GCC Telecom Report 2015 by UMS International

DOSSIER

GCC TELECOMS REPORT

2015

4.4X FASTER TIME TO MARKET FOR NEW SERVICES

96% REDUCTION IN DOWNTIME

41% LESS TIME KEEPING THE LIGHTS ON

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Copyright © 2015 VCE Company, LLC. All rights reserved. VCE, VCE Vision, Vblock, and the VCE logo are registered trademarks or trademarks of VCE Company LLC. All other trademarks used herein are the property of their respective owners. Numbers based on IDC White Paper: “The Business Value of VCE Vblock Systems: Leveraging Convergence to Drive Business Agility,” May 2015. Specifications may vary according to customer’s requirements. All information is provided ‘as is’ and all warranties are disclaimed.

EDITOR'S NOTE

BUZZWORDS AND THE NEW AGE OF ENABLEMENT BY 2020, THE MIDDLE EAST ICT INDUSTRY IS EXPECTED TO TRANSFORM. BUT A LOT NEEDS TO HAPPEN UNTIL THEN

DOSSIER

Chief Executive Sandeep Sehgal Vice President Ravi Raman

EDITORIAL Consulting Editor Shayan Shakeel

ART Art Director Steven Castelluccia Senior Designer Nadia Mendez Designer

Fahed Sabbagh

MARKETING AND SALES Assistant General Manager Poonam Chawla

Marketing Coordinator Blossom Menezes

hat would the world have looked like if CDMA and GSM hadn’t given rise to the cell phone? Or if fibre-optics hadn’t ‘enabled’ the Internet? Hardly any of the advances the world has made over the last 100 years would have been possible without the connectivity that mobility has allowed. But to get here entailed more contender technologies (remember WiMAX?) having to be trialled and scrapped than anyone can remember. The Middle East ICT industry is projected to add $20 billion worth of investment by 2020, up from $15 billion in 2014. As data consumption grows, voice– like SMS–is about to become noise. And what is becoming increasingly inevitable is that we are about to enter a new age of enablement. But how close we are to crossing the threshold is still up for debate. Telcos

are ready to transform but the industry is contracting as over the top service players such as Skype and Whatsapp eat away revenues. Amid tech vendors have to convince telcos to spend, or become relics of a different age. There is hope in 5G, IoT and smart cities. But at the heart of it all, it is the user who unwittingly has become what Google calls the "centre of the universe." It's hard to imagine flying cars in the next few years. But as some in this report are saying, a cashless society that watches TV on its phone and orders pizza from a fridge magnet, is certainly a possibility. According to one technologist, all of the data humanity has created in its history until now will account for two weeks worth of traffic in 2020. Somehow, in the world of technology, it’s hard to tell if that’s a long time to wait and see, or not long enough. SHAYAN SHAKEEL

GCC TELECOMS REPORT

EDITOR'S NOTE

Circulation Manager Rochelle Almeida Circulation Executive Rex Emmanuel

Exclusive intelligence report complimentary for subscribers of Bloomberg Businessweek Middle East edition. Not to be sold separately. UMS International FZ LLC, PO Box 503048, Building no 10, Office 346, Dubai Media City, Dubai, UAE. General enquiries: Tel: +971 4 432 9467 Fax: +971 4 432 9534 poonam@businessweekme.com

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NEWS

AGENDA

TELCOS

VENDORS

Trends, deals, restructuring, and emerging issues

The chairman of the ITU shares his global and regional agenda

Each telco faces a unique challenge in a fast changing industry

The world's biggest vendors are driving the business

INDUSTRY & SOCIETY

TECHNOLOGY & INNOVATION

LAST WORDS

Everything from phones to stadiums needs to be reimagined

Analysts believe there is money to be made in the right services

The industry is gearing for transformation and smart city technologies, enterprise, and Internet of Things dominate the conversation. CEOs of both telcos and vendors are tempering their exuberance, especially as profitability concerns threaten sustainability.

Technology will affect consumption, business and society

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HUAWEI CELEBRATES 15 YEARS IN THE MIDDLE EAST

uawei is celebrating its 15th year of operations in the Middle East this month, in the middle of a period which has seen the Chinese company mark a number of milestones. This year has seen the tenth anniversary of its Hajj services, in partnership with STC, and a decade pass since launch of the first 3G network in the Arab world, with Etisalat in the UAE.

“Fifteen years ago Huawei’s corporate structure looked considerably different than it does today,” says Charles Yang, president of Huawei Middle East. “Looking ahead, we are constantly expanding and improving our business operations in the Middle East to set new milestones in the ICT sector and to apply fresh, original thinking to our work.” Part of Huawei’s expansion has been the result of its research and

development. It operates several Joint Innovation Centers in the Middle East as well as a dedicated Middle East IT Competency Center, a Middle East Smart Cities Center of Excellence, and three Middle East training centres. The Europe, Middle East and Africa region accounts for 35 per cent of Huawei’s total global revenue in 2014. Its revenues in the region were up approximately 20 per cent year-onyear in the second quarter of 2015.

SAUDI ARABIA EXTENDS THIRD MVNO LICENSE DEADLINE

ALMOST TIME FOR A NEW INTERNET

Saudi Arabia’s telecom regulator has extended the deadline for organisations to submit applications for a third mobile virtual network operator (MVNO) license. After what it says were requests from interested parties and stakeholder, the Communications and Information Technology Commission (CITC) extended the deadline for applications until 10 December this year. The new MVNO will be able to launch services on Zain’s network. CITC had previously awarded a license to Virgin Mobile to operate on STC. Virgin Mobile commenced operations in September. Meanwhile, Mobily is in the process of launching an MVNO in partnership with Europebased Lebara. Saudi Arabia is in a drive to liberalise its telecoms sector and is the first GCC country after Oman to allow MVNOs to operate in the country.

Less than 65,000 IPv4 addresses remain available for internet exchanges to establish and continue operating in the region says the region's local internet registry. According to Paul Rendek, External Relations Director at the RIPE NCC in Dubai, the free IP pool was depleted in 2012. “Since then, 45 Internet Exchange points in 21 different countries have received blocks of IPv4 addresses from this reserved pool,” he says. IP addresses are the vital ‘naming system’ used to deliver and establish connections between devices on the internet. The current protocol, IPv4, which is numerical and resembles the 0.0.0.0 format, was developed with a capacity of approximately 4.3 billion addresses and has nearly been exhausted. Rendek and the RIPE NCC have been active in promoting the next generation of the protocol, IPv6, which has been developed to replace IPv4 and will be crucial in the growth of connected devices, which are expected to number 20 billion by 2020.

MIDDLE EAST INTERNET USERS TO NUMBER HALF A BILLION BY 2019 The Cisco Visual Networking Index (VNI) Forecast 2015 estimates there will be 425 million total Internet users in the Middle East and Africa in 2019. The forecast estimates Middle East Internet traffic will grow at a compound annual growth rate of 44

per cent. Approximately 78 per cent of all users traffic will come from mobile devices. According to the report, over 51 per cent of the world will have access to the Internet in 2019 up from 40 per cent in 2014. Growth in

GCC TELECOMS REPORT

global data traffic will be driven by an increase in users, faster speeds, proliferation of technologies such as M2M and NFC. A surge in the use of advanced media services such as music streaming and IPTV will be a major factor as well.

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�

Martin Jetter, SVP, IBM Global Technology Services; Hareb Al Muhairy, SVP Corporate and International Affairs, Etihad Airways; Robert Webb, CTO, Etihad Airways

IBM, ETIHAD AIRWAYS IN MULTI-MILLION DOLLAR TRANSFORMATION PARTNERSHIP

n a deal valued at approximately 2.5 billion dirhams ($700 million) IBM will help transform Etihad Airways’ guest experience, develop world-class infrastructure and security, and improve efficiency. The 10-year transformational agreement, signed in September, will give Etihad access to the latest cloudbased technologies and services to transform their IT infrastructure. It will also create one of the Middle East’s most sophisticated cloud data centres in Abu Dhabi, to be operated by IBM.

IBM’s previous alliance with Apple, which resulted in IBM Mobile Solutions, will provide enhanced mobile capabilities to its employees and guests. Additionally, IBM and Etihad Airways will create a joint technology and innovation council in Abu Dhabi to develop more personalised travel solutions using IBM’s global research capabilities and the airline’s industry expertise. James Hogan, Etihad Airways’ president and chief executive officer, says, “This is a long-term,

strategic partnership which will allow Etihad Airways and its partners to harness the latest technologies as we deliver our award-winning services. This is a game-changing agreement for Etihad Airways, our partners and employees, and for Abu Dhabi.” The collaboration provides a global framework for technology service delivery for Etihad Airways and its Etihad Airways Partner airlines, including Alitalia, Airberlin, Jet Airways, Air Serbia, Air Seychelles and Etihad Regional.

COMPANIES UNABLE TO JUSTIFY SECURITY INVESTMENTS: JUNIPER, RAND Many companies are spending increasing amounts on cybersecurity tools, but are not confident that these investments are making their infrastructure secure, according to research published by Juniper Networks and RAND Corporation. The landscape for managing the risks posed by security is chaotic, they say in ‘The Defender’s Dilemma: Charting a Course Toward Cybersecurity’. This is especially true in the Middle East, where cybersecurity is one of the biggest economic and national security challenges faced as countries emerge as viable global business hubs. “The security industry has struggled to understand the dynamics that influence the true cost of security risks to businesses and the government in the Middle East,” says Mario Georgiou, regional director, MENA, Juniper Networks. “What’s clear is that in order for GCC TELECOMS REPORT

organisations to turn the table on attackers, they need to orient their thinking and investments toward managing risks versus threats.” The report details how some of the main pitfalls in regional investments in security can be attributed to many security tools having a half-life and losing value over time. According to Juniper Networks, with the Internet of Things at a crossroads, there is no one size fits all security strategy. Organisations need to eliminate software vulnerabilities and invest in the workforce to reduce costs and the prospect of threats over time. With RAND’s model projecting the cost of managing cybersecurity risk set to increase 38 per cent over the next 10 years, Juniper believes that the time is now for organisations to start managing security spending and risk management as a discrete business function. 6

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NOKIA ANNOUNCES ORGANISATIONAL CHANGES AFTER ALCATEL ACQUISITION Nokia’s Rajeev Suri has announced how he intends to re-organise the combined company subject to the successful closing of the public exchange offer for Alcatel-Lucent securities announced on 15 April, 2015. "We are making very good progress on being ready to operate as a combined company when the proposed exchange offer closes," says Rajeev Suri, president and chief executive officer of Nokia." After the closing of the exchange offer, the Networks business would be conducted through four business groups: Mobile Networks, Fixed Networks, Applications & Analytics and IP/Optical Networks. Alongside these, Nokia Technologies would continue to operate as a separate business group. The business group leaders would report directly to Nokia's president and CEO, along with six additional unit leaders within the combined company. The combined company is expected to have a common sales organisation across the business groups, except for Nokia Technologies. Alcatel-Lucent is to continue to operate its undersea cables business, Alcatel-Lucent Submarine Networks (ASN), as a wholly-owned subsidiary. “Our goal is to position each business group for clear leadership in its particular market and to create a combined portfolio that provides the scope and scale our customers expect, underpinned by a strong focus on innovation, quality and superb execution,” explains Suri. “We aim for all our business groups to be innovation leaders, drawing on the combined company's unparalleled R&D capabilities to deliver leading products and services for our customers, and ultimately ensure the company's longterm value creation.” Nokia is also selling HERE, its mapping and location services business, which is not included in its planned future organisational structure. The sale of HERE, to a consortium of German carmakers, is expected to close in the first quarter of 2016.

