Ringing in the changes

For the Middle East’s telco market, next year should see change as the effects of the ongoing wave of liberalisation start to become apparent. Operators have to get to grips with a more liberalised market place and the challenges and opportunities this provides.

“Typically once you liberalise there is an energy that comes into the market and you start seeing very interesting developments. I’m starting to get the same sense in the [regional] market now the way vendors are competing,” comments Mark Rotter, an analyst with IDC.

One likely consequence of the liberalisation is that there will be increasing consolidation between telecom players, predicts Rogier van Driessche, a partner of Dubai-based Delta Partners.

“Currently the market place in the Middle East consists of about eight players with solid ambitions. As the liberalisation process continues, we expect this number to reduce over time and expect to see several mergers between these regional titans,” he comments.

Surviving telco operators will be further tested by the arrival of new players onto the scene, van Driessche adds, from outside the traditional telecommunications segment.“A whole new class of players is emerging in the Middle East that provides services to the telco operators,” he says; citing retail chains, call centres, content and application providers or managed network service providers as examples. Delta estimates these new players will take 10-15% of total telco revenue in the next five years.

In terms of technological advances, one of the biggest changes expected in 2007 is the mass-market arrival of broadband in the region.

While the first wave of liberalisation in the Middle East fanned the growth of the mobile segment, the time is now ripe for fixed line services to develop, analysts argue.

“Most governments still hold tight control of their monopolist operation, and as such new services such as ADSL broadband internet has not really taken off. This situation is about to change,” says van Driessche.

Several fixed line licences have already been granted in Bahrain, for example, while Saudi Arabia is expected to license one or more operators by early 2007.

“Once competition arrives, several of the hurdles to uptake to date will be overcome. As in the rest of the developed world, broadband will be widely spread across the Middle East very soon,” van Driessche notes.

IDC’s Rotter agrees that the region is now ready for broadband. “Whereas in central Europe you have a lot of cable, we have none of that here in the region. Most of what happens is DSL with some take-up of VSAT satellite in remote regions but what everybody is banking on is some sort of wireless broadband, fixed wireless technology and there are a couple of standards waiting in the wings,” he says.

Wireless
Starting towards the end of next year and picking up momentum in 2008, there is likely to be a significant increase in wireless in the region, he adds.

Of the various technologies available, WiMax, which is being tested by a number of providers in the region including new UAE telco operator du, is the one seen as most likely to have an impact in 2007.

“It has been many years now since the industry started to discuss WiMax. Now is the time when we will know if the promise holds true. Already out of the lab, in the field — this year we will see whether not only the technology delivers, but whether the operators are able to translate this technology in a profitable business model,” comments van Driessche.

An anticipated knock-on effect of more broadband will be greater use of voice over internet protocol (VoIP) in the region.

“If you attended an exhibition a year ago, you hardly heard about VoIP or convergence but over the last 12 to 18 months, it has been the number one key issue,” comments Amdy Hanna, chief marketing and sales officer at Bahraini telco provider Kalaam Telecom.

“The global and local focus on increased IP telephony adoption is driving new business opportunities in the Gulf states, KSA, Levant and North Africa,” says Roger El-Tawil, channel and marketing director, Avaya. “We’re increasing the regional knowledge base on applications and services, and enabling more specialisation in growth industries like financial services, hospitality, and government, as well as horizontal specialization in unified communications and IP telephony.

Mitel’s general manager Hisham El Amili agrees that the demand for IP has risen enormously over recent years and the growth is far from over. “I think we are on the verge of this IP wave,” he comments.

On the mobile side, the race will be on in 2007 to find the successor to short messaging services (SMS). Although a plethora of messaging services from multimedia messaging services and mobile instant messaging to video messaging and unified messaging currently exist, there is not one that really stands out as a forerunner.

Mobile instant messaging was expected to have a high popularity rate but has been less successful than anticipated. Growth has been hindered by problems such as the complexity of service set up and device configuration.

One service that might have a good chance of success is video messaging: around 40% of people interviewed by services firm LogicaCMG during the recent Gitex trade show predicted that video calling would be the most popular messaging application in the next two years. In addition, almost 80% of those surveyed said they expected instant messaging service (IMS) and video mail to replace existing messaging delivery methods in the next two years.

Customer focus
But perhaps the biggest challenge for operators, mobile and fixed, in 2007 will not be finding new technologies but shifting their perspective to a new more customer-focused approach, something which is already starting to happen, according to IDC.

“More and more what we are doing is actually moving away from a technology description of what something is and really starting to talk more about marketing kind of concepts,” says Rotter. The focus in terms of technology will be less about finding the next great invention and more about answering consumer needs, he says.

Rotter cites triple play as an example of a solution which is attracting a lot of hype, but which is in fact really just a new presentation of pre-existing technologies.

“Whereas before operators were mostly engineering centric organisations, modern operators are redefining themselves as customer centric organisations,” Rotter continues.

“The challenge to vendors and operators is no longer going to be what new technology can I launch, it will be how can I package what I have and what’s new to make the solution that I have?” he adds.

This shift in perspective is something that is already apparent, he says, in the approach of new players such as du which focus heavily on consumer benefits. Etisalat has also sharpened its focus on the consumer recently with launches of services dedicated to specific customer segments such as people with hearing difficulties.

“I think this is a very interesting debate how do we move from a technology centric view of the world…to how do you meet users needs in terms of technologies? I think that is something in store for next year, we will see this kind of engagement,” adds Rotter.