Capturing the benefit of media and telecom convergence in the GCC (page 4 of 4)

Expertise in supply chain management and after-sales service is key, especially for devices with short life spans, such as mobile handsets," said Mourad.

Content Economics

Telecom operators derive revenues from content, based on content usage and end-user prices. Most telecom operators in the region traditionally followed a revenue-sharing model with their content providers, but operators are increasingly pushed to take on the full demand risk by acquiring such content in a simple one-off transaction - especially for premium content.

As a result, economies of scale will become increasingly important in the regional content game. In order to achieve scale, operators may decide to resell their acquired content to other non directly competing players across the Middle East - facilitated by the relatively homogeneous preferences and cultures across the Arabic-speaking Middle Eastern countries.

"We estimate the size of the content market delivered through telecommunications channels in the region will reach around $750m by 2010, up from the current level of less than $400m. While currently more than 99% of these revenues are mobile specific, we expect the share of triple play services to grow to about 6% of the overall market by 2010. Overall, the value of the content market will not likely exceed 3% of the overall revenues of telecom operators. The role of content services should be seen as a means of creating a differentiated competi¬tive advantage aimed at safeguarding core revenues and profits, but content alone, how¬ever, is not expected to become a considerable source of revenue growth for telecom operators," Halaoui commented.

Conclusion

The key to success is in execution, and will require significant capability development and joint activities with traditional media players.

Operators could choose between developing the required capabilities in-house or acquiring existing experienced entities.

Alternatively, creating joint ventures with media players could be a solution for consolidating talent.

"In the end, irrespective of the method, one thing is certain: value chain consolidation is under way, and telecom operators are well positioned to play a lead role in driving it, should they decide to expand their role beyond pure connectivity provision," concluded Hasbani.