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

The recent Booz Allen Hamilton 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 Allen 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.