Ross Cormak, CEO, Nawras

Telecoms.com caught up with Ross Cormak, CEO of Omani operator Nawras at the recent GSM>3G Middle East Telco World Summit in Dubai.

What are the main points you will be making in your presentation?

With this new license we will be able to provide a one stop solution to all customers whether corporate, SME or residential. We will also be able to bundle these fixed and mobile services to meet different customer needs. There is a vast unquenched desire for broadband in the Sultanate so over the next few years we foresee a similar growth as we have seen in mobile. Because we shall be utilising WiMAX fixed wireless technology we shall have the flexibility to quickly focus our service availability to meet customers’ fast changing needs.

We are building an extensive broadband backbone network which will take us close to most businesses and all new residential developments in the Sultanate which is critical for providing broadband capacity. Our own international gateway with our own international cables will enable us to provide capacity and choice of quality as well as unique, new value added services.

How is the global recession affecting the Middle East telecoms market?

It appears that the impact of the global slowdown on the telecom market in the Middle East has varied with different countries. I am delighted to say that in the Sultanate of Oman, the impact has been limited. This is due in part to the Government taking bold and inspired steps to ensure the continued growth of the economy including maintaining investment levels for new infrastructure and large scale development projects. Also, with a high ratio of nationals and largely unaffected expatriates, there has been little change in terms of population migration. Finally, as telecommunication has become a basic need, the usage pattern of our customers has not altered to any large extent as they continue to use Nawras to get closer in good times as well as in those less rosy times.

On November 3, local press reported that International Monetary Fund experts had hailed the economic policies adopted by the Sultanate which provided financial ability and helped in the implementation of the development programmes in all fields.

What effect are the first MVNOs to launch having on the region’s mobile market?

Two resellers launched early this year and their initial target has been the expatriate community from South East Asia and to a lesser extent, the youth market. Nawras had already successfully launched Shababiah a year ago to serve the latter segment and with the Sultanate’s mobile penetration already above 100 per cent, the impact of the resellers is seen mainly as an increase in use of multi SIMs. In October, Nawras signed two reseller agreements with Mazoon and Samatel respectively, in what was described as a win-win situation for the newcomers using the reliable Nawras Network.

Nawras continues to see its customer base growing at a very healthy rate and benefits from the knock-on effects of increased advertising and promotional activities attracting greater interest and bringing more attention to mobile services.

With so many Middle East markets exceeding 100 per cent mobile penetration, where do you see future growth opportunities?

Being the first operator in Oman to launch mobile broadband, Nawras has experienced a fast growth in this area during 2009.  Data services together with related content and community services continue to grow rapidly.  The key is to identify the new services that will enhance a customer’s utilisation of mobile technology through a pleasingly different service.  The ability to segment the market and tailor attractive offers is paramount to continue growing value when most of the market is already connected.

Kim Larsen, executive vice president, T-Mobile Netherlands

Telecoms.com caught up with Kim Larsen, executive vice president of T-Mobile Netherlands at the recent GSM>3G Middle East Telco World Summit in Dubai.

What are the main points you will be making in your presentation?

The main points concentrate around technology enablers for achieving operational excellence and efficiencies, which will be increasingly important as the Middle East markets dry up for customer additions and revenue growth reduces. This will lead to demand of opex reductions which might arise from outsourcing of managed network services, network sharing models, joint venture models, regional centralization of service delivery, near- and off-shoring, etc. Tangible examples of technology related efficiency measures will be provided for Network Sharing and various degrees of managed services. Furthermore, it is important to relay the message that although operational efficiency can be achieved they also come at a cost (i.e., restructuring/termination cost as well as integration investments). Finally, I will address what I call the law of small numbers as an important remedy to achieve general cost efficiencies without engaging in the big initiatives such as Network Sharing which is often complex, time-consuming and in the short term also costly. The law of small numbers basically states that most companies can save easily 10 per cent by simply focusing on minor cost elements across the company.

