Mobile Momentum

Competition is about to become a reality in Saudi Arabia’s mobile telecommunications market as Etihad Etisalat gears up to take on the might of incumbent Saudi Telecommunications Company. Just which operator will win out is unclear at present, but in the short-term, customers can expect a raft of new deals and services.

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By  the Gitex Times Staff Published  April 13, 2005

|~||~|Etisalat President & CEO Mohammed Hassan Omran says the entrance of Etihad Etisalat as a second mobile operator in the biggest Gulf market has stimulated a major injection of energy and dynamism. |~|The arrival of competition in Saudi Arabia’s telecoms market gets closer by the day, as Etihad Etisalat gets ready to take on incumbent Saudi Telecommunications Company (STC). The new entrant is 35% owned by the UAE’s PPT Etisalat, with the rest of the shares belonging to the Saudi public and private investors. Initially, it will offer mobile services to users in the Kingdom and Etihad Etisalat believes it will succeed by leveraging the expertise it has gained in its home country and delivering a combination of innovative offerings and high quality service. “I am excited because we are standing at the brink of a momentous technological revolution that will accompany the liberalising of the Saudi telecommunications market. This means that the prospects of growth and available money on this deal. And I don’t accept the claims by some people that we are not experienced enough to do this work. None of our competitors calculated correctly just how big the Saudi Arabian market is going to be. I challenge any mobile operator to do their sums properly and still try and tell me we can’t make money on this. Yes, it’s true that Etisalat paid more than anyone for this licence. But that simply means we will delay the time when we start making a profit on this by another quarter.” “The current plan is for us to be in profit on this in five years, but that can be delayed if we feel we should expand more heavily there, in order to sustain our market position,” he adds. Whether the cautious telecommunications analysts end up being correct, or Bin Mes’har and the Etihad Etisalat team win out, will be interesting to watch. However, the one thing that is for certain is the Saudi Arabia’s mobile telecommunications market is just about to become more fascinating than ever and consumers will be offered deals and services that they had only been able to dream of in the past.opportunities are enormous, which makes us both happy and proud,” says Etisalat President & CEO Mohammed Hassan Omran. “The entrance of Etihad Etisalat Company as a second mobile operator in the biggest Gulf market has stimulated a major injection of energy and dynamism. We realise that there have been significant developments in telecommunications services in the Kingdom over the past few years. There are many opportunities for growth through offering innovative services and products specifically designed for this market in addition to introducing technologies and solutions that would give the market more dynamism and vitality,” he adds. Although the exact date on which Etihad Etisalat will launch its services remains a mystery, the provider recently unveiled its new brand and announced a raft of deals with vendors that will supply the technologies it needs to hit the ground running. In terms of branding, Etihad Etisalat will be known to Saudi Arabian customers as ‘Mobily’. According to Khaled Al-Kaf, Etihad Etisalat’s CEO & managing director, the brand is based on the reality of liberalised region telecommunications markets but has an emotional relevance to Saudi consumers. He also hopes it will play a major role in matching the aspirations and building a relationship with the Saudi mobile subscribers while creating recognition and awareness for the soon-to-be-launched mobile service. “Mobily represents our commitment to the Saudi market and consumers through values aiming to provide the best standard of mobile services and products to match the aspirations and lifestyle of the Saudi people,” Al-Kaf says. “The launch of Mobily is consistent with Etihad Etisalat’s vision and mission which are based on genuine values such as working with an adventurous and ingenious spirit, openness and friendliness, contemporary, collaborative, driven, simple and dependable,” adds Sheikh Abdulaziz Al-Sughayer, Etihad Etisalat’s chairman. With regard to technology, Etihad Etisalat has already signed up with the likes of Motorola and Portal Software. The former will provide the operator with a turnkey Radio Access Network (RAN) for GSM and EDGE, including Horizon II base stations. Motorola will also provide the Etihad Etisalat with Push-To-Talk over Cellular (PoC) functionality, which the operator believes will help generate additional revenue streams while providing its subscribers with quick one-touch access to their friends, family and colleagues. “We were seeking a strong revenue-generating solution to enhance wireless service offerings and delivery for our customers. We chose Motorola to help advance our mission to provide Saudi Arabians with quality telecommunications services, including its latest innovations such as Push-To-Talk over Cellular,” says Al Kaf. “Saudi Arabia is a high growth market for mobile telecommunications. Our collaboration with Mobily will help deliver ground-breaking services to subscribers. The smooth running of the network is clearly central to the successful delivery of these services,” adds Margaret Rice-Jones, corporate vice president for Motorola Networks in the Europe, Middle East & Africa (EMEA) region.||**|||~||~|Etisalat’s senior executive vice president, Obaid Saeed Bin Mes’har, says the UAE operator will roll out its Saudi services in just six months to prove its critics wrong.