Babar Khan Javed
Oct 13, 2017

Alibaba set to enter Pakistan through Telenor Bank

An examination into the logic behind Alibaba's acquisition play.

Alibaba set to enter Pakistan through Telenor Bank

Alibaba has reportedly been taking steps to enter Pakistan.

From meeting with Adam Dawood of TCS Yayvo to making a bid for Telenor Bank, Alibaba is setting itself up for an easy transition into an e-commerce market valued at US$150 million when considering profitable sales.

The reason for acquiring Telenor Bank is to have the largest payment network that is active, has a large footprint and works with a cash-dominant system. The biggest impediment to e-commerce is payments in Pakistan whereas in other markets the issues shift between logistics and warehousing.

For Alibaba to acquire it is akin to eBay entering a market by buying PayPal.

Another reason is that Alibaba has everything: the e-commerce site, item selection etc. What is unique to Pakistan is payments. That's where Telenor Bank comes in. Unless logistics companies are unreliable, they won't make or break an e-commerce company.

In summary, getting money from Pakistanis for online shopping is a larger problem. If the acquisition of Telenor Bank can solve that for Alibaba, the company would have knocked down one of the largest hurdles to entry.

During a National Assembly session on the 2017-18 budget, the finance minister of Pakistan announced the state bank was establishing a US$ 2 million e-gateway for online global payments.

Irfan Wahab Khan, the CEO of Telenor Pakistan, has gone on record to state that the local transactions made through EasyPaisa were valued at US$6 billion in 2016, with 2017 seeing 14 percent increase, accounting for 3 percent of Pakistan's GDP.

Khan predicts that by the year 2020, the e-commerce market in Pakistan will be valued at US$1 billion when considering profitable sales.

Alibaba's acquisition plans are contingent on being cleared by the State Bank of Pakistan and on Telenor's insistence on being the market leader in the FinTech space.

Speculators are bullish, expecting a deal to go through but at a minority stake by the end of 2017.

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