How is the global recession affecting the Middle East telecoms market?

Judging from most analysts it would appear that the global recession’s impact on the telecom’s market in the Middle East will be relatively light with better anticipated revenue and subscriber growth figures than in comparable saturated markets in Europe. In general I believe that the impact of the global recession will be relatively light on growth markets (e.g., Egypt, Iran, Jordan) in the region, while more mature and saturated markets (e.g., Saudi, Qatar, UAE) will be more sensitive to the crisis. Despite that, most economists expect that the region has seen the worst of the recession in 2008 and 2009 and that very healthy GDP growth is expected to become a reality from 2010/2011 onwards. Mature and saturated mobile markets will need to focus on operational efficiencies to mitigate the risk of negative growth effects of the crises (something they anyway would need to focus on given their market maturity).

What effect are the first MVNOs to launch having on the region’s mobile market?

I would expect that overall voice ARPU will come under pressure and should be expected to decline. Further given the relative large foreign workers segment in many markets of the Middle East you will see MVNO’s focusing on this segment possible with the effect of declining roaming revenues for the established operations. It will force established operations to become more efficient and competitive (i.e., many markets today with only two to three mobile operations) with MVNO’s being introduced focusing on customer experience and quality centricity.

With so many Middle East markets exceeding 100% mobile penetration, where do you see future growth opportunities?

Broadband mobile and wireless access revenues will contribute to revenue growth. In most of the Middle East markets it is anticipated that non-voice revenue would compensate any voice revenue decline (although most markets do anticipate voice revenue growth for the next five years).

What can the Middle East communications sector teach the rest of the world’s telecoms markets?

In general one can and should always learn from other market experiences. Given the success of the Middle East telecoms environment it clearly is important to follow this very closely and learn from the success. Clearly emerging Africa markets as well as other emerging markets in the world can learn from the mature Middle East telecommunications markets how to manage steep growth. Further the whole region benefits from a high degree of cultural-religious and linguistic coherence that is un-paralleled in Western Europe and Asia.

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Fortunately, the portfolios of international operations that the bigger players have built up over the recent few years present substantial opportunities for achieving economies of scale.

The Qatar-based Q-tel group has found that its network equipment costs have dropped by 10-15 per cent as a result of centralising procurement following its international expansion, Q-tel CEO Nasser Marafih said at the GSM>3G Middle East Telco World Summit that was put on by Informa Telecoms & Media in Dubai this month. Q-tel expects to make further similar cost savings as a result of centralizing its buying in areas such as roaming, wholesale and value-added services.

Operators that have scale are also better able to move into new service and technology areas, as Q-Tel has demonstrated with its Wi-tribe subsidiary, which specialises in WiMAX operations. Wi-tribe launched services in Jordan a year ago and in Pakistan recently. It will launch in the Philippines in 2010. Q-tel is further taking advantage of that WiMAX expertise by deploying WiMAX in Qatar to offer fixed-broadband services in areas that are not covered by its wireline network. Q-tel’s Omani subsidiary Nawras also plans to use WiMAX when it launches fixed services.

Q-tel is also planning to use managed-services unit Navlink as a platform for offering services to the enterprise market. Q-tel and AT&T each own 38 per cent of Navlink.

In addition, Q-tel is planning to introduce a single brand across its international operations in 2010. Such unified branding is in itself a form of economy of scale.

Etisalat also takes advantage of the economies of scale that come with its scale and international footprint, said Jamal Al-Jarwan, CEO of international investments at the UAE-based group, speaking at the conference. Etisalat has cut costs on the production of its airtime credit vouchers by centralizing manufacture in a single factory in the UAE. Etisalat has also centralized data-clearing and is looking at centralizing back-office functions. And some customer-service calls by Etisalat’s subscribers in the UAE are automatically re-directed to the group’s call-center in Egypt, which is cheaper to run than the one in the UAE because staff and other costs are lower.

