Breaking the mobile monopoly

As the region awakens to the benefits of liberalising government monopolies, the launch of a second telecoms network in the UAE looks set to transform the industry. CEO Middle East talks to the man leading the revolution, Osman Sultan, as he embarks on his quest to overthrow the dominant Etisalat empire

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By  Andrew Mernin Published  April 13, 2006

|~||~||~|In the late 1990s, the Egyptian telecoms market was beset with problems as a government-run monopoly struggled to meet the need of the country’s population. Then Osman Sultan launched Mobinil – a privatised mobile operator, paving the way for the tide of ensuing liberalisation. Eight years later, as CEO of Emirates Integrated Telecommunications Company (EITC), he has arrived on Middle Eastern shores after a stint overseas, primed for his latest mission – to conquer the UAE’s Etisalat establishment. “We will never underestimate the competition, but we believe that we can counter it with a fresh approach, and if we are run properly,” he says determinedly with a clenched fist. “If we put the customer at the centre of our operation, then I think we have all the elements to succeed.” The early signs at least, would indicate that the UAE’s second mobile operator has been extremely well received by potential customers and investors alike. With applications worth more than US $109 billion, EITC’s public share sale last month was 167 times oversubscribed with 225 000 applications made. According to investment banker EFG-Hermes, this culminated in the largest amount of revenue collected in the history of IPOs in the UAE. And senior representatives of the fledgling Du brand have predicted that it will capture 30% of the UAE’s telecoms market in the next three years. However, in achieving this ambitious target, Sultan accepts that it will not be easy: “We are quite conscious that the level of challenge we are facing is very high due to the fact that we are up against a very established company. “We will make our customers happy - it’s very simple. Customer satisfaction is about hard, disciplined and accurate work across all points in the chain where the customer encounters the telecoms provider.” As media interest surrounding the Du launch reached fever pitch over the last few months, Sultan’s mantra in relation to his rivals changed to become: “We don’t necessarily want to offer something different, we want to offer something better.” So what has been done to enforce this bold claim? EITC has taken several steps to strengthen Du’s ability to threaten Etisalat’s solidly built foundations in the UAE market. A major step forward was the US $330 million acquisition of Tecom, the sole provider of internet access and fixed line services to 19 000 customers in Dubai’s free zones. EITC also acquired Emirates Communications and Technology (ECT) for US $326 million. As well as opening a AED2.42 billion Initial Public Offering (IPO), selling a 20% stake, the company struck a US $190 million deal with Nokia, allowing it to handle EITC’s managed services contract. But while EITC has been busy, its Abu Dhabi-based neighbour has refused to let the grass grow under its feet, and it too has branched out and diversified as it prepares to do battle in the new duopoly. Last month, the company acquired a 26% stake in Pakistan Telecom Company Limited (PTCL) for US $2.6 billion and made a bid for a 35% stake in Tunisie Telecom. Etisalat also agreed a deal that will see them pay US $54 million to telecoms manufacturer Ericsson, to increase their capacity for dealing with more subscribers. Other recent developments have included the launch of a new 90-day connection package for visitors to the UAE and the opening of a new call centre in partnership with Dubai’s Road Transport Authority (RTA), offering traffic and travel information services. Despite the fact that the UAE government is a major shareholder in both networks – it owns 50% of Etisalat and 50% of EITC at pre-IPO stage – it appears that fierce competition has already been generated. And Sultan has made it his personal duty to underline how genuine the rivalry will be. “The people we have brought in have international and local expertise and all of them have the mindset of working within a completely private sector competition-type marketplace. Regardless of the ownership of these companies, we are driven, our reason for being is to ensure that competition is going to play fully.” The liberalisation of the UAE telecoms market, which can only benefit the customer and the industry as a whole, is something that Sultan is well equipped to deal with. Throughout his career, he has been instrumental in overthrowing government monopolies, improving telecom networks and affording more choice to the customer. In the 1980s and 1990s in Sultan’s homeland of Egypt, millions of Egyptians were on waiting lists for telephone lines, as the government’s poor infrastructure could not facilitate subscription levels. According to the International Telecom Union, these waiting lists stood at 1.3 million in 2000. By that stage, however, a change for the better was already in motion. In 1998, mobile operator Mobinil, spearheaded by Sultan, launched the first private-sector service. This was followed in quick succession by the launch of a second mobile operator, Click GSM, which later became Vodafone Egypt. Sultan, who