Transforming Palestine

In just 10 years since its inception, Paltel has become Palestine's biggest company. Dr. Abdul Malik Jaber, CEO, Paltel, tells Roger Field about his plans to expand the company further and transform the wider Palestinian economy.

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By  Published  June 2, 2008

In just 10 years since its inception, Paltel has become Palestine's biggest company. Dr. Abdul Malik Jaber, CEO, Paltel, tells Roger Field about his plans to expand the company further and transform the wider Palestinian economy.

While many telecom operators in the Middle East are still uncomfortable with the idea of having to operate on a level competitive playing field, executives at Paltel, Palestine's national telecom operator, already have more than a decade's experience of tough competition, both from rival operators, and from new technologies such as VoIP.

Indeed, when the company started operations back in 1997 as part of Palestinian state-building initiatives following the Oslo peace accords of 1993, it was the most liberal telecom operator in the Middle East.

All Israeli operators have been operating in the Palestinian territories from the first day. They enjoy the access to the Palestinian market but they are not interested in having competition.

The company was privately owned from inception, and has always operated in a fully liberalised, albeit stifled, telecom market.

"This was the first time in the Arab world back in 1997 that there was a telecom company in the private sector. At that time, telecom operators across the Arab world and many across Europe were government-owned," Jaber says.

"It is interesting because it says that the government [Palestinian Authority] did not want to repeat the mistakes of many other countries, which form public sector companies that are later privatised. These governments then realise that they shouldn't have held these assets in the first place, and they are disposing of them," he adds.

From the start, Paltel began deploying a modern infrastructure for fixed-line, mobile and data services using the best technologies available throughout the West Bank and Gaza.

The company worked with infrastructure providers including Nortel, Alcatel-Lucent and Cisco, to deploy its land line operation, and worked with Ericsson for its mobile network.

And the company has certainly come a long way since operations started back in 1997; it now has some 1.1 million mobile customers and 420,000 fixed line customers, as well as 75,000 DSL and ADSL subscribers.

In addition to this, the company has a turnover of some US$300 million per year and has experienced year-on-year growth of about 35% for the last four years.

"Paltel definitely grew quickly to provide all of the basic services in the mobile, fixed, data, media services," Jaber says. "We will be among the few integrated operators in the region - which means that we will be providing all of the services in one package to end users."

Furthermore, Jaber says there is plenty of room for expansion amid a fast growing young Palestinian population, although the large proportion of the population below the age of 18 means that this potential might only be realised in a few years time.

"Palestine is a young society and if you look at the age distribution you find that in Palestine there are almost a million kids below the age seven or eight. There is a future potential yes, but you can't just take the population rate as you can in Europe and have a penetration rate of 70% or 80%, because in Europe you don't have 50% of the population under 20."

"The future potential not only for mobile but for IT applications and ICT applications is great. It goes for computers and software, games, and entertainment using the internet. The IT sector is the most valuable sector in Palestine. It accounts for almost 20% of the GDP of Palestine, making it the most successful and powerful sector."

But despite the level of growth achieved by Paltel so far, Jaber says that the market is far from easy, with numerous challenges arising from the fact that Paltel's markets of Gaza and the West Bank are essentially under Israeli occupation.

And one of the main headaches for Paltel is that Israel has refused to give the company permission to set up the equipment it needs for its mobile operations in the West Bank or Gaza. Instead, most of Paltel's mobile infrastructure sits in London, adding significantly to the cost of its operation.

"The Israelis are not allowing our core network equipment, which is mainly switches, to enter into Palestinian territories, so we have ended up having our equipment based in London," Jaber says. "As we speak, our customers sit in Palestine but our equipment sits in London.

"This is unheard of in the telecom industry. The technology has found a way around it, but you can imagine the extra risk added in terms of infrastructure, logistics, staff, services and cost. It adds about US$5 million in cost a year."

Furthermore, the situation is made worse by Israeli mobile operators whose services are available in the West Bank. Indeed, about four operators including Orange and Cellcom operate in the West Bank, despite lacking the necessary licences from the Palestinian Authority, according to Jaber.

"All Israeli operators have been operating in the Palestinian territories from the first day. They enjoy the access to the Palestinian market but they are not interested in having competition," he says.

