Steady hand

Etisalat chairman Mohammed Omran unveils his strategy for expansion at home and abroad.

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Steady hand Mohammed Omran confirmed that Etisalat is considering a bid for Syria's third mobile operation.
By  Roger Field Published  November 1, 2010

While some of the region's telecom CEOs are well known for their many media engagements and often bombastic speeches, Etisalat's chairman, Mohammed Omran, prefers to take a quieter approach.

While Omran, who became chairman of the company in 2005, might not be as well heard on the international stage as some of his regional counterparts, his calm hand has been instrumental in guiding the company along a path of continued expansion, particularly during the recent global economic turbulence.

And with competition increasing in Etisalat's home market of the UAE, and with expansion on the agenda abroad, this level of focus on the tasks in hand appears to be the approach that Etisalat needs.

Etisalat is now present in 18 countries in the Middle East, Africa and Asia, and continues to see international expansion as a key pillar of its growth strategy.

The company has received significant publicity recently over its strategy in India. Indeed, after soft launching its own operation, Etisalat DB, as part of a joint venture with India's DB Group earlier this year, Etisalat surprised analysts with an announcement that it was in deal talks with various Indian operators including Reliance Communications.

But for Omran, this is really a matter of Etisalat keeping its options open in a bid to make a strong play in one of the world's biggest and fastest growing telecom markets.

"We originally decided to enter India three to five years ago by entering a joint venture with an existing licencee, but since then a lot of things happened and changed in India," Omran says.

"The rules of the game changed, the market has changed in a big way, and we have decided to review our focus and review our way of entering."

"We had some discussions with Reliance at an early stage but we also had some discussions with almost every other operator in India.

"At this stage there is no decision to go with one operator. But I think over the coming few months there will be more clearance on the way forward."

He adds that Etisalat is talking with many operators and will be able to make a decision when it finds a deal that works well for its shareholders, the Indian market and the new partner.

In the meantime, Etisalat is continuing to develop its Indian joint venture, in line with its licence agreements. The company's commitment to the venture also appears genuine, with Etisalat keen to raise its stake in the company to 50% plus one share from its existing stake of 44.73%.

"Of course, we have a licence and a commitment to the regulator to start services in certain areas and we have already started work on that, but while we are starting our operation we are also exploring other ways of how we can enter the market," Omran says.

India aside, Etisalat plans to focus its international expansion more on Arab countries, where it sees significant growth opportunities.

"When we talk about international, definitely the landscape has changed but still in the Arab countries there is the possibility of expansion, either by acquiring existing operators or by getting a new licence, so that is one of our main focuses as a company," Omran says.

Furthermore, Etisalat confirmed it will be bidding for Syria's third mobile licence, and Omran expects the bidding process to happen toward the end of this year or early next year.

"According to the feedback I received I would expect some bidding to be done toward the end of this year or early next year," he says.

Omran adds that while Etisalat is also interested in Lebanon, it is not yet clear about any moves by the country's government to open the market up or sell either of the existing operations.

CHALLENGING MARKETS

While Arab markets might be a safer bet for Middle East players such as Etisalat, non-Arab African countries appear to be tougher markets to extract a profit from. This was perhaps best demonstrated by Zain Group's recent sale of most of its African assets to India's biggest mobile operator, Bharti Airtel.

A recent report also indicated that Etisalat was experiencing difficulties in some of its African markets. Indeed, the State Audit Institution found that Etisalat made a loss of about AED1.24 billion ($338m) across ten of its overseas operations in 2009, according to a report by Arabic daily Emarat Al Youm.

The SAI also suggested that Etisalat overpaid for a number of its overseas acquisitions, including for Ivory Coast-based Atlantique Telecom, Tanzania's Zanzibar Telecom (Zantel), Canar Telecommunications Company in Sudan, and Egypt Telecom.

However, while Etisalat is now looking more at Arab markets than African countries, Omran remains upbeat about the company's investments in Africa.

"Every new market is a difficult market, that is for sure, but once you have the right people and once you have the right strategy for that market, you should be able make progress," he says. He points to Etisalat's investment in Atlantique Telecom in West Africa as a prime example.

