Interview with Jamal Nasir Khan, CEO, Supernet Limited

‘Cybersecurity challenges have increased manifold in our hyperconnected world’

Jamal Nasir Khan is the Chief Executive Officer of Supernet Limited & Supernet Secure Solutions (Supersecure). Previously, he served as the CEO of QUBEE, a wireless broadband operator. Jamal has over 30 years of technical and executive management experience in IT, Telecoms and Cyber Security. His expertise covers setting up and operating telecommunications networks (voice and data) from ground zero. Jamal has also served as member of the National Advisory Board for Information Technology under Pakistan’s Ministry of Information Technology & Telecommunications. He has a degree in Electrical Engineering from N.E.D University and an MBA (with major in Finance) from IBA Karachi.

BR Research recently interviewed the Supernet CEO on the company’s core business, recent financial performance as well as the company’s plan to raise equity from investors at the Pakistan Stock Exchange. Selected excerpts are produced below:

BR Research: What are the core service offerings at Supernet Limited? And what is the management strategy to create a competitive advantage in those offerings?

Jamal Nasir Khan: Supernet Limited, which is a fully-owned subsidiary of Telecard, is a telecom company that has been providing tailor-made connectivity solutions and services to our customers across Pakistan, ranging fromfrom Enterprise, Banking and Telecom to Government and Defense sectors.In 2018, we decided to expand our solutions and services from ‘connectivity’ to ‘beyond connectivity’ domain to cover IT Infrastructure, Power, Solar and Cyber security solutions and services. This was done in anticipation of increase in demand of ICT infrastructure and Cybersecurity requirement from corporate and government sectors due to their increasing adoption and dependence on digital systems and connectivity. This initiative has received tremendous response from our customer base of more than 600+ customers. As a result, Supernet has positioned itself to be “one-stop-shop for all ICT needs” for its customers.

BRR: Telco’s and banks/financial-services/energy/health/education providers are among Supernet Limited’s major customers, providing more than 90% of the topline. How has the growth been for the firm in these customer segments during the pandemic?

JNK: As you know, in the early days of the lockdown, there was complete uncertainty, and except for banks, hospitals, pharmacies and grocery stores, rest of the businesses were closed. The most critical industry to come out in that period was the telecom industry, to provide connectivity to businesses, banks and consumers. As a result, new customers approached us for their connectivity requirements; in addition,existing customers asked us to upgrade their capacity and links to conduct their businesses online.

One of our solid customer segmentsis the telecoms segment, where we provide backhaul services to our telco / mobile operators. We saw repeated requests for network upgrades during the pandemic, which was primarily because of the robust demand faced by mobile operators. Due to increasing reliance on online commerce and work-from-home during the pandemic, many companies needed robust connectivity infrastructure and secure network. As a result, we saw tremendous growth during the pandemic in our ‘beyond connectivity’ portfolio.

BRR: What are the prospects for ‘beyond connectivity’ segments such as cybersecurity in Pakistan?

JNK: Pakistan is going through a digital revolution, and the pandemic has helped to accelerate digital adoption, e-commerce, online consumer payments etc. There has been increased digital spending in the public and private sectors. While automation has tremendously enhanced productivity and efficiency in the operation of businesses, the challenges related to cybersecurity, on the other hand, have increased manifold in our hyper-connected world. Globally, the year 2021 broke all records in terms of data theft, network breaches and sheer number of cyber attacks on individuals, companies and governments. The demand for robust cybersecurity solutions, therefore, is increasing in tandem.

Supernet Limited envisaged this scenario three years ago, when we established a separate entity with the name of Supernet Secure Solutions, which is a managed security service provider. And it’s now become an established brand name in Pakistan. During FY21, we had ‘beyond connectivity’ revenues of Rs607 million, which we expectto grow to Rs951 million in FY22. For this business, we already have orders worth Rs1.3 billion on consolidated basis and Rs1.1 billion on standalone basis, which shows confidence of our customers on our abilities to deliver projects.

BRR: Cyber-security is a specialized field. Where is the market’s demand coming from? And what is the availability like of qualified human resource?

JNK: As the momentum of automation and online businesses is accelerating in Pakistan, cyber-attacks, incidences of breaches, digital frauds, banking frauds, identity theft, payment frauds, etc. will increase locally as it is happening world over. It was envisaged by Supernet leadership that demand of cybersecurity services will increase exponentially locally as well as globally and businesses would like to either manage their cybersecurity requirement themselves by purchasing cybersecurity solutions or will outsource its management as well. Therefore, there is a genuine requirement of a dedicated managed security service provider in Pakistan to serve this demand of solutions and services.