GCC TELECOMS REPORT

�

Rajeev Suri, CEO, Nokia, and Michel Combes, former CEO, Alcatel-Lucent

UAE BENEFITS AS OPERATORS AND VENDORS RACE TO DEPLOY NEXT GENERATION TECHNOLOGIES Both du and Etisalat are trialing new technologies in a bid to be the most relevant operator in the UAE as the ICT market gears for transformation and boosts the market for vendor’s products and services. Earlier in the year, du partnered with Nokia Networks to become the first operator to launch an LTE-A network in the UAE, promising users data speeds of up to 225mbps. It also successfully trialed Network Function Virtualizations, which aim to virtualise hardware related network operation and reduce operating and capital expenditures for residential and enterprise customers. According to Jasim Al Awadi, vice president, Network Infrastructure and Services, du, “This will potentially introduce du to the OTT market, allowing du to provide its services over other service providers infrastructure like Google and Amazon.” Meanwhile Etisalat is pushing for new business models based on revenue sharing, as the operator signs agreements with Ericsson and Huawei to deploy 5G technologies. “Currently, work on the infrastructure necessary to make this introduction possible is under way,” says Etisalat CEO Saleh Al Abdool. Etisalat aims to be the first operator in the Middle East and the world to introduce 5G on its networks, in 2019. It also hopes to launch 4.5G in the UAE by 2017. 7

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AG E N DA

THE POST 2015 AGENDA AFTER 150 YEARS OF LEADING COMMUNICATION TECHNOLOGY GROWTH AROUND THE WORLD, THE INTERNATIONAL TELECOMMUNICATION UNION IS TARGETING SUSTAINABILITY AND THE EVOLUTION OF INNOVATION By Houlin Zhao, Secretary-General, ITU

he digital revolution has transformed the world. The global economy is now driven by Information Communication Technologies (ICT) which pervade every aspect of our lives. ICT is also the catalyst shaping the post-2015 development agenda and goals for sustainable development. The next step will be further evolution, with far greater efficiencies and affordability allowing even more accessibility to the benefits of telecommunications and ICT. In a rapidly evolving global ICT environment, fostering growth and innovation at all levels is key to meeting the aspirations of end-users and people, and achieving sustainable socio-economic growth. Broadband infrastructure development is also critical in ensuring that ICTs are used innovatively as delivery vehicles for health, education, governance, trade and commerce. Post-2015, broadband access and innovating in ICT will become critical factors in achieving an environmentally sound and sustainable future. These measures can bridge the digital divide between countries, cities and rural areas, and those living in differing socio-economic levels. Recognising the importance of ICTs as the drivers of the digital economy, The World Summit on the Information Society, held in Geneva in 2003 and Tunis in 2005, made several recommendations toward creating an environment that calls upon institutions to be both responsive and supportive of research and innovation.

ďż˝ Houlin Zhao, Secretary-General, ITU

The Summit demonstrated strong political will to build a people-centred, development-oriented and inclusive information society. At that time, no one could have believed that there would be nearly 7 billion mobile subscribers within a decade; that smartphones would be in millions of

GCC TELECOMS REPORT

AGENDA

pockets; and that mobile devices would begin to replace desktop computers and even television sets. However, while this is true in most developed countries, there are still millions of people across the world without access to modern communication systems. This divide is growing and is a major challenge. We must make every effort to ensure people are connected to the sources of information and knowledge that are taken for granted elsewhere and which empower people with access to meet their own aspirations and goals. Thus, the ITU Connect Arab Summit, which convened regional heads of state and government, policy-makers and industry leaders in Doha in 2012, included proposals for dozens of projects. These ranged from those related to accessibility, innovation, ICT community centres, mobile banking and payment systems, to assistance on spectrum management in the region, ICT training, assistance with the digital television transition, migration to IPv6, and national computer incident response teams (CIRTs) to address cybersecurity issues. National and regional programmes to achieve ICT targets identified in international initiatives are promising and are helping to meet the needs of the poorest and most vulnerable populations throughout the Arab world. Additionally, tremendous progress has been made over the last decade to increase access to ICTs and encourage people to adopt them, as demonstrated through the outstanding growth in mobile telephony, Internet access and broadband

services. Market liberalisation in the region has encouraged ICT growth, but additional policy and regulatory reforms should be considered in order to ensure affordable access for all into the next decade. The Gulf Cooperation Council (GCC) countries have achieved higher penetration rates due to their wealthier economies, but this is not the only factor that has stimulated ICT growth. Notably, many countries have made impressive achievements in enhancing their ICT sector by implementing effective policies. Some of these policies have aimed at liberalising the sector, increasing competition and market access, and/or reducing the costs of ICT services. The adoption of market liberalisation policies, for example, appears to have an impact on ICT development. Middle-income countries with higher Human Development Index scores, attributed to urbanisation and a young, highly educated population (as in Jordan, Lebanon, and Tunisia) are showing varying degrees of penetration of mobile and Internet services. Early adopters, such as Jordan, are showing higher degrees of penetration in comparison to late adopters, such as Lebanon. Jordan adopted market liberalisation in 1995, fully privatised its incumbent operator and awarded several licences to Internet service providers and mobile operators, encouraging competition between service providers. In the vast majority of Arab states, mobile cellular subscriptions have reached 100 per cent or more. Wireless-broadband penetration levels vary considerably across the region. The countries with the biggest

"There are still millions of people across the world without access to modern communication systems. This divide is growing and is a major challenge. We must make every effort to ensure people are connected to the sources of information and knowledge that are taken for granted elsewhere and which empower people with access to meet their own aspirations and goals.â&#x20AC;? GCC TELECOMS REPORT

AGENDA

Countries with the most connected population:

90%

Bahrain

88% UAE

85% Qatar

proportions of population online are Bahrain (90 per cent), United Arab Emirates (88 per cent) and Qatar (85 per cent). Unlike most of the Arab region, 4G LTE is now available in all the GCC countries. Qatar stands out not only in the region but internationally as well, with more than 96 per cent of its households connected to broadband or having a computer. The remaining GCC states all reach high household ICT penetration rates of 70 per cent and above. Although, fixed-broadband is generally low in the Arab states, Bahrain and the UAE are the only ones that have reached double digits of 13 per cent penetration each. As the United Nations specialised agency for ICTs, ITU provides the intergovernmental platform for the development of new standards that are interoperable around the world. We have to keep pace with innovations to ensure spectrum is available and efficiently managed to accommodate new technological developments. There is also an emerging need to support industry sectors that wish to participate in developing new high-tech networks, even in outer space. And we must ensure that developing countries have the capacity to harness the potential of new developments in ICTs; indeed many of them are prepared to leapfrog technologies and adopt the latest state-of-the-art systems. Small- and medium-sized enterprises (SMEs) can play a major role as drivers of national and international innovation and economic development. The ITU global ICT entrepreneurship initiative kicked off at ITU Telecom World 2015 in Budapest, Hungary, on 12-15 October 2015, and offered excellent opportunities for SMEs from ITU member states to GCC TELECOMS REPORT

connect with new markets. The event showcased how even tiny start-ups in the remotest corners of the world can come up with "the next big thing" in ICT. The key to bridging the digital divide lies in strengthening global partnerships for development and using the power of ICTs to meet our sustainable development goals. ITU calls upon member states, sector members and associates as well as academia and citizens’ groups to pull together every conceivable resource to ensure that communities worldwide are fully connected to ICTs. Acting as catalysts, ICTs open the door to myriad solutions in the quest for a more productive and better life in remote rural communities and even in under-served urban areas. ITU has stepped up the global effort to bridge the digital divide, connecting people who still do not have access to modern communication tools, reaching out to marginalised communities and remote settlements, and eliminating the stumbling blocks to socio-economic growth, improving education, healthcare, and environmental sustainability. In this quest, countries in the Middle East have a very critical role to play. The top five countries in the Arab states in terms of ICT development–Bahrain, Oman, Qatar, United Arab Emirates and Saudi Arabia–are all oil-rich, high-income economies. These countries belonging to the Cooperation Council for the Arab States of the Gulf (GCC) and other ITU member states in the Arab region have over the years strongly supported ITU’s work both in the region and internationally. I call on them for their continued commitment to enhance ITU’s shared commitment to connect the world to the benefits of ICT. 11

AGENDA

T E LC O S

GCC TELECOMS REPORT

TELCOS

ETISALAT

THE BIG LEAP FORWARD ETISALAT UAE IS PREPARING TO LEAD THE INDUSTRY IN BRIDGING THE DIVIDE BETWEEN OPERATOR AND CUSTOMER

T The Etisalat Rewards Programme has

million customers who have redeemed

billion points on services

he leading operator in the best performing telecoms market in the GCC has its eyes set on Internet of Things as the next big disruptor in the industry. IoT coupled with Machine-to-Machine, and consequently Big Data, heralds a major change for telcos, according to Saleh Al Abdooli, Etisalat UAE's CEO. Operators, who had become used to being "kings of the connectivity universe," will now find themselves having to leverage their networks and customer base while using analytics to improve profitability. “There are huge possibilities in every sector, particularly healthcare, retail, banking and automotive,” he says. “Success here will require excellent partnering capabilities. Ultimately, the value of the data produced from connected devices will be the driving force behind IoT.” The past decade has seen a shift from what he calls being "Telco 1.0," where voice and SMS were king, to “Telco 2.0,” which has been all about social and customer engagement, says Abdooli. The next iteration will need operators to think beyond connectivity altogether by redefining their relationship with customers; digitising their core business; providing compelling online digital experiences; as well as quicker processing of transactions. For operators to remain relevant and play a major role in the face of ubiquitous connectivity, Abdooli says, they must establish interoperable platforms for GCC TELECOMS REPORT

TELCOS

digital innovation and make bold moves by building digital ecosystems through joint ventures. "For the region’s industry to contribute to the growing digital economy it has to make a dramatic shift, adopt a new outlook, new metrics, develop new skills and new attitude," he says. All this transformation will require a whole new set of competencies to enable the operator of the future, something for which Etisalat has been preparing for some time now, says Abdooli. “We are encouraging young Emiratis and nurturing local and international talent,” he says. "Through our tailored training and development programmes at the Etisalat Academy, we are developing the next generation of leaders and equipping young minds with functional and general management skills for digital innovation.” Etisalat also has a Future Leaders Programme that partners with top management schools including Harvard, Stanford, INSEAD, IMD and the London Business School. At the end of 2014, 400 Emiratis had taken part in and completed the Future Leaders Programme. Etisalat’s continuing development of talent has allowed it to create a network of firsts, Abdooli says: the widest FibreTo-The-Home (FTTH) and 4G LTE mobile network in the UAE; the widest sales network in the UAE; a new "smart store" concept in over 60 stores which makes for “a highly interactive and fulfilling

“We are encouraging young Emiratis and nurturing local and international talent. Through our tailored training and development programmes at the Etisalat Academy, we are developing the next generation of leaders and equipping young minds with functional and general management skills for digital innovation.” Saleh Al Abdooli, CEO, Etisalat UAE

customer experience”; roaming agreements with over 720 operators in 200 countries; and a network that boasts world-class connectivity quality. Etisalat also continues to push the envelope with its marketing campaigns and rewards programmes, one of which re-ignited fears of a price war earlier in the year. The campaign altered the mobile service landscape in the UAE with “our most competitively priced mobile offers,” Abdooli says, backed by a superior network and technologies. Etisalat's Rewards programme has notched over a million registered customers. By the end of 2014, it recorded over five billion reward points redeemed on Etisalat services alone. It's new self-care mobile app also has over a million users within a year since its launch. A core issue involving the UAE (and GCC) has been the high cost of the internet, which the ITU ranks as being among the highest in the world. Despite continuous development and the removal of restrictions aimed at boosting the ease of doing business, broadband access has been a costly affair.