International operators can also create roaming services that take advantage of their presence in a number of countries. Zain has perhaps done the most in this area with its One Network roaming scheme. But Etisalat says it plans to create a similar proposition across its operations in Egypt, Saudi Arabia, Sudan and the UAE.
Zain has also of course inked a series of managed services agreements, covering variously its networks in Iraq, Nigeria and most recently, East Africa. Batelco is keeping the costs down on its next deployment, the launch of services in India through its S Tel unit, by leasing all its towers in India from a local company rather than build its own, according to Ghassan Murad, Batelco’s head of mergers and acquisitions. S Tel will offer services in six of India’s rural C circles or mobile license areas, where ARPUs are very low, though mobile penetration is also low.

Vodafone has set up a unit to improve group efficiency by developing products and services centrally, or by transferring best practice between operations, according to Denise D’Elia, international services director at Vodafone Egypt. As a result, Vodafone Egypt will soon introduce a mobile-money service based on the m-Pesa scheme run by Kenya’s Safaricom, in which Vodafone has a 35 per cent stake.

The benefits of that centralization are not restricted to Vodafone-owned operators. Du, the UAE’s No. 2 operator, has a partner-market agreement with Vodafone that allows it to take advantage of the latter’s buying power and product development.

The focus is on improving efficiency but there is still interest in expansion, with Al-Jarwan having also said this month that Etisalat expects to win the third mobile license in Libya shortly. Etisalat is also interested in the planned Syrian third mobile license and in the privatization of Lebanon’s two mobile operators.

But further consolidation among the big Gulf operators is unlikely, because all are to some degree state-owned entities and are seen as national champions. “I wouldn’t see consolidation in the next five years,” said Al Jarwan.

Dr Nasser Marafih, CEO of Qatar-based Qtel

During the opening keynotes for the GSM>3G Middle East Telco World Summit recently, it became apparent that some of the heaviest hitters in the Middle Eastern region are looking to mobile data and other value added services (VAS) to stimulate future growth. Yet this drive will be powered by content because the regional operators are refusing to become so called ‘bit pipes’.

Dr Nasser Marafih, CEO of Qatar-based Qtel made no bones about that fact data has always been a very clear part of the operator’s strategy. “It’s clear that data is an untapped market and it was very important to focus on from the beginning,” Marafih said. “This is the next area of growth in the region – consumer wireless, low speed data services over GSM, and consumer broadband, using 3G and 4G, including WiMAX.”

But Marafih was quick to acknowledge that while data would be a key driver, it will be more difficult to exploit than voice because of the level of competition, not just from rival operators, but also from other internet savvy companies like Google, Microsoft and Apple, muscling in on telco territory.

“What is important is who owns the customers? It’s important for us [Qtel] to keep the customer relationship, we don’t want to become a dumb pipe,” he said.

Yet Marafih acknowledges the predicament that many operators are finding themselves in – the need for partners, much like Google. “We [operators] are good at developing services, but not yet good at building content. So we need to find the right partnerships to deliver value. Content is important, because in the Middle East it is limited. But growth is going to come from content.”

The trick then is finding the right applications to monetise that capacity. As Mark Newman, Informa Telecoms & Media’s chief research officer pointed out, some applications like mobile health and mobile payment services are the most promising means of expanding non-SMS data revenues. An oft cited regional success story is Safaricom’s launch of M-Pesa in Kenya, which in the six months to the end of September 2009, spurred its data revenues on 93.6 per cent year on year, to KES7.2bn ($96.58mn), equating to 17.7 per cent of the operator’s total revenue, up from 10.8 per cent in the six months to the end of September 2008.

Qtel’s Marafih revealed that the operator has a dedicated team looking into such services as mobile health, science and academic information delivery and finance as well as Machine to Machine and Location-Based Services LBS) as they offer a better opportunity for monetisation than those from internet-based service providers.

