Holding the line

Jordan Telecom Group is one of the emerging players in the region’s fixed, mobile and internet markets, but several key factors are holding it back from signing mega-deals and pushing for major expansion. CEO Middle East discusses the future of the company with French chief executive Laurent Mialet and discovers why an IPO could only be around the corner

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By  James Bennett Published  March 13, 2006

|~||~||~|If the minister for Information Communications and Technology, Fawaz Zu’bi, was dubbed the ‘Tony Blair of Jordan’ when he first arrived from the private sector in 2000 to revolutionise the Kingdom’s telecoms sector, then Laurent Mialet could be the Jacques Chirac of the Jordan Telecoms Group (JTG). Whether he’d like to be compared to the current French president is another matter, but Mialet does share several common similarities. For one he is used to drawn out negotiations having secured key equity acquisitions with France Telecom (FT), he has arranged major deals and was the main instigator in the FT chairman signing a deal with the Jordanian government five years ago. More importantly, however, the CEO of JTG has big plans for the most dominant force in Jordan’s fixed, mobile and internet communications sector. Ever since joining JTG in 2003 after 32-years service with France Telecom, that owns 40% of the Jordanian group, Mialet has shaken things up and moulded the business into a successful force that has serious ambitions to push forward in 2006. His most recent move was to oversee the major restructuring of the group and integrate its four companies, Jordan Telecom, MobileCom, Wandaoo and e-Dimension under one brand at the beginning of February this year. This was the first step towards the company making progress, however, it is facing a number of obstacles; increased competition under a newly liberalised telecoms marketplace with two other players on the scene; 18 additional communications licences being fought over; and the Jordanian government wavering since September 2003 over when is the best time to sell off its 41.5% stake in JTG. Mialet has a lot of his plate but is more than aware of what 2006 has in store for the group. He tells me that positive, rapid change and growth is the only way to stay on top and beat off the mounting army of hungry competitors. “MobileCom was designed for the fight against Fastlink (a rival Jordanian mobile operator) and it was a challenger type of business. The model company was Jordan Telecom and the incumbent operator. Today everything has changed and we think growth is the new approach to the market,” he says. “On the technology side the mobile and internet approach has delivered what it was supposed to deliver and we now have to mix all these approaches under one brand and one approach to the customer. We have the same customers so we have to focus on convergence services.” But growth won’t come easily. It will have to be done at lightening pace and will also mean long hours in the office for Mialet and his senior team, several of which still need to be hired, he says. While we speak, however, he inadvertently mentions that an Initial Public Offering (IPO) on the Dubai International Financial Exchange (DIFX) later this month is a distinct possibility and a means by which the company could grow and raise funds fast. Could this be why he’s been in Dubai for the last two days? As he sips his coffee, the suggestion merely receives a shrug and a typical Gallic grin in return, not giving away any more company secrets. “We have a project in Bahrain and we are in the final stages,” he says. “If we go to IPO in Dubai the prospectus is ready. If we do it, it will be done in March of this year. The advisor for the government here is preparing the move and the final decision has to be taken by the board.” Raising further funds will be vital to JTG’s future prospects in what is becoming a very crowded market but that is not the only solution to increased profitability, says Mialet. He wants more international tie-ins and partnerships to bolster the brand and increase the scope and quality of services it offers. “An area in telecoms that we don’t see a lot in region, but that we see a lot in the US and Europe, is the need to partner with some sort of global player. In the past, companies had a software business, a telecoms business and a content business – all this has now blended into one and you cannot play alone anymore, you have to form partnerships on a global scale. “Microsoft and Cisco, for example, are dramatically willing to enter the operator business, not only the supplier business. It’s easy to understand because the value of the equipment is going down and the value of services is going up. If you are not involved in services you lose.” Mialet, in slightly broken English, says he is excited about the next 12 months, and that the amount of work he and his team will have to carry out in such a young marketplace doesn’t scare him off. “The market is not so mature so we have a lot to do, but I am always excited especially where there is a lot to do. Our main problem is growth so we have to find ways to grow.” He calmly