Being innovative and decisive: The keys to capturing the growing ‎telecommunications market in the MENA region

Telecommunications Leaders Summit finds opportunities and ‎challenges for the industry’s regional players.‎

Dubai, UAE, 20 January - The recent Booz & Company Middle East ‎Telecommunications Leaders Summit at Madinat Jumeirah Dubai, bringing ‎together senior leaders and thinkers from telecommunications operators ‎around the globe, uncovered a number of opportunities and challenges for ‎the telecommunications industry in the Middle East and North Africa ‎‎(MENA) region.‎

The industry in the Middle East and Africa is growing at a phenomenal ‎pace, and as such, many challenges and opportunities are likely to arise ‎from this relatively young market. For example, the subscriber base for ‎mobile users is expected to double over the next 10 years. Users numbered ‎‎200 million, in 2007 are expected to reach the 400 million mark by 2017.‎

The growth in the subscriber base for mobile users is paralleled by the ‎escalating intensity in business development for telecommunications ‎operators, whether in the form of acquisition of new licenses or existing ‎operations regionally and internationally. ‎

Over the past three years in fact, more than USD 55 billion has been ‎registered in merger and acquisition transactions in the industry, both from ‎and within the region, with a year-on-year growth of 20%.‎

Market capitalization of the Middle East telecommunication sector means ‎operators are now firmly entering into the top 20 rankings globally, due to ‎the number of developments and advancements in the industry. MENA ‎telecommunications operators are additionally well positioned to capitalize ‎on further expansions in the coming years, providing an excellent ‎opportunity for business growth.‎


The move to privatization

The MENA region in general is also heading towards further privatization, ‎as governments continue to disengage as shareholders from the ‎telecommunications sector. In many cases, the government remains the ‎largest single shareholder with stakes ranging from 80% for Telecom ‎Egypt, 70% for Saudi Telecom and Omantel, 60% for Etisalat (UAE), and ‎‎40% for du (UAE) and 37% for Batelco (Bahrain). ‎

This, like the case with many of the increasingly liberalized industries in ‎the region, is likely to change in the coming years. In October 2007, Oman’s ‎government declared its intention to sell part of its stake in Omantel to a ‎strategic partner, which is likely to set a precedent throughout the region.‎


Facing the challenges

During the summit, industry leaders and senior Booz & Company ‎consultants cited that despite the strong growth of the industry, there are a ‎number of challenges that the region’s operators face. A summary of these ‎main challenges follows below:‎

  1. Maintaining leadership in the home market, the summit found, ‎remains the top priority for the main operators, even as they ‎engage in successful regional expansion. Successful leadership is ‎manifested in terms of both market share and operational ‎excellence, and is applicable to all market segments whether in the ‎low or high end.‎
  2. Customer Segments that form the market are another major challenge ‎for operators, as they have increasingly distinctive requirements ‎that require customized solutions. Operators realize that offering ‎the same package and mix of solutions will differ greatly, for ‎example, between a technology-savvy young user and an older ‎customer. Therefore, telecommunications operators must strive to ‎define and serve these segments in a sustainable manner.‎
  3. Business emphasis is gradually shifting to usage-based relationships ‎where customers interact with their telecommunications devices ‎through multiple formats of communication and where they expect ‎different services to be grouped together seamlessly. ‎
  4. Content is another general requirement playing a growing role in ‎the communications habits of customers. As such, ‎telecommunications operators are pursuing various partnership ‎and alliance models with content companies, to develop a desirable ‎service offering to users that is localized, geared to users’ ‎individual tastes and part of an attractive package.‎
  5. New and next generation technologies, the summit agreed, will allow ‎operators to provide operational excellence and garner cost ‎benefits, as well as unlock the potential of new revenue streams ‎built around content and a closer relationship with subscribers. ‎There is increasing evidence that the telecommunications industry ‎will shift from one focused on infrastructure, to one focused on ‎building the brand and services, accompanied by operational ‎excellence.‎
  6. Synergies from regional and international expansions are achievable ‎through proper leadership and management, and with a ‎consistency in the operational processes. Such expansions are also ‎considered by telecommunications operators as a springboard to ‎develop the next generation of managers and leaders among ‎nationals, by strengthening their local market.‎ 
  7. Developing and nurturing human capital is a key priority for all ‎operators, in addition to instilling a cohesive and inspirational ‎working culture. This development must be backed by a proper ‎investment in technology, to ensure that operational excellence, ‎alongside efficiently working resources, can be achieved.‎ 
  8. Dealing effectively with regulatory regimes is a key challenge, as ‎regulations in the industry are evolving at a rapid pace and creating ‎considerable challenges and evolutions in the industry. MENA ‎operators are often called to deal with new regulatory ‎environments that are introduced in a 2-3 year window, while ‎comparable regulatory changes in Western markets are often given ‎much longer lead-times. ‎ 
  9. Another significant challenge is the increased competition in the ‎industry. This competitive pressure will require operators to ‎effectively adapt their operating models to take advantage of new ‎revenue streams and drive cost efficiencies for success.‎


Conclusion

Participants in the summit agreed that the industry is continuing to evolve ‎at a very fast pace, which throws up a number of challenges, much faster ‎than is often anticipated, but also offers a number of significant ‎opportunities. ‎

In order to capitalize on the opportunities in the changing industry, ‎telecommunications operators must continue to innovate, take an early ‎lead in their service offerings and be decisive. The outlook in the MENA ‎region continues to be strong, and growth will be achieved through gaining ‎new customers, offering new services, and in general capitalizing on the ‎growing role of telecommunications in people’s everyday lives.‎

Among the regional attendees to the event were Mohammed Omran - ‎Etisalat Chairman, Osman Sultan - du Chief Executive Officer, Dr. ‎Mohammed Al Wahaibi – Omantel Chief Executive Officer, Peter ‎Kaliaropoulos - Batelco Chief Executive Officer, Deepak Padmanabhan - ‎Emirates International Telecommunications Chief Executive Officer, Jassem ‎Al Zaabi – Yahsat Chief Executive Officer, Jameel Abdullah Al-Molhem – ‎Saudi Telecom Vice President and Head of Mobile Business Unit. ‎

The event also included industry leaders from Europe namely Kaj Uwe ‎Ricke – ex CEO of Deutsche Telekom and Supervisory Board Member of ‎Generali/Telekom Italia, Anne Bouverot – Senior Vice President ‎International Development France Telecom Group, Dr. Erich Gnad - ‎Director of Mergers and Acquisitions, Telekom Austria, and Hatem ‎Dovidar - Chief Executive Officer Vodafone Partner Markets‎