Steady operator

Qtel has made a steady stream of acquisitions across the Middle East, North Africa and Asia over the last few years, but now the focus is on consolidation, CEO Dr Nasser Marafih tells George Bevir.

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Steady operator Qtel CEO Dr Nasser Marafih says that for tomorrow’s telcos, partnerships will be key to driving down cost and boosting profits.
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By  George Bevir Published  October 13, 2009 Communications Middle East & Africa Logo

From his office on the 26th floor of Qtel's group headquarters, Dr Nasser Marafih has an unrivalled view of Doha, across the crescent-shaped bay and beyond. And having been CEO of the telecom giant for almost a decade he has enjoyed a similarly privileged view of the events that have shaped one of the Middle East's largest telecom operators. Marafih says that over the past nine years the most challenging task he has faced so far was leading the company from an inwardly-focused domestic operator to an international player that was ready to take on a challenger in its home market.

"That was a painful exercise," he says. "But it was important for us to do, otherwise we would not be in the position we are in today. That process took us one year, and we transformed the company."

As part of the reassessment of the company's strategy, 30% of the management were changed. But Marafih says that the most difficult aspect was committing to such upheaval when there was no immediate pressure to change.

"It was difficult to convince some of the people in our company, and even the board questioned it, given that we had issues that we needed to resolve domestically," he says.

Four years ago Qtel won the licence to be the second operator in Oman, and Marafih says that the lessons learned there have proved to be highly valuable to the group, from how to defend Qtel's home market, to experience of how to operate other companies outside Qatar's borders.

Indonesia's example

Qtel's half-yearly results, released at the end of August, show just how far geographically the company has travelled since the decision was made to expand into the Middle East and beyond. One of the star performers in Qtel's portfolio of 17 markets in which it has a presence was Indonesia's Indosat. The 65% Qtel-owned operator was the biggest contributor to the group, in terms of both its customer base and earnings; it was one of the group's most profitable operations, with QR392 million (US$108 million) net profit during the first six months of the year, behind only the Qatar operation's net profit of QR954.3 million ($262 million), and Wataniya Kuwait's QR1,051 million ($288 million).

The decision to look to Asia to satisfy the firm's desire for growth was born out of a frustration with the cost of licenses and operators closer to home and in Africa, and Marafih says that based on the firm's analysis it became clear that Asia represented a better opportunity.

Africa was over-crowded, with regional players and up to six groups competing in the market, while in Asia the amount of competition was limited, he says.

"The cost of assets in Asia was reasonably priced when compared to Africa, and we thought that because we were the first ones to move from the region, we would have a better chance of getting assets at a reasonable price, and I think that has proven to be the case not only with our acquisition of STT (Singapore Technologies Telemedia), but also with Indosat which we believe was done at a proper valuation."

Qtel's subsequent moves into the Philippines and Pakistan done were also done at a "reasonable" price compared to other regions, he adds.

Savings drive

For now, the push for acquisitions appears to have been paused while company efforts are directed toward integrating the recently-purchased assets. Marafih estimates that so far the group has made a 10-13% cost saving through collective procurement across all capex through cost negotiations with vendors, and he wants to find other areas where more savings can be made.

"More or less every operator now has their own negotiation with their counterpart in terms of interconnections for international traffic and that is an area where we believe there will be good savings," he says. "It's difficult for me to quantify now, because we just started it, but we believe that is a major cost item in the group and a saving there would improve the financials of the group."

Eye for expansion

While integration sits towards the top of Marafih's ‘to-do' list, he does not rule out the possibility that Qtel could make further acquisitions this year. Last month, the operator expressed an interest in acquiring a stake in Meditel, but along with the UAE's Etisalat and Bahrain's Batelco it missed out on a share of Morocco's number two operator after Portugal Telecom and Telefonica both sold their 32% stakes in the fixed and mobile operator to a group of Moroccan investors for US$524 million.

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