Competing without competition

Whereas most regional PTTs are reengineering their organisation and deploying technology to support customer service innovation, Etisalat is figuring out how to ramp up demand for broadband and finding partners for its 3G strategy.

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By  Greg Wilson Published  March 24, 2003

I|~||~||~|Etisalat is an anomaly among the region’s other state-owned telecoms operators. Whereas most PTTs are still reengineering their organisation and deploying technology to support service innovation and customer care, the UAE’s monopoly telecoms player is figuring out how to ramp up demand for broadband, finding partners for its 3G strategy and assessing business opportunities outside the country’s borders.

Etisalat has used its monopoly position to create the most mature telecoms market in the Middle East, with the highest levels of internet and mobile services penetration in the region. “There are a lot of monopoly operators in the region, and most of them have been idle. Etisalat has not been idle — it aims at being the premier operator in the region and introducing as many sophisticated services [as possible.] They like the idea that they are the best and the richest operator in the region,” says Hala Baqain, UAE analyst, Arab Advisors Group. “Etisalat also has the highest penetration rates in all its markets for the entire region,” she adds.

Etisalat hasn’t just been working on infrastructure and service availability — it has also been polishing its public image as it shifts towards a more customer-centric footing. Etisalat’s marketing makeover has included the establishment of several business divisions, such as Emirates Internet & Multimedia (EIM) and Comtrust, both of which are currently engaged in aggressive marketing campaigns. On the customer care front, the PTT has built a 450 seat contact centre in Ajman.

“Etisalat has come a long way in its customer orientation,” comments Mohsen Malaki senior telecoms analyst, Central & Eastern Europe, Middle East & Africa IDC.
“They have worked to improve their marketing and their development of call centre customer services is improving,” he adds.

However, Etisalat’s quest for a streamlined and customer-focused organisation inevitably leads straight to the question of its own monopoly position. Over the last 18 months most of the region’s monopoly operators have started talking openly about the impact of competition in the local market. Bahrain, for instance, is expected to have a duopoly situation in its GSM market within months. Saudi Arabia has revealed plans to liberalise its mobile market by 2004 and its fixed line by 2008. However, the UAE’s government and Etisalat have remained tight-lipped on the subject.

“All the neighbouring countries have announced plans to introduce competition, but the UAE hasn’t announced any firm plans… There are no clear dates for [competition,] so Etisalat will be able to maximise its monopoly status,” comments Baqain.

The decision to liberalise the local market needs to come from a government level. In the meantime the UAE’s PTT believes it is ready for all eventualities. “We operate within the framework of the UAE law (Law No. 1 – 1991). As such, Etisalat is the sole provider for telecommunications services in the UAE. This is a government decision, which can only be changed by them — it is not up to Etisalat,” says Etisalat’s president & CEO, Ali Salim Al Owais.

“Etisalat is an open-minded organisation and we have already been very successful in coping with international trends and technological developments. Given this success, we feel we are very well placed to accept and meet any competitors,” he adds.

||**||II|~||~||~|What form this competition will take is a matter of speculation. However, market analysts believe its arrival is inevitable and the internet space is hotly tipped to be the first market to open up to competition. However, the de-regulation of the UAE telecoms market isn’t likely to happen until 2005/06 at the earliest.

“The driving force behind any change in the status quo is not going to be federal or UAE government, because they have a vested interest in Etisalat remaining a monopoly,” says Malaki. “But new ventures [like] Dubai Internet City and Media City are going to have to start providing a competitive market for telecoms infrastructure if they are going to attract more businesses to [sign up,]” he adds.

Any re-writing of Law No. 1 – 1991 will also mean the likely formation of a telecoms regulator — a role currently fulfilled by Etisalat — to ensure competition delivers low costs and higher quality of service.

The region has already witnessed the impact of little or ineffective market regulation in Saudi’s internet market, which until relatively recently was without an independent regulator. “It is important that the UAE learns from the experiences [of] other markets and that proper regulation is put in place, to oversee market liberalisation,” says Al Owais.

“Competition driving prices down is only beneficial if strict guidelines are adhered to in order to maintain service and investment levels, ultimately protecting the consumer,” he adds.

In the absence of a competitive market dynamic, Etisalat has used the need to ‘develop the UAE’ as its operating remit to improve services. The PTT has also been benchmarking itself against other regional and international telecoms players in an attempt to raise its own performance. “We have been competing on an international level for some time, setting ourselves very high standards in terms of technology, price and customer satisfaction,” says Al Owais.

“At the same time, independent research shows that we have maintained very high levels of customer satisfaction, as high as or, in some cases, better than any levels found around the world,” he adds.

Etisalat is poised to step up its customer service initiative in the coming weeks. Although the details of the plan remain largely under wraps, it is likely to leverage on the PTT’s recently completed data warehouse infrastructure. Etisalat is using several business intelligence tools to mine the data in the warehouse and intelligently target services at its most profitable customers.