Acknowledging the issue, Abdooli says that Etisalat has been working towards making Internet more affordable by increasing broadband speeds by up to 2.5 times for over 100,000 customers in the past year. Real-time interaction with customers, reaching out to global partners and markets through uninterrupted streaming, high-quality sound and visual interaction can be a costly and very data-demanding affair, says Abdooli. “However, our specialised propositions for SMBs are designed to help businesses better manage their costs and improve cash flow, while increasing productivity, efficiency and profitability," he says. Citing Etisalat's new Business Quick Start service, which offers businesses a range of high-end office equipment such as printers and projectors, Abdooli says, "This is over and above the basic essentials of high-speed broadband, calling minutes and devices. At zero upfront cost and on an easy instalment basis, it really helps businesses save more and offers invaluable relief with office set-up challenges.“

GCC TELECOMS REPORT

TELCOS

million USERS registered for the Self Care app, launched in 2014

SOME LOVE FOR THE CHALLENGER DU HAS REVAMPED ITS INFRASTRUCTURE AND INTRODUCED END-TO-END HOME ENGAGEMENT IN A BID TO APPEAL TO SME’S AND THE SMART CITY

ince breaking Etisalat’s monopoly on the UAE telecoms industry and launching operations eight years ago, du has managed to become more than "the other operator" in the country. Witty advertising, a network of customer care outlets and an aggressive pricing strategy helped du post a profit 21 months after opening shop in 2007, a year ahead of schedule. It’s Q1 results this year revealed a shrinking subscriber base which might be a cause for worry, but CEO Osman Sultan brushes off any concerns, attributing the decrease to customer migration to its rival’s My Number, My Identity initiative, a mobile number portability programme. “Our result for Q1 2015 showed a yearly improvement in our net profit before royalty,” he says. “The year-on-year decrease was more than offset by a combination of an improved product mix and more efficient operations, resulting in better performance.” Until last year, the operator had been restricted to operating in the newer parts of Dubai. Extensive negotiations with Etisalat and the TRA to allow it to share fixed line networks with the former incumbent operator have been key to its push for growth. The fixed line agreement

negotiations finally made progress late in the first half of this year, when du was allowed to offer retail services to a “controlled number of customers” which will be added to in the coming months. The agreement isn’t forecast to yield any sizeable boost in revenue but is expected to be a factor in retaining customers who would prefer to keep the bill for all their connectivity services with a single provider. Competition in fixed-line services would also allow both operators to offer differentiated products and encourage a focus on quality, says Sultan. “The implementation of the agreement in its entirety will ultimately lead to the expansion of the ICT sector in the UAE,” he says. “This is a favourable development as it will transform the ICT sector by providing a competitive environment that will propel innovation and offer customers real choice.” The Smart City initiative is where du hopes to find value in the future. Sultan has been vocal in his support for the government making it a key priority, and is enthusiastic about what this means for public-private partnerships. Pointing out various ways in which du is positioned to provide and extract value across multiple layers of the smart city, Sultan says, “We

GCC TELECOMS REPORT

TELCOS

Sept

2008 du posted it's first profit, 21 months after it began operations in 2007

a success, Sultan says, the marketing campaigns for which the company is known needed to show what the company offered and reflect the spirit in which they did. “Affinity with a company is what makes any challenger brand successful,” he says. “We were and will always be a human brand, hence, we use social media to address customer issues and reach out to the customer in a way that breaks through the monotony.” The campaigns are also indicative of where du will be heading in the future. For instance, with the SME sector making up for the largest portion of the UAE economy, du is diverting a lot of its media to communicate the predictable prices, partnerships and services they need for technology to be an enabler in their realm. du has been pivotal in enabling a wave of social entrepreneurship, Sultan says, and will continue to introduce ways to drive their performance, productivity, and reduce their costs of operation. Besides big data, machine-to-machine and cloud based services for the data-driven society, in the consumer space, du has begun introducing end-to-end home automation services in security and entertainment. “The way in which people are consuming content has changed incredibly over the last few years," says Sultan. "We have had to look at new avenues of providing entertainment and diversifying our home services to offer anytime, anywhere, multi-screen viewing to our customers. In addition, we are collaborating with independent Over-the-Top providers to enable the ease of subscription and payment for our mobile customers”.

provide WiFi, enable IoT and provide advanced LTE services enabling faster data transfer at the network layer. Additionally, we play a key role at the platform layer by analysing data from the storage, calculation or network pool. Ultimately, by serving as an enabler we make the application layer a reality as this is the level that empowers smart city, smart education, smart healthcare and smart traffic among others.” Besides building network capability to support an Internet of Things ecosystem and rolling out complimentary Wifi for all, du has also been introducing IoT enablement products such as digital wallet services as well as innovative payment methods for street parking or the Dubai metro and bus. “Our focus now is on delivering the smartest, simplest digital solutions that offer the greatest value for residents and businesses in the UAE,” Sultan says. However du’s CEO acknowledges that there are concerns on how creating efficiencies will lead to new revenue opportunities. “Monetising services depends on the facilities people require and then options to choose what they want to pay for," he says. "This is an evolutionary process.” du has trialled WiFi monetisation by offering restricted speed access for basic services, such as social media apps and email, and high-speed access to government services. Premium WiFi allows high-speed access for all services at a range of price points. In terms of communications, du is arguably the more visible of the two operators in the country. For du to be

“Affinity with a company is what makes any challenger brand successful. We were and will always be a human brand, hence, we use social media to address customer issues and reach out to the customer in a way that breaks through the monotony.” Osman Sultan, CEO, du

GCC TELECOMS REPORT

TELCOS

OOREDOO QATAR

THE INCUMBENT’S ADVANTAGE DESPITE THE END OF ITS MONOPOLY, QATAR’S OOREDOO IS POSTING RISING PROFITS AND TAPPING INTO LATENT DEMAND FOR ROAMING TO DRIVE GROWTH

ata, roaming, fibre, B2B, smart city infrastructure–Ooredoo Qatar is tackling them all in the operator’s bid to be the leading contributor to Qatar’s National Vision 2030. “Ooredoo’s ability to deliver is demonstrated by Akamai’s study of global internet speeds,” says CEO Sheikh Saud Bin Nasser Al Thani. The study ranks Qatar’s 72 per cent connection speed increase as one of the fastest in the world and attributes it to Ooredoo’s fibre speed upgrade in 2014. However Qatar has one of the world’s highest broadband/phone penetration rates, implying a huge appetite for connectivity, and Sheikh Saud doesn’t want to take for granted the strength generated from being an incumbent. “We’re preparing for the future,” he says, talking about the operator’s ongoing investments in infrastructure and network upgrades. “Qatar was the first market where Ooredoo launched 4G and 4G+ and at the 2014 ITU conference in Doha we showcased a record-breaking 4.1 Gbps over LTE. We are also developing a whole range of smart solutions–smart healthcare, smart education, smart living and smart traffic control–which will provide more convenience for residents, reduce the environmental impact of urban development, and provide a better life for all.” According to Sheikh Saud, this investment will also be be critical to plans for Lusail City, Qatar’s first smart city. The city will be home to the main venue of the FIFA World Cup 2022, where the government intends for every element of daily life to be supported by automation and smart technology. GCC TELECOMS REPORT

Ooredoo currently claims 3.3 million consolidated customers in Qatar, a fibre network connecting over 225,000 homes and a 4G customer base now representing 25 per cent of all of the group’s data customers across Qatar, Kuwait, Oman and the Maldives. Having a competitor hasn’t dimmed Ooredoo’s fortunes in Qatar. In the first quarter of 2015, revenue grew by 16 per cent to 1,986 million Qatari rials ($546 million) year-over-year while customers grew by 12 per cent to 3.3 million. Net profit also increased by 88 per cent in the same period, a result which allows Sheikh Saud to remain bullish even six years after the end of Ooredoo’s monopoly. “We’re very confident that the presence of competition in the market has strengthened our value proposition,” Sheikh Saud says. “Our most recent results show we have increased our value and market share, and are leading the market with the best network, range of services and customer experience.” According to Sheikh Saud, part of Ooredoo's growth in revenue and profit can be attributed to agreements with manufacturers to introduce the newest devices at competitive prices. Sheikh Saud believes introducing lowcost 3G smart phones, device buyback programmes, device financing and attractive data bundles have driven smartphone adoption and will in turn drive migration from 2G and 3G to 4G technologies. “Traditional services will continue to be important for us,” says Sheikh Saud. “However, in terms of key revenue drivers, we’re investing heavily in data. By driving data market expansion through enhanced 18

TELCOS

“Traditional services will continue to be important for us. However, in terms of key revenue drivers, we’re investing heavily in data.” Sheikh Saud bin Nasser Al Thani, CEO, Ooredoo Qatar

Qatar posted average peak connection speeds of 62.8 Mbps in 2014, a

72% year-on-year increase, one of the biggest leaps in the world

networks, new services, data packages, and partnerships, we see huge growth potential for data services.” With the Smart City looming and a growing number of businesses looking at Doha as a viable regional base for their operations, the other big area of opportunity Ooredoo aims to capitalise on is the high revenue B2B sector. Qatar has a growing and dynamic corporate sector with a growing number of large blue-chip companies and a backbone of small and medium enterprises. In order to cater to these, Ooredoo has created what it claims is “the most sophisticated and advanced compliant data centre in the MENA region.” Leveraging the capacity of the Ooredoo Data Centre, the company offers a host of additional security and recovery solutions, including Qatar’s first cloud-based security solution, Ooredoo Cloud Security. Ooredoo aims for the data centre to provide organisations with a full range of services including hosting & co-location, web content delivery, data backup and restoration, business continuity and disaster recovery, infrastructure monitoring and management and IT security. As Sheikh Saud puts it, “We’re looking to GCC TELECOMS REPORT

TELCOS

the future, and developing cutting-edge technology that can be deployed on our bigger, faster network.” In the long-term, Sheikh Saud is expecting the existing roaming landscape to transform. Instead of a regionally applicable model, Sheikh Saud is looking at a global roaming model that will enable customers to use the same SIM and devices wherever they travel. And as Ooredoo's competitor Vodafone attempts to leverage its global footprint in a bid to gain market share in Qatar, Ooredoo too is rolling out products and services to encourage travellers to remain on Ooredoo networks. Ooredoo Passport, the operator’s key roaming product, offers discounted voice, data and SMS bundles on over 165 partner networks in 65 countries. The global roaming market is expected to grow to more than $60 billion by 2016 and is ripe for transformation. “We fully support the International Telecommunication Union in pushing for legislation and industry agreements that will secure roaming price transparency, immediate access to price information, greater competition and prices that are based on the actual costs,” says Thani.