|~|While Motorola is helping Etihad Etisalat build its mobile network, Portal Software will help it charge customers for the service it provides as the market entrant has signed up for the US vendor’s revenue management solution. Etihad Etisalat selected the software based on its ability to support the rapid deployment of new services. Saudi Business Machines (SBM) will implement the solution. “In the coming decade, our customers will have an increasing variety of 3G services to choose from, going beyond just data to include video and a host of value-added services,” says Al Kaf. “Portal’s revenue management solution gives us the ability to provide flexible service and pricing options to our customers, which will increase both loyalty and profitability,” he adds. In addition to getting its technology in place, Etihad Etisalat has also been securing the permissions it needs to provide users with roaming services. This has meant working with its rival STC. According to local media reports, the two have already signed a three-year nationwide roaming deal. However, such cooperation between the two will only go so far, as STC will need to protect its installed base against Etihad Etisalat. To this end, the incumbent operator has already started making changes to the way its mobile division, Al Jawal, operates. For example, during 2005, Al Jawal plans to commercially introduce EDGE, which will enhance the speed of data transmission to around 256 Kbps to cater for video streaming, content and high speed internet services. The operator also plans to start field trials for 3G and it has been extending its coverage and beefing up the number and type of services it offers. “Al Jawal worked during the last couple of years to enhance the network coverage, service quality, customer care and portfolio of services. We have achieved great results which were validated by an independent research and the end of year results,” says Jameel A. Al-Molhem, marketing general manager at Al Jawal. “In 2005 Al Jawal will continue to roll out new value added services for the consumer and enterprise markets in the Kingdom. We will also be focusing on increasing the sales reach through dedicated Jawal stores and also through our distribution partners. Our loyalty program Qitaf will be further enhanced to pass more rewards to our customers,” he adds. Although both Etihad Etisalat and STC have vehemently denied that the entrance of the former will create a price war within the Kingdom, Al Jawal has been addressing its pricing. This initiative began back in 1998, according to Al-Molhem. “Al Jawal started discounting prices in 1998, when STC became a private company, and this continues every year. In October 2004 we reduced our post-paid monthly subscription and usage prices to be among the lowest in the region,” he says. “Also, in December we significantly reduced our pre-paid SAWA prices by around 40% and introduced a new range of recharge vouchers to cater for different segments needs. The new 300 Riyal recharge voucher will extend the validity of the SAWA line for one full year and will credit the customer account by an extra 33 Riyal for free. The international calling rates were also reduced on January 1, 2005, by around 15% and we will continue to monitor prices and adjust according to market dynamics,” Al-Molhem adds. While both Etihad Etisalat and Al Jawal are confident that they can both succeed in the Saudi Arabian market, telecommunication industry observers are less convinced the ride will be an easy one. For example, analysts at Pyramid Research suggest the US$3.46 billion Etihad Etisalat paid for its licence to operate in the Kingdom may have been too high. “Given Etisalat’s US$3.46 billion offer for the license, this ranks as the biggest telecoms deal ever made in the region. Indeed, the incentive for Etisalat to go for the Saudi market could hardly be greater, in view of the impending liberalisation of the UAE communications sector and the relatively mature UAE mobile market. However, the license price makes Etisalat’s entry a risky venture and even in a best-case scenario, the company is likely to face a long payback period,” says a Pyramid report. The US-based analyst house also believes Etihad Etisalat’s target of seven million subscribers by 2009 could be too high, especially as STC has already taken steps to get itself competition ready. “STC has taken the threat of competition seriously with reduced tariffs and a comprehensive operational revamp… Secondly, there is arguably little scope for Etisalat to differentiate itself against the Saudi incumbent unless it applies a radically different business model to its Saudi operation as compared to that applied in its home market. In fact, the two operators have much in common: Lack of customer segmentation, no handset customisation or subsidization, limited data content and a relatively passive approach to marketing,” it says.||**|||~||~|Jawad Abbassi, founder & president of Arab Advisors Group, says that although the amount paid by Etisalat for its Saudi license may be on the high side it does have a major business case supporting it.