Being innovative and decisive: The keys to capturing the growing telecommunications market in the MENA region (page 1 of 2)

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.