BATELCO GROUP

THE BIGGER PICTURE

Keeping all our customers connected with world class communications solutions, no matter how far away they are from our HQ, is crucial. Our grand plans during 2015 include the roll out of an LTE enabled network to meet customer demands for mobile services in the South Atlantic, specifically for St. Helena and Ascension Island. This investment is part of Batelco Group’s ongoing strategy to build and enhance mobile networks across all of its operations. We are confident in our ability to strengthen our financial and operational performance throughout 2015.

BUOYED BY ITS OVERSEAS OPERATIONS, BATELCO GROUP IS ATTEMPTING TO REVIVE ITS FORTUNES IN AN INCREASINGLY COMPETITIVE ENVIRONMENT, EXPLAINS CEO IHAB HINNAWI

Profits rose the last two years after four years of decline, but Batelco Group has recently posted a dip revenue again in Q2, despite posting subscriber growth. Are the pressures on profitability temporary or do you expect them to continue? Batelco Group reported gross revenues for Q1 2015 of 93.7 million Bahraini dinars ($248.4 million), a 4 per cent decrease both year-over-year and on the previous quarter. The decline in revenues was partly due to movements in foreign exchange rates which constantly fluctuate. The revenues’ marginal decrease can also be attributed to competitive pressures in some of the group’s operations. On a positive note, the Group’s Q1 2015 net profit was 14.2 million Bahraini dinars, up by 68 per cent in comparison to Q4 2014. We are also very pleased that the subscriber numbers across the Group continue to grow with the total customer base just short of 10 million when we announced our Q1 financial and operational report.

Batelco is posting strong performances in its overseas segments. What is your strategy going forward and how are you aiming to cope with external pressures on revenue? As we announced at the end of Q1 this year, our overseas operations contributed 59 per cent of revenues and 54 per cent of EBITDA. Nonetheless, the challenges in our industry are unrelenting and to meet the ongoing challenge we need to constantly adapt and look to new revenue drivers.

What role will Umniah Jordan continue to occupy under the Batelco umbrella after plans to sell it were dropped? Umniah remains a major player under the group umbrella and continues to do very well financially and operationally, as is evidenced by its strong Q1 results. The customer base remains steady at just over 2.7 million while the broadband subscriber base witnessed a 13 per cent growth YoY thanks to Umniah’s upgraded infrastructure and expansion of its coverage across Jordan. Umniah’s strategy is based on offering best value while keeping abreast of sector developments and tending to its customers’ various needs. Batelco operates in a region with a number of other heavyweights actively pursuing expansion plans in Africa and Asia. How does this affect the group’s own acquisition and expansion strategy? Batelco Group’s M&A team continues to explore various acquisition opportunities; this is an ongoing exercise as part of our strategy to grow further. However, Batelco remains focused on its own expansion plans to suit its specific needs.

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Ihab Hinnawi, CEO, Batelco Group

GCC TELECOMS REPORT

TELCOS

BATELCO BAHRAIN

BACK ON TRACK BAHRAIN’S OLDEST DOMESTIC OPERATOR HAS REGAINED STABILITY UNDER ITS FIRST FEMALE CEO, FOLLOWING A TUMULTUOUS PERIOD OF TELECOM LIBERALISATION

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Muna Al Hashimi, CEO, Batelco Bahrain

atelco Bahrain enjoyed a run of over two decades as the sole state-owned operator in the country. But in the early 2000s, the small kingdom of just over 100,000 mobile subscribers decided to liberalise its telecom economy, awarding licenses to not one but two new operators between 2003 and 2010. The move positioned the newly formed Telecommunications Regulatory Authority (TRA) as the most aggressive in the region and allowed for mobile subscriptions to grow to 2.21 million–a 173 per cent penetration rate–in 2013. However, the move drastically affected Batelco’s competitive position. Profits shrank until the third quarter of 2014 when it only contributed 42 per cent to the parent group’s profits. The operator also experienced a crisis of management, with two CEOs (one acting) departing in the space of a little over a year. However as of late, Batelco’s fortunes have changed for the better. New CEO Muna Al Hashimi (who was acting CEO for 8 months until August), says this is the result of “re-emphasising focus on the customers.” According to Al Hashimi, Batelco has the largest number of physical customer care outlets across the kingdom supplemented by a 24/7 online customer care centre, as well as a state of the art network operations and control centre dedicated to monitoring and resolving any issues related to customer experience. However, Al Hashimi believes the company’s strategy has been helped in large by the easing of regulations, which she says allowed Batelco “after many years of restrictions, to operate on a level playing field alongside our major competitors.” “In early 2014, we were very pleased that the TRA removed broadband retail regulation from the GCC TELECOMS REPORT

mass-market segment, following their review and findings that mass-market broadband services were competitive,” she says. “However, Batelco still retains its regulatory restrictions for serving the business sector in a majority of products. We look forward to being relieved from such restrictions in order to better serve this important sector of the national economy and accordingly continue to work closely with the TRA towards achieving that goal.” With Viva and Zain (formerly MTC) also offering services in the country, Bahrain, along with Saudi Arabia, is the most competitive market for telecoms in the GCC. The environment has led to a dynamic market for broadband access, which continues to boom as each operator competes and caters to evolving consumer preferences. According to Al Hashimi there is more room to grow as partnerships with OTT services develop. As an end-to-end service provider, Hashimi says Batelco has no intention to focus solely on either fixed line or mobile broadband but plans to contine investing in its infrastructure. “We will continue to invest millions of dinars to ensure that our products, services and solutions are relevant and world class,” she says. This, she believes, will also help Batelco remain the operator of choice for the enterprise segment. “Our unique value proposition for the enterprise sector has been built around the concept of providing businesses with a range of benefits including solutions on lease and hire purchase basis, fully qualified support specialists including a dedicated account manager for each business, turn-key project delivery for mission critical operations installation, remote support through online reporting tool and 24/7 helpdesk for fault reporting,” she says. 21

TELCOS

STC

A NEW AGENDA IN A COMPETITIVE ENVIRONMENT RAPIDLY CHANGING WITH THE INTRODUCTION OF MVNOS AND AN ACCOUNTING SCANDAL, STC HAS A NEW CEO, AGAIN. KHALED AL BIYARI SPEAKS TO DOSSIER

There have been issues with stability at STC with respect to the CEO position. How are you dealing with expectations? STC is a well-structured company and is able to operate and serve its customers even during times of management change through reinventing itself. It is customary in the industry to see companies restructure every few years to meet the ever-increasing market demand for fast-changing services. In that regard, STC has been adaptive. For the past two years or so, the company has been on a very surefooted path towards achieving strategic objectives that we have set and agreed upon with our board. I feel privileged to come in at a time that is both challenging and exciting.

Net profit fell

8.7% in Q2

What is your agenda as the CEO? I believe the key to success is uniformity of objectives across the board. Whether you work as CEO or at any other position, the organisational direction is the common denominator. Internally, we are focusing on a set of values that focus our energy on enhancing the customer experience and ensuring that all of our units operate as ‘One STC.’ We will be striving for quality service delivered through efficient means. Externally, we are gearing for GCC TELECOMS REPORT

TELCOS

increased activity in the enterprise sector while ensuring that we keep enhancing our services to the consumers and home segments. There have been suggestions that STC remains overstaffed. Is dealing with this situation an immediate prriority or do you believe the organisational structure is something that will/can be addressed in other ways? I think the use of term ‘overstaffed’ is a bit unfair, considering that STC continues to be among the most successful telcos in the region. Usually, you would associate overstaffing with sluggish performance and inefficiency. However, there are some areas, which require balancing; some growth areas require more people while some more mature areas need less. This internal balancing process will be on-going, as at the end of the day, efficient performance is in the best interests of all. For this reason, we have started an early-retirement program aimed at injecting new and fresh skills into the organisation and creating the needed efficiency. How has the climate of corporate governance at telcos changed with the accounting related incident of a wellknown operator last year and the

â&#x20AC;&#x153;We have started an earlyretirement program aimed at injecting new and fresh skills into the organisation and creating the needed efficiency. â&#x20AC;?

recent opening of the Saudi stock exchange to foreign investors? I believe that generally speaking, businesses in Saudi Arabia are cognisant of international practices and have been striving to fulfil and even exceed them. The opening of the Saudi stock exchange though brings about a need for increased responsibility and effort towards corporate governance. At STC, we have several checks and balances in place. STC enforces strong governance, has an enabled internal auditor reporting directly to the board of directors, adopts transparent and strict financial reporting guidelines and has a risk management practice on the lookout to pre-empt and mitigate several layers of potential risks.

Khaled al Biyari, CEO, STC

STC recently created STC Solutions. Where does the division fit into STCâ&#x20AC;&#x2122;s overall B2B strategy? Why was it necessary to devote an entire division to gain a broader share of the enterprise pie? Enterprise customers are unique in terms of the sophisticated solutions they require. These solutions need to be customised to ensure best fit. While we have been growing rapidly in terms of gaining market share in the enterprise sector, STC Solutions is organised as the innovation engine side of the operation to deliver turnkey, bespoke solutions. How has the strategy paid off? We are already seeing year-on-year growth. As an enabler of smart cities and Internet of Things solutions, STC is targeting mega projects that will continue to fuel growth for years to come; this is where we see the value-added STC Solutions offerings and we expect even greater results in years to come. When a large operator such as STC has to end its monopoly, profitability is expected to suffer. Is the game then to focus on particular services, or do investors expect the same revenue as was possible earlier? In the dynamic world of telcos, adaptation is the name of the game. Since the introduction of new players in the market, demand has soared on numerous fronts which translated in greater revenue streams for all operators. As the world quickly adopts IoT, we will witness growth in areas that require sizeable investments in technology and services. This is where STC is focusing its attention, to better address the needs of Saudi Arabia and become a technology enabler for the knowledge-based economy that the government has declared as a strategic option for the nation. GCC TELECOMS REPORT

TELCOS

VODAFONE QATAR

GLOBAL GOES LOCAL VODAFONE’S ENTRY INTO QATAR HAS SIGNIFICANTLY IMPACTED THE DOMESTIC TELECOM INDUSTRY, BUT PROFITABILITY CONCERNS REIGN

ne of the top 25 brands in the world, Vodafone first recorded a call on its networks in 1985 in the UK. So it was with a historic track record, network muscle and the technical know-how coming from being the second largest telecommunications operator in the world, that Vodafone entered the Qatari market in 2009 and ended Qtel’s (now Ooredoo) monopoly. However, it’s been six years since Vodafone began operations and the operator has yet to record a profit. Amid strong competition from the incumbent, as well as a scuppered deal with Qatar National Broadband Network last year, Vodafone is being made to feel the heat in the small desert country that has quickly grown to have one of the highest smartphone, internet and fibre penetration rates in the world. Yet Vodafone has made a significant dent in the Qatari telecom industry. International calling rates have fallen by up to 92 per cent, since the operator entered the market. Local calling rates have also dropped by almost 82 per cent while data rates have declined by approximately 99% during the same period. And despite the tragic loss of its CEO Graeme Maher in 2011, strong leadership since has seen it notch over a million subscribers in 2013 and double its share price over the last two years. Kyle Whitehill, who was appointed CEO in 2013, considers this no small feat in a

country roughly 1/7th the size of his native Scotland but with over two million people, of which an estimated 85 per cent are expats representing over 63 nationalities. According to Whitehill, this poses a unique set of particularities as telecom providers are expected to offer highly competitive tailor-made products and services to attract all these different segments. Whitehill previously served in the UK as well as Ghana. There, he revised the operator’s recruitment strategy, cut expenditure, and reversed 26 years of losses, making Vodafone the second biggest operator in the country in terms of subscribers. But Qatar is different he says. “The UK, India and Ghana were not a duopoly and therefore the game was completely different,” he says. According to Whitehill there are similarities to the UAE duopoly but Qatar is an even smaller market with a very fast-paced business environment. The country leads the world in the percentage of consumers with smartphones and tablets, and its telecom sector is also expected to grow at a time when the majority of the world’s telecom market growth seems to have plateaued. Since the country decided to liberalise and introduce competition, the telecoms industry has witnessed “sustained and aggressive price reductions” over a very short period of time. “This revenue pressure has caused us to dampen down expectations for the current year and we