|~|While Jawad Abbassi, founder & president of Arab Advisors Group is less critical, and suggests there is a lot of room for growth in the Saudi market, as cellular market as penetration is only at around the 30% mark, he too says the cost of the licence could prove a stumbling block for Etihad Etisalat. “The amount paid by Etisalat for the license may be on the high side but it does have a major business case supporting it. However, Etisalat is already in the UAE, so it’s already in the region and there was no political risk discount. The bottom line is that if things go badly in the peninsula for any reason, Etisalat will be suffering in its home market let alone Saudi Arabia,” he says. Despite the doubts of analyst groups around the world Etisalat is confident that Mobily will be a roaring success and those that doubt its ability to compete with STC and tap into new customer streams will be proved wrong. For example, Etisalat’s senior executive vice president Obaid Saeed Bin Mes’har, says: “I am telling you we are going to make money on this deal. And I don’t accept the claims by some people that we are not experienced enough to do this work. None of our competitors calculated correctly just how big the Saudi Arabian market is going to be. I challenge any mobile operator to do their sums properly and still try and tell me we can’t make money on this. Yes, it’s true that Etisalat paid more than anyone for this licence. But that simply means we will delay the time when we start making a profit on this by another quarter.” “The current plan is for us to be in profit on this in five years, but that can be delayed if we feel we should expand more heavily there, in order to sustain our market position,” he adds. Whether the cautious telecommunications analysts end up being correct, or Bin Mes’har and the Etihad Etisalat team win out, will be interesting to watch. However, the one thing that is for certain is the Saudi Arabia’s mobile telecommunications market is just about to become more fascinating than ever and consumers will be offered deals and services that they had only been able to dream of in the past.||**||Saudi Arabian LBS market shows growth|~||~||~|Pitched as a must-have application for mobile operators when they first came on the scene in the late 1990s, location based services (LBS) have still to live up to their early promise. Globally, their impact has been limited, in part by an ill-defined technical roadmap, low end-user awareness and the poor accuracy offered by early positioning solutions. While services are starting to appear in the Middle East and Africa, providers admit it could be some time away before they provide healthy returns. Several mobile operators have also held back from investing heavily in LBS in the absence of a clear business case; focusing instead on lo-fi, mainstream consumer applications. “Many operators’ attitude towards LBS has been to throw it out there and see how it goes,” says Jason Angelides, director of global services at location equipment vendor, True Position. While ‘find-your-nearest’ services allowing consumers to locate nearby ATMs and other amenities have been slow to take off, LBS have seen greater success in the area of security. This has been particularly evident in the US. Outside the US, however, authorities have taken a softer line when requiring operators to implement LBS for emergency-type applications. As a result, conservative assessments of LBS’ commercial potential are perceived to have held them back. In MEA, most operators have yet to offer any LBS at all. In Europe, meanwhile, many providers that have launched LBS have based them on Cell Identification (Cell ID) or Enhanced Cell ID technology. Nevertheless, signs are emerging that LBS demand could rebound. While vendors and operators believe that Big Brother-type concerns could still be a barrier to LBS, they argue that privacy has not become the insurmountable problem that many people once thought it would be. On the one hand, the idea of a retailer pushing SMS ads to pedestrians has yet to achieve any widespread appeal among users. But vendors argue that certain consumers will put privacy aside if services have tangible benefit. BWCS conducted a survey in Europe earlier this year into reasons why LBS usage was lower than expected. Fewer people cited privacy issues than the fact that they didn’t know services existed. “Privacy will always be an issue and there will always be a case where there can be some abuse,” says Angelides. “But application developers also recognise how important privacy is and are making substantial efforts to make sure that their systems are secure. Once consumers understand that LBS are opt-in services, the issue disappears.” Vendors also claim that more demand is emerging from the enterprise community for more precise solutions, to integrate into security applications, as well as other processes such as supply chain management and sales force automation. “Initially, operators thought that the consumer space was going to be the most thriving market, and consumers can be more forgiving of accuracy,” says Scott Petronis, senior product manager at US-based vendor, MapInfo. “But we’re seeing more requirements for precision technologies. We’re also doing more and more work around specific business applications, such as supply chain logistics and security,” he adds. In Europe, Angelides suggests that regulations similar to those in the US could be tightened up. This, he says, will encourage operators to invest in more advanced technologies, such as Assisted GPS (A-GPS), which uses satellite positioning to track users more accurately, and Uplink Observed Time Difference of Arrival (UTDOA). Through UTDOA, separate base stations listen out for signals normally transmitted from handsets and compute their position from the times they arrive. Both technologies can improve accuracy at least to within 50m. Regional interest in security-oriented LBS also seems to be growing, particularly in countries where enterprises and governments are more worried about threats to their employees and assets. Saudi Telecom’s mobile arm, Al Jawal, is one operator that has already committed to roll out security-oriented LBS for both the consumer and business sectors. Although it is yet to launch an LBS platform on its GSM network, personal safety-oriented mobile services are in the network operator’s roadmap for 2005. “We are planning to start introducing personal safety and locator services next year,” says Jameel Al-Molhem, marketing general manager, Al Jawal. “Given the geographic spread of Saudi Arabia and the number of cities in the Kingdom, we believe there is a need for LBS,” he adds.||**||

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