His move

Marwan Alahmadi is MTC Group's former chief strategy officer, who three months ago was appointed to head the company's foray into the rapidly evolving and fiercely competitive Saudi Arabian telecoms market. He will be required to balance his understanding of the strategic importance of the investment with the challenges present on the ground in Saudi Arabia, and it will be no easy task to make the huge upfront investment a success.

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By  Tawanda Chihota Published  August 8, 2007

Analysts estimated the third mobile licence in Saudi would sell for around US$5 billion. MTC Group ended up offering more than 20% above that estimate in order to secure the concession. The US$6.11 billion MTC pledged is by far the highest amount ever offered across the entire Middle East Africa region for a greenfield opportunity, and now the operator is going about making good what it claims to be one of the last remaining viable investment opportunities of its size left in the region.

Marwan Alahmadi is the man chosen to steer MTC's launch in Saudi Arabia. He is an inspired choice of launch architect given his previous responsibility as MTC Group's chief strategy officer, a position that permitted him to help implement and indeed mould the grand vision of MTC's global expansion as envisaged by Group managing director and deputy chairman, Saad Al Barrak.

Thus Alahmadi is acutely aware of how significant a role a foothold in Saudi Arabia plays for MTC's overall expansionary aspirations. "We are an international player and we are now aspiring to become a global player," Alahmadi tells CommsMEA. "Being a regional and international player, I think we all agreed that we had to have Saudi Arabia as one of the blocks of the operations that we have in the region, for various reasons. One is the kingdom's economic power, as the largest economy in the GCC with GDP of US$350 billion and GDP growth of around 12% in 2006," he says.

The kingdom's geographical location, bridging Asia and Africa is also of significant importance and value to MTC, and given that the operator has a presence in many of the countries close to Saudi Arabia, such as Sudan, Jordan, Bahrain, Kuwait, Lebanon and Iraq; potential geographic synergies definitely have a space to manifest.

"The proximity, commercial relationship and the potential for building one network for that region exists," explains Alahmadi. "We have already done it in East Africa with Celtel, so it is Saudi Arabia's ability to fit in to a region in which MTC already has operations that makes it lucrative to the operator," he adds.

We are rebranding the whole group into a new brand. Saudi will start with a new fresh brand; it will not be called MTC. Ultimately this single brand will exist everywhere that MTC is and I envisage this process starting to take place as early as September.

In terms of the strategic direction in which MTC Group is headed, and into which presence in Saudi Arabia forms a part, at the beginning of this year the parent company - MTC Group - embarked on its ‘ACE' programme, which represents the adoption of a set of values positioned to propel it onto the global stage. ACE, which stands for accelerate, consolidate and expand, is an implementation strategy that seeks to extract superior value from existing assets through acceleration of growth, consolidation of operations and further expansion of the business. Based on organic growth through ACE, MTC Group aims to serve 70 million subscribers across all the markets it operates by 2011, attain a US$6 billion EBITDA, and emerge as one of the top 10 mobile operators in the world.

So as far as Alahmadi can see, placing a static value on the price paid by MTC for the licence in Saudi Arabia is the wrong way of assessing its commercial value. "Licence prices cannot be taken in absolute terms. One has to take into consideration the penetration levels and the GDP per capita of the country in which one intends to invest," articulates Alahmadi.

MTC stands to benefit from Saudi Arabia's high ARPU levels of around US$35, as well as the 25-year duration of its operating licence, which is substantially longer than standard 15-year concessions.

"If you take that into consideration, what we paid for the third licence in Saudi Arabia is less than what it cost Etisalat to pay for the third licence in Egypt. Just a simple comparison, I'll leave the maths to those who want to do it, but we have done it already, and the conclusion is that our Saudi investment is a much more lucrative opportunity than the one in Egypt."

It is poignant that Alahmadi refers to the battle to win Egypt's third mobile licence last year, which was ultimately won through Etisalat's winning bid of approximately US$3 billion. Etisalat's offer was a clear 20% higher than the highest bid tabled by MTC, which amounted to US$2.5 billion, and which constituted the second highest bid after Etisalat's.

In the rapidly consolidating operator landscape within Middle East and Africa, a trend has developed in which operators that have been frustrated in one bid process or acquisition attempt, refocus their efforts in order to win a subsequent opportunity, in some cases overpaying in order to shake off any lingering disappointment. One only need look at South Africa's MTN, which following its failure to acquire Celtel International, it subsequently acquired Investcom for US$5.5 billion - a figure that at the time was viewed as a significant premium for the assets on offer.

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