GCC TELECOMS REPORT

TELCOS

92% of households in Qatar have a smartphone

“The business is making money and we are still able to pay dividends before we reach breakeven level. What you will see from our end of year financial results is that we remained on our growth path and we had another year of more than double digit growth.” Kyle Whitehill, CEO, Vodafone Qatar

look at turning truly profitable in the next 3 years but that is very much a paper transaction,” he says. “The business is making money and we are still able to pay dividends before we reach breakeven level. What you will see from our end of year financial results is that we remained on our growth path and we had another year of more than double digit growth.” Two focus areas will determine how well Vodafone will be able to cement itself in Qatar’s growing telecom industry: enterprise and smart cities. While the consumer market can obviously not be ignored, the growing business environment in Qatar presents a lucrative new avenue for growth. The volume of business in the enterprise sector is valued at 1.8 billion Qatari rials ($494.4 million) and Whitehill believes Vodafone’s global footprint will allow it to offer international contracts which the competition will not have the capacity to. Vodafone has already implemented something similar with its London Edition plan for consumers, a first in the industry which allows subscribers on its networks to go between the UK and Qatar at no roaming charge. “We have almost doubled the size of our enterprise business year-over-year and I am hoping that in the next two years to see the same growth path for our SMEs,” he says. As Qatar pushes forward with its Vision 2030 and GCC TELECOMS REPORT

smart city plans, Vodafone Qatar will tap into the operator’s global pedigree in IoT and M2M, the latter of which Analysys Mason has been rating the best in the world for four consecutive years. Based on scale, execution, technological enablement, customer support and aftersales support, Vodafone has topped all five criteria and been rated number one in every annual survey since Analysys Mason initiated the M2M Scorecard in 2011. For non-enterprise consumers, Vodafone continues to deliver on its strategy to tailor make solutions to attract customers. According Whitehill, Vodafone’s recent brand identity has been perceived to be “young and ambitious.” This has been reinforced by the operator’s aggressive product development, such as its Red Postpaid plan which affords lifestyle advantages such as access to benefits such as airport VIP lounges, personal concierges. According to Whitehill, Vodafone’s differentiation comes from global cues and products which go beyond data and voice offers. "We are customer-obsessed driven by speed, trust and simplicity as dictated by 'The Vodafone Way' across all of our markets," he says. "And I believe what differentiates us the most is our cutting-edge networks infrastructure which is a testament to our continued investment in being at the forefront of technology and innovation.” 25

TELCOS

OOREDOO OMAN

MOVING MOUNTAINS IN A COUNTRY WITH A UNIQUE TERRAIN, OOREDOO OMAN'S INVESTMENT IN INFRASTRUCTURE AND CUSTOMER EXPERIENCE HAS BEGUN BEARING FRUIT

man’s topography presents a specific set of challenges which the CEO of Ooredoo Oman, the first privately owned operator in the country, is quick to point out. "The sultanate is mountainous and hilly with a population spread out far and wide, often in small clusters and yet demand for cell phone services is high," says Greg Young. According to him, this requires a high level of capital expenditure to provide coverage for all and is the main issue plaguing both of the sultanate's operators and the regulator. For the longest time, both operators have tried to maintain a rate of capital expenditure at 30 per cent of revenue which is one of the highest in the world. “But balancing this pressure with the pressure of ensuring shareholder returns presents a significant challenge to both the regulator and operators,” says Young. “So the greatest challenge facing the Omani telecoms market is finding the investment for necessary infrastructure development.” And yet in a little over a decade of operation, Ooredoo Oman, formerly Nawras, which ended Omantel’s monopoly in 2005, has managed to provide coverage to almost 99% of the population, an achievement Young says is testament to the operator’s ability to “move mountains.” The performance can be attributed to a number of interdependent factors. A higher level of investment in network development after joining the Ooredoo Group in 2014 saw population coverage increase to almost 99 per cent. This in turn brought market penetration close to 150 per cent and boosted total revenue substantially by almost 25 million Omani rials ($64.9 million). Called the ‘Turbocharging Programme,’ the network upgrade has so far cost nearly 100 million Omani GCC TELECOMS REPORT

TELCOS

“The greatest challenge facing the Omani telecoms market is finding the investment for necessary infrastructure development.” Greg Young, CEO, Ooredoo Oman

rials to develop 70 per cent of network capacity to 3G/3G+ and provide 4G coverage across the sultanate. Ooredoo Oman is also nearly through with rolling out a national fibre backbone across the Sultanate and investing in two submarine cables, which Young believes “will significantly enhance our service levels as well as future-proof our network.” The effect of all this has been to allow Ooredoo to continue to introduce a number of new products and services. The mobile postpaid customer base has grown to 192,427 customers, while prepaid increased by 7.1 per cent last year. Being under the Ooredoo umbrella has also allowed Young to bring cost-efficiency to its commercial operations as it can now leverage an increase in buying-power, group-wide synergy, global sponsorships and strategic programmes. Last year, Ooredoo Oman posted rises in EBITDA of 18.9 per cent and net profit of 4.5 per cent. The company has now posted a 26 per cent increase in Q1 profits, its fifth increase over the last six quarters after seven quarters of declining revenue. However, the period of declining revenue, while appearing “inherently negative,” is a fairly common balance sheet phenomenon for companies investing in short to long term projects, says Young. “Like the vast majority of businesses

across the world, Ooredoo has often spent more capital on network development than it made through increased profit margins. Reinvesting the excess capital over our baseline turnover year over year produced greater rises in revenue in the short to mid-term. Now we are able to look back and demonstrate this was as a successful strategy.” Without the incumbent advantage Ooredoo Oman should have had a much tougher time operating in the country. However, in Young’s opinion, the company might in many ways now have become crucial to Oman, given the level of investment in developing the sultanate into a knowledge based society. “If Oman wishes to continue down its current and new avenues of growth, then the presence of Ooredoo is indisputably necessary,” he says. “The globally aligned expertise and know-how of the group has seen the advance of e-services, the digitisation of the government and public sectors and connection to the Indian subcontinent via submarine cables.” Core to Ooredoo Oman’s strategy has been its somewhat all-encompassing definition of customer experience. Young says the operator isn’t just focused on delivering a memorable customer experience but on being a community-focused brand in entirety. Almost all its initiatives, from working with the regulator and Oman Broadband Company in sharing costs to reach tough locations, to Turbocharging its network and delivering home broadband services over 4G, come under this umbrella. According to Young, strength and coverage are a large part of the customer experience, but not all of it. “Customer experience is about the service levels we are providing, products we have available, how we engage our communities, drive the country through telecommunications and how we really use what customers are saying to drive our next innovative solutions,” he says. "Recent results and increased customer numbers have grown, showing it is a strategy that is paying off.

GCC TELECOMS REPORT

TELCOS

In 2012, 53% of the population had 3G+ coverage; this had risen to

90% by Q2 2015

As of Q1, 2014, nearly

99% of the population was covered at a 150% penetration rate

VENDORS

ERICS SON

THE NEXT REVOLUTION? ERICSSON MENA PRESIDENT RAFIAH IBRAHIM BELIEVES IOT WILL TRANSFORM PEOPLE, BUSINESSES AND CITIES

Why is IoT being heralded as the next industrial revolution? The power of connectivity is going to be the next main transformative force. In this era, everything that can be connected will be connected: people to people, machines to machines, cars on the roads, all will be connected to another. Moreover, these connections will also be very intelligent. Everything will be connected through the infrastructure that we already have. Legacy systems will of course have to be upgraded, and in some cases replaced; however, the foundation for IoT that will provide sufficient connectivity already exists. But the future must be anticipated and the infrastructure must be able to manage the massive amounts of data that will eventually be going through it. These upgrades will require a capable vendor that can manage networks and provide services and solutions for networking. We have the capability to manage connectivity when the transformation to the Networked Society takes place. As for it being akin to the industrial revolution– that is something we will have to witness as it happens. What exactly is Ericsson doing in the IoT realm? Ericsson is focusing on three areas:

intelligent transport systems; public safety and security; and utilities, by which we mean smart grids and smart issues. In terms of transportation, cars will be connected to people, infrastructure and emergency services; sensors will announce traffic jams, for example, and enable the mainstream production and sales of driverless car technology that we are already witnessing today. With safety and security we are talking about emergency services. In five years, we will be living far different lives. If there is an accident on the road, the police, and insurance companies, all need to be informed in time. You need a system that makes that connection possible. So you need to activate a set of alarms–to hospitals and security systems. And that needs to be done in a very short period of time, effectively. Finally, with smart cities, we will see streets communicating with pedestrians and the emergence of smart homes with sensors for improved intelligence. We will also find smarter ways of transmitting data with regards to housing and living as well as urban conditions. Even light bulbs will be connected and managed in a smarter way, and we have collaborated with Phillips in making them even more energy efficient and sustainable.

GCC TELECOMS REPORT

VENDORS

40%

of the world’s network traffic is carried by Ericsson

“Eventually, if we need to dig holes, we will have robots do it for us. It doesn’t matter who implements our projects, all we want is the right talent behind them.” Rafiah Ibrahim, President, Ericsson MENA

find it extremely important to be creating these solutions ahead of the fifth generation of mobile networks, which will fully power IoT in the future. The journey to this future will include a large number of smart concepts including smart cities, smart capital, smart transportation, and intelligent transport systems.