adds, alongside the odd word of Arabic, that even a serious tweak in JTG’s business model doesn’t concern him “too much” and that what must be done for the good of the business “must be done”. “We have to transform the company and change our business model slightly and raise more money. We can be helped by our international development and we’ll be helped by booming mobile demand in Jordan. But the region, is becoming quite unstable so, Enshallah, if the boom continues then we will grow and benefit from it.” What is so refreshing when you meet and talk telecoms with Mialet is his honest and open approach to discussing the future of the business. Unlike some CEOs he admits that JTG’s business is far from perfect and needs to move with the times. “We have to be frank, we have two segments to develop, the corporate and the low-income models and these two sectors can bring us additional revenue. For the higher part of the market I’m sure this is where we need to partner with someone like Microsoft or Cisco.” Mialet explains that the company’s future lies in developing outside Jordan but also solidifying its status within the region. “We have some undisclosed targets over three years to 2008. We know what we want to do. The problem is to do it.” The key to this, and the main sticking point stunting JTG’s immediate growth, lies in getting the green light from the Jordanian government and its advisers, Goldman Sachs, on when it plans to sell its 41.5% share in the company. This way, Mialet says, France Telecom can pounce and purchase a further 11% or more in order to gain a controlling stake in JTG. “Take the 41.5%, roughly JD 500 million (US $704 million),” he says, “they [the government] have decided to sell for political and strategic reasons.” “They consider that the market is liberalised and that they should not enter into this type of business. This is well known but the deal is ongoing and it’s not a secret that FT is willing to buy part of these shares to take more than 50% of the company and to control it.” With over JD 250 million (US $352 million) in liquidity available the business is standing by for the signal to grow and invest in more projects. Mialet admits that the situation has built up a certain level of frustration. He adds, however, that until the government sells its shares, JTG won’t be able to make large deals because it needs to authorization. “We have some projects in Bahrain as well as other smaller deals but big deals are difficult to put through. They [the government] want money to remain within Jordan and not to leave to external markets. What we can expect when they do sell is that JTG will invest in its growth and things will become more aggressive when FT takes the lead.” In the meantime Mialet, or the captain of the ship, as he calls himself, has some work to do in bringing the company together under one banner. He says the business must become more “customer-centric”, be the first to deliver convergence services in the region, increase broadband access and to choose the JTG leaders of the future. “I’m not driving the ship or behind the wheel everyday but I’m the one giving the directions and more importantly the one who chooses the leaders. I need challenging people, people who are focused on targets. The main challenge here is to come from a technological orientated company to a service orientated company that is customer-centric.” One way he intends to push the business forward is through new ideas and new products as well as focusing on core customers without, as he says, “destroying value”. “The problem we had with the third operator was that it tried to destroy value with very low prices. It took some part of a lower fixed market so we have to try and develop a new approach. The problem is not to lower the price for people who need good services and who can pay, it’s to develop service for people who need services but who generate a low income.” Mialet believes his latest idea for the low-income market, a pre-paid universal telephone card that could eventually include some kind of broadband internet application, could be the solution to blowing the competition out of the water. “Let’s take a family with a low income. They had a fixed line because their son studied in Egypt but this was expensive so when the third licencee came along and said ‘we have a very low price’ they cancelled the line and used a mobile. For us this wasn’t good because the line exists and what costs is to build the line. So our interest is to keep the line open and keep the people and not to disconnect them and to give them a specific offer,” he says. “This means keeping the line and not paying a monthly fee. Instead we’ll give you a card and when you use it, you pay. So incoming calls are free and we can keep the customer happy and keep the customer connected.” A huge number of factors depend on essential growth and potential success of the Jordan Telecoms Group, but with Mialet at the helm of the good ship JTG it has a chance to tap into the increasingly mature Jordanian and regional telecoms customer base. Let’s just hope the government doesn’t hang up on its promises.||**||

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