghanistan contributing over 5% of the government’s domestic revenue. Integral to their success has been successful with their commitment to social development. While Roshan was not the first telecommunications company in Afghanistan, they are the most successful and a key driver in their ability to gain and maintain market-share stems from their success in marketing themselves to the Afghan population as integral to the social fabric.

 

Telecom Networks 2013Taliban Control 2015

(Top) Cell tower Construction by company within Afghanistan as of 2013

(Bottom) United Nations Data on security risk level within Afghanistan’s Provinces

Operational Model for Roshan
Building a telecommunications network in Afghanistan has multitude of challenges but the three preeminent ones are lack of a skilled workforce, security issues throughout the country and total lack of existing distribution networks or infrastructure. The Roshan operational model addresses each of these shortfalls in ways that align with their overarching business model

Train a skilled local workforce with external assistance
When Roshan began hiring for employees they rapidly found out that the Afghan educational system, which had languished under the Taliban, was ill equipped to provide the required engineers. After initial frustrations the Chief Technology Officer decreed that “if a candidate could speak some English and turn on a computer, he would be hired.” Roshan than leveraged international experts to provide on the job training but the core employee base was Afghans and the company was able to market this fact in their to portraying themselves as a national resource. In a measure of this success as of 2012 they directly employ more than 1,300 people and indirectly contribute to the employment of 30,000 more through their vendors.

Leverage community status, not arms to ensure security
Throughout Roshan’s history Afghanistan has been one of the most violent places in the world. However, despite the Taliban regaining influence outside of Kabul, Roshan has been able to progressively reduce its expenditures on security. Much of Roshan’s protection from the Taliban has stemmed from its broadcasting via media campaigns and word-of-mouth of its assistance to Afghan communities. In this regard, the Aga Khan Fund’s business model of providing aid to the community tied exceptionally well with Roshan’s ability to portray itself as a national asset for the Afghan people. This same community focus was applied down to the most tactical level. For example after an increase in attacks on towers in 2008 Roshan enhanced local relationships with the community to secure its infrastructure, rather than adding armed security. Through putting responsibility on organic local community leaders, rather than third party contractors to secure Roshan property the company was able to actually drop security costs, decrease attacks and put more money into the community. Being seen as a community asset also enabled Roshan to decline paying bribes to either corrupt officials or the Taliban, which cost other competitors time, capital and credibility.

Harness foreign expertise to build but utilize organic distribution network to capture value: 

While Roshan’s marketing focused on the company’s assistance to the community they leveraged resources of their investors to rapidly expand their cell network. Through partnerships with Monaco Telecom International and TeliaSonera they had the expertise and funds necessary to rapidly build up their capacity and capture market share through networking effects . In keeping with their local focus however they created the far more visible distribution network by motivating preexisting local trade networks to sell pay-as-you go cards. Through extending small loans to traders, and offering substantial margins to these key influencers Roshan further ingrained its services to the community.

Afghan Telecomunications Penetration

Combining Operational and Business Models
Today Roshan is the dominant player within a robust Afghan telecommunications sector. Roshan continues to be profitable and operationally successful largely because Afghans, including the Taliban, perceive the company’s business model as performing a greater good for the people of Afghanistan. While since 2008 the market has become increasingly competitive, Roshan continues to reinforce its position through reinvesting its profits into infrastructure in even more remote areas and additional social programs. The company has constructed playgrounds, often in contested areas and invested heavily in education through the One Laptop Per Child Foundation. More recently they have expanded into data and money transfer services to address underserved markets within the country . While these programs in the short-term are not operationally profitable, they reflect the continued manner in which a company with a longer-term business plan can differentiate itself from peers to gain a competitive advantage. Moreover, they illustrate how a company with well aligned business and operational models can succeed in creating development where billions of dollars in donor money continue to fail.

 

Works Cited

Afghanistan: CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/af.html accessed 4 December 2015

Afghan Telecoms Status. Online http://discourse.apn.af/state-telecoms-internet-afghanistan-glance/ Accessed 07 December 2015

Bishop, March personal interview conducted on 9 December 2015

Brinkley, Joel “Money Pit: The Monstrous Failure of US Aid to Afghanistan” World Affairs January/February 2013 http://www.worldaffairsjournal.org/article/money-pit-monstrous-failure-us-aid-afghanistan accessed 2 December 2015

Leonard, Herman and Dhani, Qahir “Roshan: Light at the end of the tunnel in Afghanistan” Harvard Business School Case N1-310-041, President and Fellows of Harvard College 7 October 2009

Nordland, Ron and Goldstien, Joseph “Afghan Taliban’s Reach is at it’s Widest Since 2001” New York Times 11 October 2015. Online.  http://www.nytimes.com/2015/10/12/world/asia/afghanistan-taliban-united-nations.html?_r=0 Accessed 04 December 2015

“Roshan Recognized As Company With A Conscience In Afghanistan – With New Benefit Corporation (B-Corp) Status” PR Newswire Europe 7 February 2013.

Susan, Adam “16 Companies Considered ‘Best for the World’” Forbes.com 14 April 2015 accessed 07 December 2015

 

 

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2 thoughts on “Roshan Telecommunications (Afghanistan) – Private Enterprise Winning where Developmental Aid has Failed

  1. Very interesting! In conflict-ridden areas, it is extremely hard to sustain a business, especially a start-up. I am impressed by Roshan’s ability to leverage the local community and existing players, like local trade networks, in its operating model. I love that they focused on non-profit initiatives for children, which not only have a positive social impact, but also generate great PR for the firm. In addition, it sounds like human capital plays a key role in Roshan’s success. This reminded me of India’s ITC eChoupal, where local leaders are hired and the company provides all the necessary training to develop these individuals. The direct and indirect benefits to customers help weave Roshan into the fabric of the community. I would also be curious to know if Roshan established any political connections or provided “facilitation payments”, in order to grow their business.

  2. Great article Trevor. I didn’t realize that foreign aid to Afghanistan was considered to be so ineffective – this must be a concern to taxpayers and administrators. Do you think that Roshan’s success is a one-off, or are there lessons learned from this company that could be applied to other initiatives in Afghanistan? If they have figured out a winning combination that is applicable to other projects supported by foreign aid, there may be the potential for this knowledge to be leveraged to increase the efficacy of the financial contributions

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