Which sectors today are where the Internet of Things is creating the most obvious transformation? Currently we are witnessing a surge specifically in the power and energy area. The topic of smart grids in particular is an area that is very relevant to us. We have been showcasing smart grids and how they would aid the transformation of the utilities sector while improving overall living and energy saving for individuals and families, throughout the region. We are pushing ahead in the transformation to the Networked Society and GCC TELECOMS REPORT

VENDORS

How is Ericsson’s business suited to enable IoT transformation from within the organisation at the scale at which it imagines the world will need? At Ericsson, we emphasise the importance of human capital development and research and development. We have put human capital and entrepreneurship together in order to improve the development of the country. Our agreement with the AT&T fund has us collaborating in trying to spot all areas in which we can improve research and development. And we have also built a platform with stakeholders across the US which serves as a model to get us closer to our customers. But it’s not only about funding and seeding projects. It’s about putting true leadership on the table. We have put experts to work on concepts to make our platforms more accessible to everyone. Our objective is to encourage innovation, local talent and entrepreneurship by bringing them together in R&D incubators. For me, this is one of the main objectives for the region. So when we implement any of

these projects, we look for a diverse set of young talent, both male and female, at universities and within our own employees as well. We make sure that we are giving equal opportunities to everyone and we see what they can do. Eventually, if we need to dig holes, we might possess the technology to have robots do it for us. We believe in equal opportunity, so it doesn’t matter who implements our projects, all we want is the right talent behind them. In terms of infrastructure for IoT, how will this affect operators? IoT is what will pave the way to our vision for the Networked Society, which is dependent on connectivity. And connectivity is one of the main goals for operators. Smart cities are about to emerge, as a response to the changing nature in which citizens interact with their city. As the internet makes us more informed as individuals, we are able to make better and more informed decisions. Operators in the region already have smart city objectives, and as citizens turn smart, so will the cities they inhabit. In light of this, mobile operators are being challenged by evolving business models operating outside the scope of telecommunications. For this reason, we believe that managed services and software defined networking will optimise networks and the customer experience. Additionally, solutions such as machine to machine (M2M) will provide operators with alternative revenue streams by allowing them to service industries such as the automotive and oil and gas. Internet of Things will require new data storage forms such as cloud computing. How will this affect IT and telecoms? Cloud computing is basically about delivering ICT resources as a service in a utility model (on demand and pay-per-use). The key enabling technologies that enable this are ubiquitous broadband connectivity and virtualisation for increased data centre utilisation. For operators there is the opportunity to create new revenue streams by taking on the role of delivering these ICT resources

to enterprises, as well as the opportunity to utilise cloud technologies and services to improve their operations. Our technology and deep expertise which comes from running many of the world’s most demanding systems powers Ericsson Cloud System and turns telecom and IT operations into a differentiator by modernising infrastructure, applications and data under one operational and economic architecture. Cloud computing can improve operator productivity and connectivity through the Networked Society, and to increase profit margins by enhancing their business models and customer services. Revenue growth opportunities can be leveraged through M2M and the Internet of Things (IoT), hybrid cloud services for enterprise, and transport network evolution for future growth. What impact will IoT have on the evolution of smart cities in the region? In a smart city, mobile networks will need to handle massive amounts of connected devices, from mobile phones, to cars, appliances and even streets–anything and everything that can be connected. To cope with the challenges of a smart city, Ericsson is working with mobile operators on clear strategies to complement the evolution of existing technologies with the latest LTE innovative products and solutions. This will enable even more efficient, scalable and versatile networks. In addition to establishing high speed, trusted and pervasive ICT infrastructure, the key factors for the success of a Smart City initiative is the implementation of the infrastructure to enable communication between devices, as well as the adoption of the cloud and multi-cloud to facilitate the transfer of information. From our experience in several smart city projects, such as Santander, Paris, Stockholm, the Johannesburg World Cup and the 2012 London Olympics, clear goals will pave the way to prolonged economic growth, foreign capital inflow and enriched lives. Ubiquitous connectivity and information utilities will also help with the generation of new ideas and business models, However, only the ones that will really improve citizens’ life will prosper.

GCC TELECOMS REPORT

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Formed in

1876 Ericsson employs

100,000 people

180 countries

INTERVIEW HUAWEI

TOP OF THE GAME HUAWEI MIDDLE EAST'S NEW PRESIDENT, CHARLES YANG, BELIEVES THE REGION IS CRUCIAL TO BUILDING ON THE FIRM'S STATUS AS THE WORLD'S LARGEST TELCO VENDOR IN TERMS OF SALES

As one of the world’s largest multinational tech companies that is also privately held, what is the overall organisation of Huawei today? By localising our operations and building a global value chain, we help local innovators maximise their global value and share win-win outcomes. In terms of corporate structure, the shareholders' meeting is the highest authority within the company, making decisions on major issues such as the company's capital increase, profit distribution, and selection of the members of the board of directors/ supervisory board. The board of directors (BOD) is the decision-making body for corporate strategy and management. Huawei also implements a rotating CEO system under the leadership of the BOD. Acting as the primary person of the company’s operations during his tenure, the rotating and acting CEO is responsible for the company’s overall development.

Given the sheer size of Huawei today, do you think the brand is now duly recognised as a global ICT leader? Huawei exists to serve customers, whose demands are the driving forces behind our development. Our goal is to continuously create long-term value for our customers by being responsive to their needs and requirements. Huawei’s reputation has grown as a result of this commitment. We are trusted by customers in over 170 countries worldwide, providing products and solutions for 45 of the world’s top 50 carriers. We were recognised as one of BrandZ’s Top 100 Global Brands in 2014, and one of the world's 100 most in-demand employers of 2014, according to LinkedIn. Aside from our leadership in the telecommunications field, we have also risen to be a preferred partner in the enterprise IT domain, as well as one of the world’s largest and most popular smart device brands–all in less than a decade. I think such achievements speak for themselves.

How has Huawei’s business strategy evolved since it began operations in the Middle East 15 years ago? The most significant shift has really happened as a result of Huawei becoming a true end-to-end ICT solutions provider. Today we serve telecom operators, enterprises, governments, and consumers. That was simply not the case 15 years ago. This is done through Huawei’s comprehensive 'cloud–pipe–device' strategy. Our end-to-end capabilities are of particular value in the development of national ICT initiatives including national broadband networks and smart cities. These projects serve as an example of how Huawei joins its expertise across the network layer, the software layer, and at the device layer to build more intelligent and connected societies. GCC TELECOMS REPORT

Huawei calls itself a fully integrated end-to-end ICT solutions provider. How is this unique compared to your competition? We offer end-to-end solutions covering telecommunication networks, enterprise ICT solutions, and devices. This allows us to support partners striving for real integration and efficiency across their organisation’s needs. Today we are connecting businesses, cities, and people around the globe in ways that are transforming traditional industries and ultimately creating better experiences for everyone. Supported by bold investments in ICT research and development, we are also able to bring 32

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“The most significant shift has happened as a result of Huawei becoming a true endto-end ICT solutions provider. Today we serve telecom operators, enterprises, governments, and consumers. That was simply not the case 15 years ago.” Charles Yang, President, Huawei Middle East

to market many technologies that are truly unmatched in the industry. Are there plans to expand your presence in the GCC and Middle East? The Middle East is a significant market where we contribute to the development of the ICT industry. This year Huawei celebrates its 15 year anniversary in the Middle East. That is a monumental occasion for our employees, our customers and our partners. As a responsible corporate citizen, Huawei will continue to integrate deeply into Middle East society and be a significant contributor to the region’s vision of ICT enablement. We are confident that we will maintain steady growth and development in all business segments in 2015. Huawei’s end-toend capabilities are of particular value in the development of national ICT initiatives including smart cities in the Middle East. GCC TELECOMS REPORT

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How crucial to operations in the Middle East is research and development conducted locally? Does Huawei have any R&D centers in the Middle East? We have adopted a long-term approach to R&D investment by setting aside over 10 per cent of our sales revenue into it every year. Today we are a leader in terms of intellectual property, and that allows us to create solutions that are unparalleled in the market. In 2014, the company’s investments in R&D reached approximately $6.6 billion, accounting for roughly 14.2 per cent of our annual sales revenue. Furthermore, Huawei has about 76,000 R&D employees worldwide, representing around 45 per cent of our total workforce. Through projects like the recent launch of an Oil & Gas Joint Innovation Center in KSA, a dedicated Middle East IT Competence Center in Bahrain, and our Middle East

Investments in R&D reached

$6.6 billion

representing 14.2% of its annual sales revenue in 2014

76k Huawei has

R&D employees worldwide

45% of its total workforce

Smart Cities Center of Excellence in UAE, we will continue to increase investments in cutting-edge solutions for our local partners. Investing in local talent through regional training centers and joint innovation centers has also been a defining characteristic of our journey during the last 15 years in the Middle East. When do you expect we will see a tipping point for IoT in the region, and how can Huawei help? The boundaries of the Internet of Things are quickly expanding. That transformation will, however, require massive access capabilities over wireless networks. Expected to be commercially launched in 2016, plans for 4.5G will lead mobile communications into the gigabit era for the first time and spearhead the next phase of the mobile communications industry. The capabilities of 4.5G will be essential to M2M applications already under development as part of the regionâ&#x20AC;&#x2122;s embrace of the Internet of Things. In terms of technology, the GCC sits in the middle between the more advanced Western economies and emerging economies of Asia and Africa. How do you feel telcos are responding to the drive towards modernisation with respect to the ability to deliver ICT services? The real power of digitisation is being able to connect businesses, cities and people in ways that create better experiences for everyone. I think the overall picture in the Middle East is very positive. In the last year alone we have seen incredible initiatives undertaken to move towards a more agile software-defined future, to develop new platforms, infrastructure-as-a-service, and to bolster information sharing between businesses, governments, and the telco sector. This digital transformation has been widely supported through ambitious national development agendas across the region. GCC TELECOMS REPORT

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As the industry transforms, will Huawei attempt to position its Networks, Enterprise and Consumer Business Groups differently than it has been so far? As a whole, we see the ICT industry now moving towards more open standards and ecosystems. This enables the full industry chain to become a powerful engine driving the advancement of other sectors. We believe that the key to opening up this new digital industrial era will require delivering on three value propositions: ubiquitous broadband, agile innovation, and more inspired experiences. In the Middle East, this means offering more individuals Web 2.0 services and high-speed broadband connections anytime and anywhere to bring their world closer. Businesses are also being pressured to launch new products and services into the marketplace in a better and faster way, which means driving upgrades in mobility, cloud computing, big data, and analytics systems. As the newly-appointed president of Huawei Middle East, what have been your own experiences with the company, and are there any anecdotes that define your journey at Huawei? I first joined Huawei in 1999 and have been working in the ICT field ever since. I have been privileged to hold a number of senior positions in the company including president of Huaweiâ&#x20AC;&#x2122;s STC Group account, and as CEO of several local offices in China. Technology has greatly changed the way I work. I still recall 15 years ago and how we used to collaborate in the office. Today that is totally different. Now I stay connected with my team members anywhere anytime for better coordination and to make business decisions as fast as possible. In fact, you must use technology to bring out the very best in people wherever they are, building value chains that can match global solutions to local challenges.

ADVERTORIAL

HOW HUAWEI IS ORGANISED considerable resources to consolidate its market presence, establishing strong relationships with operators such as: Etisalat, STC (Saudi Telecom Corporation), Zain, Batelco, du, Ooredoo, Mobily, Vodafone and so on. Huawei has been managing over 24 operators’ networks in more than 10 countries, launching three Huawei resource centres dedicated to Managed Services, three training centres and several Joint Innovation Centres with leading telecom operators.

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Huawei Headquarters in Shenzhen, China

ENTERPRISE BUSINESS GROUP By leveraging Huawei's R&D capabilities and comprehensive technical expertise, Huawei's strategy in the enterprise domain focuses on close cooperation and integration with partners to deliver a wide range of highly efficient customer-centric ICT solutions and services that are based on a deep understanding of customer needs. The company’s portfolio of innovative ICT solutions cater to global vertical industry and enterprise customers across government and public sector, healthcare, education, oil & gas, transportation, and more. The portfolio covers enterprise networking, unified communications and collaboration, cloud computing & data centre, enterprise wireless, network energy and infrastructure services.

uawei is a leading global information and communications technology (ICT) solutions provider which established its Middle East headquarters 15 years ago. Headquartered in Bahrain, it has offices across 10 countries with around 5,000 employees—of whom over 66 per cent are local hires. In the Middle East, Huawei is most actively involved in the GCC and Pakistan. Today the Middle East region is one of the fastest growing markets for Huawei worldwide with a unique “Cloud-Pipe-Device” strategy to innovate across the ICT value chain. In the first half of 2015 Huawei generated global sales revenue of USD$28.3 billion, an increase of 30 per cent year-on-year. Driven to build a better ‘connected world’, Huawei believes beginning a new digital industrial era in the Middle East will require delivering on three value propositions: ubiquitous broadband, agile innovation, and creating more inspired experiences. To this end, Huawei has established an end-to-end ICT solutions portfolio involving telecom and enterprise networks, devices and cloud computing. All three of Huawei’s main business groups—Carrier, Enterprise and Consumer—are active in the Middle East.