These companies have a significant advantage over Paltel, not least because they avoid paying any taxes to the Palestinian Authority. "We pay a licence fee which is 7% of our gross revenue every year to the government which means that we have contributed to the PA budget."

Price matters

Despite this, Paltel has been able to compete with its rivals through clever pricing structures and various special services. This has been vital to Paltel's success, as few customers would voluntarily switch from using their existing Israeli provider to an Arab provider for political or nationalistic reasons, according to Jaber.

"The national factor was not the main factor - and we were not counting on that. Our focus from day one has been to offer superior quality and to compete on prices, otherwise our customers are not going to stick with us, and potential customers won't shift from the other operators."

With its fixed-line, mobile and data services, Paltel has been able to offer its customers some attractive deals that have been successful in encouraging people to move from their previous operators.

The company offers its customers comparative packages whereby it is cheaper to call a Paltel landline from a Paltel mobile than from a non-Paltel phone.

"We were really looking at every single advantage we could have to encourage our customers to make the rational choice to move to us...that is the way we approached it and it won a lot of people over. In terms of the market share we have almost 65%. The other 35% are Israeli operators," Jaber says.

Paltel also has roaming arrangements with the other local operators, so that customers who cross over into Israel are still able to use their mobile phones.

Paltel is set to gain further competition in the next few months from Kuwaiti operator Wataniya. The company, which is majority owned by Qatari incumbent Qtel, is planning to launch mobile operations in the West Bank by the end of 2008 or early next year.

It also plans to start operations in Gaza depending on political stability in the area. The company plans to invest some US$600 million in the Palestinian economy over three years, according to Allan Richardson, CEO of Wataniya Palestine.

While Jaber welcomes this competition, he also thinks it will take time for Wataniya to get its operations off the ground, largely because it is likely to face similar problems to Paltel in terms of gaining the required spectrum and setting up equipment.

"We have been demanding a frequency for the past 10 years and we still haven't got it. Wataniya started only a year ago, so I don't know when they are going to get it," he says.

Moving ahead

Despite its successes to date, Paltel's appetite for growth is showing no signs of abating. The company has numerous plans for new products and services. Jaber points to a new ‘bundled service' that will allow Paltel customers to pay for mobile, fixed line and data services as one package.

"This year our focus is on what is called bundled services through what we call the ‘unified one-stop shop'. In April we started offering a unified point of sale where you have all services offered in the same place.

"We are looking at the customer's needs, and the customers often want all of their services in one package - they don't want to worry about all the different services. This service will give the customer a single account and a single customer care point of reference."

Paltel is also planning to launch a private terrestrial TV station which should be ready to start broadcasting family-oriented content in the West Bank and Gaza by about September 2009. Jaber added that $10 million is being invested in the project.

"It will be the first private TV station ever in Palestine. It is an independent entity that will be run commercially separately from Paltel. People from that industry will be running it, but the idea is to have family style entertainment that fills the gap that exists in Palestine in that area."

Nation Building

Paltel was established in 1995 as part of the efforts of state-building following the Oslo agreement at Oslo. Today, with more than 1 million mobile subscribers, 420,000 fixed line customers, and 75,000 DSL and ADSL subscribers, Paltel is Palestine's biggest company.

For the management of Paltel, the sheer size of the company also brings significant responsibilities to the Palestinian people and the development of the country's economy. And for this reason, Paltel is focusing increasing efforts on CSR initiatives.

"Paltel is not acting as a typical telecom operator," Jaber says.

"We represent 50% of the stock exchange in Palestine in terms of market cap. Paltel is the largest employer in Palestine, so when you are that big you no longer look at yourself as a telecom operator. You are the driving agent of the economy, whether you like it or not."

He adds that Paltel has initiated numerous projects in the country, including a micro-finance bank and a logistics company. Paltel is now working on its largest CSR project to date, building a new city in the West Bank.

The project, which will cost about US$650 million, will include a university, schools, a police station, and other amenities needed by a city.

"The future potential not only for mobile but for ICT applications is great. It goes for computers and software, games, and entertainment using the internet. The IT sector is the most valuable sector in Palestine. It accounts for almost 20% of the GDP, making it the most successful and powerful sector." Dr AL Jaber

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