"The initial investment was minimal, a very small amount, but later on we expanded by buying more shares and now we have 100% of the shares.

"With the right strategy we are doing well now. It takes time, but once you start to get critical mass, then it will start to bring results. 

"No market is similar to another, each market has its own characteristics and we have to understand it more," he adds.

In a move to strengthen its international growth and strategy, Etisalat launched a group operation at the start of the year with a "distinct separation" from the local operation, according to Omran.

"With that one we have developed criteria of investment and that will become the main mandate of the group and its operation," Omran says.

He adds that the group operation will also perform the role of advising the group operations on issues such as technology, services, and customer care. "This aligns the operations and also ensures that every operation achieves its goals," Omran says.

COMPETITION AT HOME

With fixed line infrastructure sharing to be implemented by the end of the year, the UAE's telecom market is set for a major change, as the country finally moves to a far broader level of competition.

While many incumbent operators seek to resist such change, fearing a significant loss of business to their rivals, Omran appears remarkably relaxed.

Omran expects to see fixed infrastructure sharing implemented by the end of the year, and both of the country's operators said they were "technically ready" for infrastructure sharing in July.

"We have done a lot of work with both the TRA and Du in order to do this. To my understanding, we are ready now from an operational point of view to offer this," he says. However, he adds that it will take time for infrastructure sharing to be implemented across the entire country.

Furthermore, he adds that the "basis for opening the network" is being decided by taking into consideration Etisalat's "huge" investment in establishing the latest fibre optic network, which has cost "north of AED5 billion ($1.35 billion)".

Given the investment that Etisalat has made in its fibre network, Omran appears to be genuine when he says the company feels it is "advantageous for the country to have this network available to every customer, whether that is our customer or the competition's customers."

In terms of differentiating its services from those of its competitor, Omran says that there are two important components; one is to offer a high quality network, and the other is to offer the right type of packages.

He confirms that whenever a second operator enters a market, the incumbent will lose some market share, but he remains optimistic that Etisalat will hold on to the majority of its fixed customers.

"Every country where a new operator comes, he takes market share and that is normal, whether he works hard or not. The market has changed and the rules of the game have changed.

"We are operating in several countries with these rules, here the market share is changing because the newcomer takes some market share. But in the meantime in the UAE we are optimistic that the majority of customers will continue to be with Etisalat.

While competition is increasing in the UAE, Omran also sees potential for further growth, mainly through broadband.

"In the UAE, connectivity is available almost everywhere, whether over fixed or mobile. We are still expanding in fibre optics by offering higher bandwidth and more services. We are offering IPTV, we are offering some new technology on fibre, because fibre enables us to have more capacity and more capability to connect customers," he says.

He adds that video, while already demonstrating strong growth potential, remains in its infancy, and Etisalat sees opportunities to develop and expand services such as 3D TV in the near future.

Omran also envisages a world where seamless connectivity is far more important, whether between people or machines, and he hopes to position Etisalat to profit from rising demand for machine-to-machine connectivity.

"The internet will become much more about connectivity for the customer, whether it is customers with networks, or machines. There are now more machines than people, so this is another area of growth in the market."

To this end, Etisalat is working with technology partners including vendors Ericsson, Huawei, and Nokia Siemens Networks and it also has partnerships with other operators including BT Group in the UK, and Korea Telecom.

Omran stresses the importance of embracing the latest technology to compete in all of its markets.

"Our business has witnessed a lot of changes over the last five years. Competition in the UAE and outside has become normal, technology has changed also, of course. There are a lot of challenges and there are a lot of opportunities.

"What we decided in Etisalat a long time ago is that we should be at the lead, we should ensure that we give our customers the best technology, and we have done this - we made the decision to go for 3G much before any other operator in the region, and you can see how that resulted in giving a good lead for Etisalat Group.

He adds that in Egypt, where Etisalat started operations in 2007, the operator has already achieved a 3G market share of about 50%. "We are the leader in the region for 3G in the UAE, Saudi Arabia and Egypt," Omran says.

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