CONSUMER BUSINESS GROUP Huawei’s Consumer Business Group offers products covering a wide range of market sectors including mobile phones, mobile broadband devices, home devices and cloud services. The unit has 20 years of expertise in the information and communications technology (ICT) sector, an extensive global network, vast global business operations and network of partners. In 2014, Huawei’s smartphone global shipment ranked third in the world. With 16 R&D centres in countries that include Germany, Sweden, US, France, Italy, Russia, India, and China, Huawei’s products and services extend to over 170 countries. Worldwide sales revenue for the business group in first half of 2015 increased 69 per cent year over year, totalling USD$9.09 billion.

CARRIER NETWORK BUSINESS GROUP Huawei offers end-to-end ICT solutions and professional services for telecom operators covering terminals, wireless and wireline networks, core network, and application & software. In the Middle East, Huawei has invested GCC TELECOMS REPORT

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I N D U ST RY & SOCIETY

VISA

MOBILE MONEY THE UAE IS STILL A CASH BASED ECONOMY, BUT HADI RAAD, EMERGING PRODUCTS AND INNOVATION HEAD AT VISA CEMEA, THINKS THAT IS ABOUT TO CHANGE SOON

How would you describe the market for mobile payments in the UAE? The UAE has one of the highest smartphone penetration rates globally and thus is a great market to support the mobile payments ecosystem. According to a Nielsen study, smartphone penetration rates have reached 78 per cent in the UAE. In addition, consumer behaviour is shifting, with more willingness to embrace mobile technology as a new way to pay, be paid, and manage finances better. However, great customer experiences are critical for success and "mobile first is about the mobility of human experiences, not the device. What is Visa doing to improve the customer experience? Visa’s strategy is to enhance the consumer purchase experience by making mobile payments and services broadly available across many different handsets and operating systems. We work with our partners in the mobile payments ecosystem by offering them rapid access to a platform that enables secure and frictionless payments. We're ensuring mobile payments can scale and deliver the same security, reliability, and interoperability as card payments. Payments on digital should be as easy as swiping a card, and this is increasingly important on smartphones, where screen sizes are smaller than on desktop or laptops. We’re a platform–an enabler for our clients to use software, connectivity, and data to deliver great experiences to their

customers in ways that will best equip them to compete in the industry. Visa utilises its network and publishes application program interfaces that will enable our partners to select the components of Visa’s services most relevant to their businesses. We multiply data and analytic capacity to fuel innovation and relevance, and establish one-touch, scalable commercial frameworks, as we’ve done with our recently launched Visa Digital Enablement Platform (VDEP), to accelerate access and simplify commercial connectivity. All of this is within the context of a model of co-development and co-creation that defines how Visa works with our partners. Who is Visa partnering with to improve its mobile payment offering? Visa operates on a four-party model which includes financial institutions–traditionally known as issuing and acquiring banks–and merchants. With the surge in digital payments, new types of partners are getting into payments. We have worked with Apple in powering Apple Pay with Visa Token Service. Additionally, we have recently introduced Visa’s Digital Enablement Program (VDEP), which connects financial institutions and technology companies to simplify and accelerate the roll-out of new payment and commerce services. The program builds on Visa’s secure token technology and adds a turnkey, toll-free commercial framework accessible to all Visa financial institution clients and technology partners around the

GCC TELECOMS REPORT

INDUSTRY & SOCIETY

Smartphone penetration in the UAE stands at

78%

world. With VDEP, issuers can get access to Visa Token Service and launch their own mobile payment solutions. Additionally, Visa is partnering very closely with the local merchant landscape in order to educate staff and cashiers on the benefits of contactless technology and how to promote mobile payments moving forward. How do you see mobile payment technology transforming commerce in the coming years? We are seeing mobile technology being leveraged by every player in the overall commerce ecosystem. For merchants, in addition to the benefits of contactless technology, the mobile channel also represents an opportunity to communicate and push new content through a channel that is on the consumer at all times. It’s a very relevant channel for the end user, so merchants are in a great position to bring better value and newer content to the consumer. Mobile enables contextual shopping, once relevant in the virtual world, to be now a reality in the physical world. Digital technologies are transforming the way we shop. E-commerce and smartphones have raised the expectation consumers have about their shopping experience. Until recently, personalisation of the shopping experience could only be expected in e-commerce. But as technology is evolving, personalised shopping is becoming a reality in the physical store as well. Smartphones, beacons–which essentially are small devices that allow physical products in the store to speak to the consumer through their smartphone–and contactless payments are enabling a new contextual shopping experience.

“Great customer experiences are critical for success and 'mobile first' is about the mobility of human experiences, not the device.” Hadi Raad, emerging products and innovations head, Visa CEMEA

Our recently launched product, Visa Checkout, which greatly simplifies the process of buying something online or through your mobile phone, has already been adopted by nine UAE issuing banks which represent more than 80 per cent of the Visa’s UAE e-commerce volumes. We are lining up a number of merchants who are going to be offering Visa Checkout in the UAE and look forward to sharing more on that in the near future. Our work with merchants has been increasingly successful with contactless payments as well, with 20 per cent of payment terminals in the UAE enabled to accept contactless payments. We continue to work with merchants to bring awareness of mobile payments solutions and promote adoption for consumers. Moreover, we recently announced the introduction of VDEP in the UAE. Through VDEP, financial institutions in the UAE can now take advantage of our secure token technology to deliver to their customers the most popular mobile and digital payment services on the market today, regardless of the shopping channel (online or in store) or device they are using. I’m glad to share that Emirates NBD has already confirmed their participation in VDEP, making them the first bank in the Central Europe, Middle East and Africa region to participate in the program. We hope that this will soon reflect into new mobile and digital propositions to their customers.

Are there any regulations or restrictions to overcome in the UAE in relation to mobile payments? Are these restrictions more related to operators or banks? The UAE’s regulatory environment has proven to be more dynamic and progressive than other countries in the region, thereby allowing the private sector more opportunity to innovate and introduce new technologies. The country offers an ideal market to introduce this technology given the high rates of smartphone ownership, growing penetration of contactless terminals by UAE merchants, and the rising number of contactless cards being issued by banks. All these points indicate that the market is keen to develop and adopt mobile payment technology. Compound these factors with the government’s Smart City initiative, which links Dubai’s government services to the public through smart devices, and we can foresee a rapid rate of mobile payment adoption. At Visa, we are constantly improving the infrastructure for mobile payments. To truly drive this trend forward, we work with our partners to co-create and collaborate on services that consumers can benefit from. Can you estimate when the UAE might become cashless and mobile payments will take off? GCC TELECOMS REPORT

INDUSTRY & SOCIETY

SAP

THE BOARD +1 DIGITILISATION AND THE EMERGENCE OF THE CDO WILL HAVE IMPLICATIONS ON COMPANY STRATEGY. BUT IT'S NOT FOR EVERYONE, AND MIGHT FACE RESISTANCE FROM THE CIO

dvocating an addition to the board might not be what one expects to hear from a CFO. But George Riding, CFO and co-MD of SAP MENA, says it makes complete sense. “It all comes down to numbers. The CFO is often the custodian and interpreter of data, and the ‘digitalisation’ of a company’s strategy has made the role bigger, wider and deeper in terms of supporting opinions on the decisions that need to be made. They might be simple decisions, but simply making them two or three weeks before everyone else will help compound their effect.” It’s a relatively recent addition to the C-suite, says Riding, but introducing a chief digital officer to address the move to a digital economy is becoming increasingly critical to a company’s strategy as opposed to simply its processes. Using Red Tomato, a pizza company, as an example, Riding explains how a fridge magnet with a consumer’s details stored on it can create a new kind of demand revolving around the convenience of clicking a button. “You don’t need to call anyone, pay anything or explain where you live. You just press the button and your ‘usual’ will come to your address and be charged to the billing information initially recorded.” Uber and Careem have also used a digital focus to use the concept of geo-spatial data to great effect, says Riding, allowing users to get rides from locations shared via their cell phone. Businesses can interpret a technology in different ways, Riding says, such as with Fetchr, a company that uses the same geo-spacial cell phone data to deliver packages wherever you may be. That technology has always been an enabler should now be taken as a given, according to Riding. But over the last decade technology has been seen to provide more opportunities for differentiation, allowing newer companies to be disruptive with their business models. “There are lots of people now with a lot of technology horsepower and differentiating yourself has become very critical. It is important now to look at the tech available to a company, then at the market, and explain GCC TELECOMS REPORT

to the board how to use the tech to gain or protect competitive advantage.” SAP’s discussion with clients on the importance of the CDO role comes at a time when Gartner expects 25 per cent of large companies worldwide to have filled the position this year. Searches for the role have also been on the rise–Russel Reynolds, a global executive hiring consultancy, found the term trending in a report in 2011 and Google’s Insights continue to forecast an increasing amount of interest in the keyword. With more companies having a digital focus, telecom operators will also have a role to play in the digitalisation of the world. They have already been looking to move beyond their traditional revenue streams and have the networks that are crucial to the enablement of a number of next-generation applications, says Riding. “How they capitalise on the products going through the platform however is what they have to decide,” he says. “So far they have largely focused on managed services instead of disruptive business models, but it is inevitable–if only to ensure their survival as their investors would want.” A lot of questions around SAP’s involvement in digitalisation revolve around how this will fit companies that aren’t utilising their enterprise resource planning solutions. But, Riding says, SAP has moved beyond enterprise resource planning into being a systems integrator with multiple cloud solutions, business networks and an in-memory platform called HANA which has tremendous big data implications. Finding value in digitalisation is about asking the right questions, says Riding. Internet of Things, for instance, has been of interest to a lot of industries, but companies need to know what purpose two machines talking to each other can achieve instead of falling for the novelty of it. “If a machine is trying to tell another that it is about to break, routing the information through the supply chain so that it can be pre-ordered would drastically reduce the downtime of the asset," he says. "But does it need to go through the ERP solution? No, you can set it up so the part is ordered directly from the 40

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supplier, and the bill once sent by the supplier comes in through the ERP system. We have capabilities in M2M bringing massive amounts of data together and connecting suppliers etc. So we aren’t just sitting around nursing the core.” Most of the advocacy towards digitalisation will focus on larger companies, Riding says. Some businesses won’t need to move towards digitalisation as urgently as others whose market share is more sensitive to disruptive technology. However, when a company includes a focus on digitalisation some roles might suddenly come under direct threat of redundancy–such as the chiefs of technology and information. The CIO would probably have more at stake, though the role wouldn’t necessarily become dispensable, says Riding. “The CDO has a specific strategy based role, which hasn’t existed before. It doesn’t require getting down to the nitty-gritty of wiring and downtimes. Some CIOs are being strategic themselves and splitting their responsibilities into keeping the lights on and managing technology, and looking outwardly to spot threats and opportunities to help meet objectives.” There is of course the glacial move to the cloud to consider. As more data gets routed and stored online, there will be fewer assets to look after. “The need for hardware includes hiring a guy to look after it, finding somewhere to put it, buying fans to cool it, etc.,” says Riding. “It costs a lot of money. So while the CIO role will probably still exist, the increasing trend towards having a CDO on the board might come at the risk of putting the CIO a peg or two lower on the career ladder.”