Meanwhile, Jamal Jarwan, group chief investment officer for UAE-based operator Etisalat, said that in the last two years, the company has introduced more than 15 Value Added Service offerings, including the BlackBerry. In the Saudi Arabian market, where Etisalat operates as Mobily, the firm says that the data friendly BlackBerry has proved a smash hit with consumers, pushing a review on the concept that the BlackBerry is only an enterprise tool.

Sherif Hamoudah, SVP and GM for Middle East, Africa and Pakistan at messaging company Acision, spoke about how to increase revenues without increasing opex and capex at the event yesterday, noting the importance of shifting from traditional ARPU to a ‘profit per megabyte’ model.

“For success in mobile broadband it is clear that operators need to find a way of turning mobile broadband into a profitable, long term, mass market business model,” Hamoudah said. As mobile broadband uptake increases in the Middle East, just as it has in more developed markets like Western Europe, so will the bandwidth consumption on the network, which will eventually present problems for mobile operators.

Regional consolidation derailed by pride

The prospect of consolidation among operators in the Middle East and African region has provided much fuel for the industry rumour mill in 2009. But the collapse of talks involving the disposal of Zain Africa to Indian carriers BSNL and MTNL, as well as those between Bharti and MTN has brought to light a disruptive and persistent level of pride within the operator community.

During a panel discussion on international expansion and geographical footprints at the recent GMS>3G Middle East Telco World Summit, Informa Telecoms & Media’s chief research officer, Mark Newman, asked whether operators are too proud to merge with a rival carrier unless it is a merger of equals.

In response, Jamal Jarwan, group chief investment officer for Etisalat, said: “Regional consolidation very tough because of friction between the two companies, and it is also very difficult to establish governance even in the negotiation process.” Jarwan indicated that in some markets, many companies have a strategy set on expansion, which is detrimental to the merger process.

Just minutes before, Dr Nasser Marafih, CEO of Qtel, had told the auditorium how the Qatar-based carrier had moved to acquire new opportunities as quickly as possible – starting to expand its operations before a second player had even launched in its domestic market, meaning the company was building market share in Qatar while looking for MENA expansion opportunities.

Among the panelists it seems that being number one or number two in a market is a clear requirement for entering that arena. “It’s important to be number one or two, or maybe three, but less than that and it’s too difficult to get market share,” said Marafih.

This stance was supported by Vodafone, which has an innovative strategy for entering new markets with its partner market model. “Vodafone invests in markets as a number one or two player. We may think about being third, but Vodafone has its partner market model, allowing partners to share the brand and introduce new products,” said Denise d’Elia, international service director for Vodafone Egypt.

Wind of change lifts Middle East MVNOs

Following the launch of the Middle East region’s first MVNOs – Friendi Mobile and Renna in Oman earlier this year – winds of change appear to be blowing through a market once reluctant to accept virtual operators.

The Sultanate of Oman is certainly leading the charge, having signed yet another MVNO agreement with Mazoon Mobile in October, a service provider which entered its third week of operation as the recent GSM>3G Middle East Telco World Summit kicked off.

“The mentality of the incumbent operators has shifted a great deal and perception has changed,” said Mohamed Al Hashili, CEO of Mazoon Mobile, which piggybacks on the Nawras network. “So today we are true partners, working hand in hand for the benefit of both parties.”

Mikkel Vinter, CEO of Friendi, which started operations in partnership with Oman Mobile earlier in the year, supported Al Hashili’s remark. “The whole attitude towards the MVNO model has changed in a positive direction in the past year. Operators now more open to discussing deals and we are able to engage with operators across the region,” he said.

Regardless of whether they are open to the MVNO model, operators are certainly curious. Speaking on the panel discussion on the Impact of MVNOs in the Market Place yesterday, Phillippe Vogeleer, chief strategy officer for Orange Jordan, agreed that the sentiment towards MVNOs has changed, but perhaps not for the same reasons.