Supernet Secure Solutions Pvt. Ltdwas, therefore, launched in December 2018. We have seen many such breaches in Pakistan since then, and many of them became public news as well.As for human resource, we have a very talented technology / engineering team of more than 200 engineers, and many of them have been trained and have acquired certifications in the fields of firewalls, end-point, deep-security, vulnerability-assessment, Pen testing, SOAR and SIEM solution and services, etc. We have a dedicated Security Operation Center which provides monitoring and alert services 24/7/365 for our managed security customers.

One of the key challenges globally and locally is the dearth of cybersecurity professionals in the market. This is resulting in outsourcing opportunities. One of the areas that we are targeting is to get outsourcing projects from the international markets as well in the cybersecurity domain.

BRR: What are your views on the policy landscape impacting basic connectivity as well as value-added connectivity services in Pakistan?

JNK: Progress in areas like broadband availability and e-commerce market is helped by policy initiatives like the Digital Pakistan Policy, National Cybersecurity Policy, Cloud Policy, etc. These policies are pivotal for businesses to invest in this market. In the public sector, the National Cybersecurity policy provides guidelines to sector regulators to digitize and secure their relevant domains. There is a lot of awareness as well as a serious push from the government to not only digitize systems but to also ensure cybersecurity. Policy now needs to incentivize optic-fiber networks in second-tier and third-tier cities, as high-speed broadband is only available in selected areas of major cities.

BRR: As per Supernet Limited’s Information Memorandum (IM) for raising equity from the PSX, during FY21 the firm’s revenues grew in such a way that the firm became less dependent on its ‘data networking’ business segment while improving revenue share of ‘equipment and license’ and ‘turnkey project. What are the key factors that brought about this shift towards a more diversified topline?

JNK: This shift has come about after lots of hard work, training and business development efforts. The results are especially strong in the form of higher revenues from ‘beyond connectivity’ segments, solutions, and projects.

BRR: In real terms (adjusted for inflation), the Rs2.468 billion in unconsolidated revenues reported for FY21 are actually lower than Rs2 billion revenues reported in FY17. Why do you think topline growth has lagged over past five years?

JNK: There have been several factors at work. First, while there has been inflation, the consumer price of connectivity services has been falling. There has been cutthroat competition, which didn’t let us pass inflationary impacts. Second, overall bandwidth cost has decreased due to technological advancements. And third, the taxation system had been such that whatever we were earning was being paid out in taxes due to 8 percent minimum tax on revenues.

BRR: Based on information in the IM, Supernet Limited’s net profit jumped significantly to Rs202.692 million in FY21, about ten times what it was in FY20. What were the main reasons behind it?

JNK: The answer to this question is linked with the previous question: the 8 percent minimum tax rate. Previously, the government in 2015 had taxed the services sector at 8 percent of revenues, as minimum tax. All our customers are corporate customers, who used to withhold 8 percent of their payment to us. Back in FY20, Supernet Limited’spre-tax profit was Rs219 million, on which minimum tax was Rs199 million, so the profit after tax was Rs20 million. So whatever we were earning, the minimum tax was eating it up. During FY21, the government provided a relief to the IT and Telecom sectors where the tax rate was reduced from 8 percent to 3 percent. This helped raise our bottomline significantly. Besides, profits from ‘beyond connectivity’ segments have also been coming in strong.

BRR: What are the main reasons behind raising equity of roughly half a billion rupees at the PSX?

JNK: The reasons of raising equity from the stock market were several. First, we wanted access to the capital markets, as Telecard, which owns 100 percent of Supernet Limited, needs to unlock Supernet’s value. Second, we see a lot of growth in the future that will double our revenues in next two to three years – and for that, we need external funds to finance our growth.We would also be looking towards raising debt in the future, if required, to meet the growth requirement.

BRR: Why has Supernet opted to be listed on the Growth Enterprise Market (GEM) Board at the PSX by offering shares only to accredited investors, instead of getting listed at the main board of the PSX by offering equity to the general public?

JNK: We felt that by applying for listing on the GEM Board, we would be able to quickly meet regulatory requirements, compared with the main board. Our aim is to go to the main board, but we will do it step by step.

BRR: You are still going ahead with the listing despite the negative sentiments prevailing at the bourse.

JNK: We are getting solid response from our customer base in terms of orders and projects. The good thing is that the money we are raising is to meet requirements to execute the projects and business that we already have in hand. The purpose of raising these funds is to meet our commitments with the customers, increasing the working capital needs for the ‘beyond connectivity’ initiative and invest in network infrastructure. If the market was really good, we wouldn’t be offering our shares at a low price relative to peer comparison. Our offer is very competitive, and we hope to further unlock Supernet’s value once we go to the main board at the PSX.