“[The data warehouse] gives us more in depth knowledge of the customer and how they use our services. This will enable us to more effectively tailor our pricing, packaging and marketing,” says Al Owais.

“CRM systems enable us to create niche marketing activities. This has created a channel direct to the consumer using telemarketing from the Contact Centre in Ajman, SMS marketing, e-mail and direct marketing. With the marked increase in direct, one on one personalised communications, we are now much closer to our customer,” he adds.

||**||III|~||~||~|Etisalat’s pending customer service drive is critical if the PTT is to sustain growth. In the mobile and internet markets, Etisalat is trying to upgrade clients to the latest services and increase usage time. The PTT has achieved approximately 70% market penetration with its mobile services, and is striving to reach 80% with the introduction of new data services and reduced tariffs.

“To fuel this growth, we will continue with our policy of price reduction, as well as introducing value added services to our mobile customers as soon as they are available internationally,” says Al Owais.

Value added services include the launch of multimedia messaging services (MMS) in the near future. Etisalat is working with content and applications providers to ‘fuel’ the growth of data services and its m-Net subscribers.

“The voice market is mature… [Etisalat] enjoys fairly high usage per customer,” says IDC’s Malaki. “However, mobile data service are obviously very new… [Etisalat] is still experimenting with a lot of things and they are still not clear how that is going to develop,” he adds.

Etisalat has already put together its blueprint for the implementation of 3G services. Although the service is still without an official launch date, Etisalat has been conducting extensive testing of the 3G network.

“We have a clear roadmap towards the commercial launch of 3G,” says Al Owais. “We gave the first demos in the UAE during Gitex last year and customers were very excited by the application. Obviously international developments will have a bearing on final launch dates, but Etisalat remains fully committed to the launch of the new technology,” he adds.

Core to the dual development of mobile data and internet business is Etisalat’s content strategy. The monopoly operator is planning a large marketing campaign to win more businesses and consumers to its broadband services. However, it realises that it must work with content providers to build localised material. EIM is currently working with partners to develop an e-learning application for both businesses and consumers.

“We are making high speed internet a priority,” says Al Owais. “As more high bandwidth applications become available, demand for high speed internet [will increase.] We need to explain to the customer where broadband internet adds value. [Businesses are] starting to realise that it is no longer just a question of broadband being a business advantage, but without it a business is at a significant competitive disadvantage,” he adds.

Despite Etisalat’s enthusiasm, it is the adoption of bandwidth-intensive applications, such as supply chain management (SCM), customer relationship management (CRM), videoconferencing, instant messaging, web casting and e-learning that will drive the UAE’s businesses to broadband. And, although the UAE is one of the most mature IT markets in the region, only a few organisations have begun to implement SCM or CRM.

“The UAE is leading the region in the deployment of CRM and SCM, but these are relatively low compared with the rest of the world,” says Jyoti Lalcnandani, software & consulting, regional director, IDC Middle East.

Building usage revenues from its existing customer base will only push Etsialat’s growth so far — to maximise its opportunities the PTT must start looking at opportunities elsewhere in the region.

Currently, Bahrain’s Batelo is the only old style operator to make the transition into a regional business by forming a number of joint venture ISPs in Kuwait, Jordan, Egypt, and Saudi Arabia. The telecoms operator has also managed to extend its managed data services (MDS) to Oman. With other regional telecoms players beginning to emerge, market analysts are predicting Etisalat to follow suit and start building its regional business interests.

“A couple of years back [Etisalat] decided to focus on the local market and most of its investment plans were [designed] to further expand its home market for mobile, internet and data,” says Malaki.

“But we have been seeing signs that they are interested in markets outside the UAE for different types of markets. [For example,] we have seen an interest in mobile markets, particularly in the immediate surrounding region,” he adds.

A number of Etisalat’s business units have already been elsewhere in the region marketing their services. For instance, Comtrust has building up a chain of resellers around the region for the last 18 months and recently embarked a regional roadshow campaign to market its services.

“Diversification into other countries is a natural progression,” says Al Owais. “To what extent and when these expansion plans become reality will be done in accordance with future trends,” he adds.

Malaki expects Etisalat to target markets with little or no competition, such as Bahrain or Saudi Arabia, for their mobile and possibly their data markets.
“As other GCC markets, such as Bahrain, Oman and Saudi Arabia move towards liberalisation, Etisalat will actively follow up potential opportunities to establish mobile licences in such countries,” says Al Owais.

The likelihood that Etisalat could step into competitive markets in the near future will prepare the PTT for the inevitable introduction of competition in its own home market. In the meantime, Etisalat will do its best to sew up the local market with its range of services and soften the impact a potential competitor may have.

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