“Looking at Oman gave us something concrete, something tangible to study,” he said, admitting a positive outcome from this research. “We thought that maybe in some markets segments we are not as effective as we could be and we could use someone to help us.” This is where the MVNO, which typically targets niche markets underserved by the network operators comes into play. “But the fear is that the MVNO could go from helpful as a way to target niche markets to being very successful and even become a competitor.”

Convergence is here, cost efficiency is next

As mobile data usage continues to skyrocket, the challenge going forward is to sustain this stellar growth in a cost effective manner.

According to David Banjo, head of research, technology and platforms at heavyweight infrastructure vendor Nokia Siemens Networks (NSN) fixed network traffic is set to increase by a factor of ten this year alone, while mobile is expected to increase by a factor of 28.

Against a background of economic crisis, Banjo warned that it is more crucial than ever for service providers to understand and manage their customer experiences if they are to retain subscribers and generate profits. To this end, service providers need to pay attention to customer service, quality of service, cost and billing. And real time user profiling is also vital to help operators understand their users’ behaviour, preferences and usage patterns, such as the time of day a user makes a call, the location, and the application she or he uses.

These elements will be further facilitated by the deployment of next generation technologies such as LTE. Ihab Ghattas, assistant president for Huawei in the Middle East, expects a smooth migration from GSM/UMTS to LTE, with the technology eventually encompassing 85 per cent of the mobile world. Huawei expects 450 million LTE subscribers by 2015.

“Many elements from previous technologies will disappear,” Ghattas said, “making way for the simplified flat architecture of LTE.” Huawei expects the first commercial deployment, or at least trial, of LTE in the Middle East to take place in 2010.

Jay Srage, vice president of business development for the Middle East at chip vendor Qualcomm, added, “Now we need to focus more on the services side because technology is already at the leading edge.” According to Srage, the types of content and applications to be made available are as important as the devices – a sentiment that was echoed by Qtel chief Nasser Marafih.

Indeed, it is the services that pose a far more interesting question than the technology. “The move towards 4G highlights one important fact – convergence of fixed and mobile is finally upon us. The driver is broadband. Mobile is moving towards a broadband model in the longer-term, where the differentiation of basic functionality and services between fixed and mobile becomes blurred,” said Michael Kovacocy, telecoms analyst and sector strategist, Daiwa Securities. “That net neutrality – an issue first made relevant in a fixed-line context – is now being discussed within the context of mobile should serve to highlight that the lines between fixed and mobile have diminished. Whether it be Google and Skype in a fixed or mobile setting is increasingly an indistinguishable point.”

A Dubai Metro station

United Arab Emirates-based operator du has announced the launch of the first mobile WiMAX network in the Emirates.

The network launched in Dubai, which played host to the recent 14th annual GSM>3G Middle East Telco World Summit, and is available on the recently launched Dubai Metro both in stations and in carriages.

When completed, the Dubai Metro will be the longest fully automated rail transport system in the world. The Red Line, which is 52km long, is already functional and is expected to be followed by the Green line in early 2010. Once completed, the Metro will have 47 stations, four of which will be underground.

Using infrastructure supplied by Motorola, du will offer users wireless internet access whilst travelling on the metro at speeds of up to 90km per hour via wifi. The WiMAX element will be used for backhaul. Motorola’s involvement in the deployment of the network included network design, installation and optimization in order to ensure peak performance for nomadic data services to mobile customers across the Dubai Metro system.

“Offering city-wide internet access on the Dubai Metro is part of ongoing efforts to ensure our customers enjoy the convenience of exceptional connectivity, on-demand, wherever they travel,” said Hatem Bamatraf, senior vice president, network development, du.

WiMAX is gaining some traction in the Middle East, where it is being used to extend wireless coverage in areas with low fixed line broadband penetration and difficult territories to serve with cellular broadband.