“There are lots of people now with a lot of technology horsepower and differentiating yourself has become very critical.”

GCC TELECOMS REPORT

George Riding, CFO and co-managing director, SAP MENA

INDUSTRY & SOCIETY

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T E C H N O LO GY& I N N OVAT I O N

WHAT MAKES A PHONE SELL? THE GCC IS A HIGH-END DEVICE MARKET, SAY EXECUTIVES AT BOTH SAMSUNG AND HTC, BUT WHAT DEFINES HIGH-END IS QUICKLY CHANGING

ntil recently LTE handsets had been seen as key to differentiation in the high-end device category. Offering connectivity at speeds faster than most Wi-Fi connections and significantly faster than any third generation technology allowed manufacturers to charge more for LTE enabled devices. However, budget and mid-range manufacturers are now offering the technology in an attempt to carve a piece out of the highend pie. Hayssam Yassine, head of IT and Mobile and at Samsung Gulf Electronics, believes there is still room in the market to charge a premium for LTE devices but says the company is looking towards LTE-A as well. “We have always offered LTE at various price points to cover both midrange and premium devices,” he says. “Now we are offering LTE advance with our new devices and many operators are testing services that will give consumer even faster Internet speeds.” According to Yassine, competition is driving manufacturers to innovate and find more use cases that fit with customer behavior. “This was true even before campaigns on NFC (Near Field Communication),” he says, explaining the rationale behind Samsung’s S-pen and its foray into e-payments with the Note 5.

40% of the manufacturer’s mobile device sales can be attributed to the high-end market in the GCC. “Mid-range has its consumers as well, but they largely come from the same income level,” he says. Samsung has largely become the sole dominant player against Apple in the smartphone industry. Meanwhile, HTC is struggling to remain afloat. With Peter Chou at the helm, HTC had based its entire sales strategy on creating devices for customers all over the spectrum, while investing heavily in the high-end device segment over the last few years. The move didn't manage to pay off with investors, who recently valued the company lower than the cash it held in its bank. The distressed manufactured named a new CEO earlier this year. According to Nikitas Glykas, vice president at HTC MEA, this is because competitors such as Apple and Samsung can bankroll their products with investments that are larger “by a minimum of 10 times” while also gaining synergies from other verticals like TVs and laptops. Despite the impact on profitability, Glykas believes the brand became relevant in the market on the back of its high-end sales, especially in the GCC. “In 2014 we set a growth target of 3 times the growth of

GCC TELECOMS REPORT

TECHNOLOGY & INNOVATION

300% HTC has posted

sales growth in the GCC in 2014-2015, in stark contrast to a 75% fall in sales since September 2011 globally.

“Solid partnerships between telecom companies and manufacturers help consumers to cut through all of that clutter.” Hayssam Yassine, Head of IT and Mobile, Samsung Gulf Electronics

the previous year,” he says. “In 2015 we are maintaining a 40% increase in sales.” Company announcements at the M9 launch earlier this year have claimed a 300% growth in sales in 2014-2015. As retail markets around the world saturate and mature, HTC executives have been vocal in their call for partnerships between telcos and manufacturers in order to spur sales of devices. According to Glykas, “This is how we’ve maintained our momentum over the last few years.” Part of the reason for the need for telco-manufacturer partnerships is how overwhelming the smartphone market has gotten says Yassine. “Solid partnerships between telecom companies and manufacturers help consumers to cut through all of that clutter,” he says. “Promotions and plans

make it easier for consumers to identify products that fit their needs.” In terms of differentiation. HTC might be planning a move bolder than no other. “Virtual reality is the next phase in the evolution of the smartphone,” says Glykas. “This year we announced our partnership with Valve, a global leader in gaming, to launch the HTC Vive consumer edition by the end of 2015. “Our aim at HTC is to completely transform the way in which consumers interact with technology and the world around them. While HTC Vive is our first offering to in the VR landscape, we are working with some of the world’s best consumer brands, including Google, HBO, Lionsgate and the National Palace Museum in Taiwan to make this vision a reality.”

GCC TELECOMS REPORT

TECHNOLOGY & INNOVATION

QATAR'S TECH TRANCHE CHARGED WITH THE TASK OF DELIVERING ON THE CEO'S STRATEGY, CTOS ARE THE OFTEN ON THE FIRST LINE OF ACTION AT AN OPERATOR

n Qatar, the CTO's role is especially critical, not just as the country modernises itself towards Qatar’s National vision 2030 but also in gearing up for the World Cup in 2022. Technologists working with vendors, marketers, commercial officers and other executives are implementing and deploying bleeding edge industry technology for the most significant event ever to be held in the Middle East. Quoting Moores’ Law which talks about processors reducing in price while doubling in speed every two years, Bjorn Lundstrom, CTO, Ooredoo Qatar, expects a lot can happen before 2022. “We are putting the foundations in place with Ooredoo Fibre and mobile LTE that will enable us to fully support 5G when it becomes commercially-viable,” he says. “Ooredoo is developing significant expertise in smart stadium technology, with a range of intelligent network solutions that will provide fans inside the ground and viewers around the world with up-to-themoment information and results at sporting events. Catering for the event should be an exciting challenge.” The operator received its first rehearsal in catering to a sporting event during the 2014 Men’s Handball World championship. Using technologies such as Wi-Fi offloading and small-cell networks combined with nationwide fibre networks connected to the stadia, hosting venues and hotels gave Ooredoo significant understanding of stadium traffic, says Lundstrom.

By the end of 2016, he says, Qatar will have one of the top 5 fastest internet access speeds in the world. While the World Cup in 2022 will bring enough demand to take care of the excess capacity telcos are developing, the industry is developing for the long term in line with Qatar’s National Vision 2030. As the Qatari economy diversifies away from petroleum-based exports, there will be a greater need for internet infrastructure and bandwidth capacity. Vodafone Qatar is also working on deploying new technologies in anticipation of the event. According to Ramy Boctor, CTO, Vodafone Qatar, the nature of handling a large and transient population in 2022 is very different than covering an existing, more permanent population base. The need is to develop solutions that can handle massive data (and voice) traffic in very small areas, a quandary which conventional outdoor macro cells are not suited for, being limited in both capacity and indoor coverage. “We have to deploy cutting-edge distributed in-building coverage technologies that cater to high concentrated capacities across different technologies, 3G/4G and Wi-Fi included,” says Boctor. “Small cells and distributed antenna systems would be a major component for this. On the backhaul side, existing microwave backhaul would not be the right options in terms of scale. A state-of-the-art fibre network would be essential in handling the events.” Besides prepping the technology for the event, the telecom industry in Qatar is also

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TECHNOLOGY & INNOVATION

“The demand from the enterprise side (for the cloud) is growing every day, making it in the heart of Vodafone’s focus and development as an integrated ICT service provider. We see every enterprise requesting a cloud service in the very near future.” Ramy Boctor, CTO, Vodafone Qatar

rapidly evolving, for instance in moving from 4G to 4G+. According to Boctor, 4G+ is the next immediate step after 4G, which will allow for higher capacity, better networks in terms of speed, efficiency and customer experience. Of course realisation of its true value will depend on handset availability. “It isn’t expected to be high at the beginning,” he says. However the progress and market adaptation is high and promising, especially as the handset market develops rapidly. This has made 4G+ a necessary and important option for us.” Both executives believe cloud is one of the major pillars that is shaping the ICT industry now. According to Boctor, “The demand from the enterprise side is growing every day, making it in the heart of Vodafone’s focus and development as an integrated ICT service provider. We see every enterprise requesting a cloud service in the very near future.” Adding to Boctor’s insight, Lundstrom cites C-RAN and the telco cloud as technologies that will give operators “flexibility in a convergent environment” boosting the time to market and delivery mechanisms. “We already work with local media companies to provide global services,” says Lundstrom. “With our network, we should be able to cater towards any eventuality.”

“Ooredoo is developing significant expertise in smart stadium technology, with a range of intelligent network solutions that will provide fans inside the ground and viewers around the world with up-to-the-moment information and results at sporting events.”

GCC TELECOMS REPORT

Bjorn Lundstrom, CTO, Ooredoo Qatar

TECHNOLOGY & INNOVATION

LAST WORDS

REVENUE STREAMS: INCREMENTAL VS. NEW CONSUMER RESEARCH FINDS THAT MANY CUSTOMERS ARE WILLING TO PAY MORE FOR NEW SERVICES, EVEN THOUGH THEY THINK THEY ALREADY PAY TOO MUCH

espite numerous studies on the income potential of mobile technology, the telecom industry continues to struggle in finding ways to monetise, relying on commoditising network units such as data and minutes, instead of creating new revenue streams from additional services. According to Gregory Garnier, partner in the telecommunications practice at Bain & Company in Dubai, the market across a large part of the world is saturated. Because of a lack of new services, carriers have resorted to lowering prices to lure customers away from each other in a near zero-sum game. In ‘Stopping Telecom’s Slide Toward Commoditization’, a report written in conjunction with consultants from Bain’s US offices, Garnier writes about how many customers feel carriers overcharge and underserve for their services. “Our survey of 2,000 wireless customers in the US, followed by direct conversations with 100 customers in focus groups, found that wireless customers still have unmet needs and are willing to pay more for new services that delight them. When we introduced compelling new offers in focus groups, some of the same people who had said they wouldn’t spend more were interested,” he writes. That consumers value services which add convenience to their lives is also the subject of a Boston Consulting Group study, ‘The Mobile Revolution: How Mobile Technologies Drive a Trillion-Dollar Impact.’ According to the study, customers equate mobile technologies to being worth 11 to 45 per cent of their income– significantly more than what they pay for the services they receive–depending on where they live. In developed economies, for instance, ubiquitous connectivity allows for mobile banking, GPS-based GCC TELECOMS REPORT

mapping, and crowdsourced recommendation services, which consumers value at an average of 12 per cent of their income. In emerging markets, cell phones are often the only ‘connected device’ and associated with applications for healthier lives, education, income and better living conditions. Users surveyed in these economies valued mobile device technology at up to 45 per cent of their income. Consumers across both economies were unanimous in their willingness to give up ‘luxuries’ such as eating out, going on vacation and having a pet when faced with the option of giving up their cell phones. A big factor to this indispensability was not just the way mobile technologies had become a part of daily life, but also how they were expected to contribute to improving and transforming their lives. Garnier says the telecom industry could learn from others, such as the airline industry. In the last decade, airlines have unbundled services and charged for features such as legroom and priority boarding. These have become a significant proportion of industry profits and involved “refocusing on specific customer needs and preferences” which prevented commoditisation. Bain’s report stresses that consumers are drawn to “tangible features” such as ubiquitous connectivity, mobile video, voice over live game streaming, and customer experience issues such as “knowing [their] connection won’t drop.” Developing such features will need carriers to move from the “one size fits all” approach which Garnier argues only helps carriers look at monetising networks in terms of speed and bandwidth. Terming it cross-functional decision making, Garnier says “effective product development will require the best joint perspective of marketing, product development, engineering and IT.” 48

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