was also part of the liberalisation process in France during his time working for the France Telecom Group, is now relishing the opportunity of opening up the UAE market and taking it into a “brave new world.” “I feel very excited and privileged to be a part of the liberalisation of the sector in the UAE. I have witnessed directly the phenomena of a transformation of culture that comes with the introduction of competition,” he says. “Operators in the fast changing environment of telecommunication have to be built on a healthy financial foundation, because that is the only way to ensure growth, sustained profitability, and that is what liberalisation is all about.” Du will launch its mobile services in the second half of this year and is likely to develop fixed line and broadband services in 2007. The task of driving the ‘Du’ network forward within the new duopoly will differ from anything else Sultan has ever experienced. “Here, it is a multidimensional challenge in a country where things are really happening. “In the UAE, I think the challenge is to think globally but act locally, to bring the cutting edge things from around the world here and keep up with the amazing development we are seeing. “With all companies, investors and individuals coming here and feeding this economic momentum, it is a great opportunity for us.” One particular factor that could hinder Sultan’s mission to liberalise the UAE industry is the uncertainty over the provision of internet access. Internet users in the UAE currently dial up to a proxy server where they are restricted from accessing certain banned and censored sites. While the UAE’s commercial free zones are exempt from these restrictions, it remains to be seen whether this will continue, following EITC’s acquisition of Tecom, the internet provider to the free zone. As negotiations continue between EITC and the Telecom Regulatory Authority (TRA), another questionable issue is the use of infrastructure. Details of how reliant the Du network will be on the current telecom infrastructure in the UAE and how much independent development there will be have yet to be revealed. “There is an infrastructure existing in the country. So we will wait and see what the regulator says in terms of sharing some of it. The two players are negotiating under the umbrella of the authority of the operator,” Sultan says. “Obviously we will have to obey the restrictions of the TRA, but we have seen signs that they want to be able to ensure the interest of the customer, but there are of course other considerations.” One thing that is not uncertain is Sultan’s confidence in the Du brand. “I am passionate about this brand. I wouldn’t be doing my job if I didn’t have the ambition of being the new leader tomorrow. This leadership is not necessarily in terms of numbers, but also in terms of customer relations, innovation and creativity. “We want to be a monolithic brand – one brand to offer all of our services. We wanted something that was short and concise, something iconic – it’s not English, Hindi or Arabic – it is an icon that can be understood by everyone.” In capturing the market, Sultan aims to “attract new customers and convert existing Etisalat ones. There is less uniformity here in the UAE, particularly because of the ex-pat market, so we have to appeal to all languages and cultures.” As well as competing with Etisalat on one frontier, the other battle for Sultan is to keep pace with the mind-blowing developments in mobile technology and the increasing demands of customers. Today’s customer wants to “not only make calls, but carry with them their office, mail, internet, business relations with their company and their entire world – whether that’s the bank, the school, or the shopping mall. “Tomorrow, a mobile will be your bank, your transactions and even your television set.” But it is not just technology that makes these exciting times for Sultan, according to HE Mohammed Nasser Al-Ghanim, director general of the UAE’s Telecoms Regulatory Authority. He told CEO Middle East that as well as the telecoms branch of the free trade agreement with the US being close to settlement (despite recent delays) a Memorandum of Understanding (MOU) with Bahrain’s TRA had been agreed. The MOU, expected to be the first of many between the UAE and other Middle Eastern nations, will enable TRAs to work together in liberalising and regulating the region’s telecoms market. In light of the new duopoly, the UAE’s TRA has also begun discussions to create new competition policies, something they have never had to consider in the past. All of which will lead the Middle Eastern telecoms industry towards a more open, better-regulated future and will assist Sultan in his role as the liberaliser. Although a number of uncertainties remain on how the new duopoly will operate as discussions continue behind closed doors, one thing that remains clear is Sultan’s unwavering conviction to satisfying his customers. “The more things become complex and complicated, the more ultimately it’s about people. Our business, our industry is about the communication of people, and if we meet their needs then we are doing our job.” If Sultan can complete his crusade in opening the UAE market, using his expertise in bringing telecoms monopolies down to their knees, then he will more than meet these customer needs.||**||

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