But this was a situation that Qatar’s incumbent telecom operator, Ooredoo, managed to avoid. The operator, which has a presence in some 14 countries in the Middle East, North Africa and South East Asia, now appears to be reaping the benefits of a more careful approach to expansion.
In June, Ooredoo added to its international presence when it won one of two mobile licences in Myanmar, a country that is widely viewed as one of the last remaining green field opportunities in the mobile sector.
Indeed, with a mobile penetration rate of less than 10 percent, according to US research firm IDC, Myanmar holds significant potential for Ooredoo. But with the country suffering from grossly underdeveloped infrastructure, deploying a network in the country will be no mean feat.
To this end, Ooredoo has wasted no time in Myanmar and already has a team on the ground in the country, led by seasoned telecoms CEO, Ross Cormack, who was responsible for establishing Ooredoo’s operation in Oman in 2004.
“We already have a team there, more than 120 people on the ground now,” says Dr Nasser Marafih, Group CEO of Ooredoo. “We are in the process of looking how to build the operation. There are many challenges because this country still has very low penetration and there are issues with power and building infrastructure.”
In a bid to keep a lid on deployment costs and to hasten the rollout, Ooredoo is preparing to adopt an approach that would have scarcely been conceivable in the telecoms sector just a few years ago. The operator has been in discussions with Norway’s Telenor Telecom, which won the second Myanmar mobile licence, about potentially sharing the cost of building cell towers.
“We are in discussions and we are moving very well on that side. We believe there is an opportunity,” Marafih says. “We are trying to optimise the investment and also to share some of the infrastructure cost with our competitors, and the government is also encouraging such a move, which we believe is good for the industry. This will also help make those services available and affordable for the majority of people there.”
It is a model that Ooredoo has tried and tested in other markets, including Indonesia, where it has tenants for some of its cell towers and also has its own radio infrastructure in towers that belong to other companies.
“This is something that is happening in this industry, not just in this market. But we believe it needs to happen in more markets. It is more challenging when people have multiple towers but that is the opportunity in Myanmar because we are building from scratch. It makes sense to do that from the very beginning,” he says.
Marafih admits that it is difficult to give a precise launch date for the operation because the government is still working on the final licence conditions. “We are trying to do it as fast as we can but that will depend on the government’s finalisation of the licence conditions, but it will be some time next year for sure,” he says.
But the scale of the challenge ahead in Myanmar has done little to assuage Ooredoo’s appetite for further expansion, should the right opportunities appear.
Indeed, Marafih is bullish on the subject of mergers and acquisitions, although he insists that new green field licences are largely off the agenda.
“I think if there is going to be an opportunity it will be to acquire an existing operation and I believe there will be opportunities, and the reason for that is we believe the industry needs to consolidate,” he says. “We see it is increasingly difficult for small operators to exist because their cost structure will not allow them to compete with big companies.
“So we are going to be patient and when those opportunities come we will look at them. We need to make sure that [potential acquisitions] would make sense for us because there are a number of criteria that we use in order to look at those opportunities.”
In terms of the type of acquisition targets that Ooredoo is interested in, Marafih says the company is looking beyond mobile operations and is also interested in fixed-line assets and ISPs, particularly where this could complement its existing operations.
“That is an important point because we don’t look at our expansion just for mobile, we might also look at fixed, especially in a market where we already exist, because we believe the integration of fixed and mobile makes sense in some markets,” he says. “We are doing that already in markets like Tunisia, Tunis and Kuwait. It makes sense to look at that. In Oman, Qatar and Indonesia we also already have fixed and mobile.”
Furthermore, Marafih says that Ooredoo is also interested in potentially acquiring or investing in data centres and cloud services to complement its existing services, particularly in the enterprise segment. “We are looking at that space and trying to find ways to serve those communities especially in the market that we operate in,” he says.
But Ooredoo intends to steer clear of acquiring or making large-scale solo investments in adjacent industries and the so-called over-the-top (OTT) space, a broad area that covers social networking and digital content. “Adjacencies have still not proven to be a big generator of revenues [for telecom operators]. It might be something that will happen in future but I do not think that it is going to be huge,” Marafih says.
In this light, the best way to gain a presence in these areas is through partnerships. “We believe a partnership model makes more sense,” he says. “Even though we might make some investments, we would not be in a position to build those [operations] ourselves.”
While Ooredoo remains keen on geographical expansion, the operator is also busy consolidating its existing operations. With a combination of mobile, fixed-line and ISP operations in 14 countries, the company is keen to forge its operations into a more cohesive group, allowing it to create savings in areas including procurement and marketing.
The clearest example of this strategy is the company’s ongoing rebranding process. The brand Ooredoo, which means ‘I want’ in Arabic, was unveiled in February during Mobile World Congress, the world’s biggest mobile exhibition. So far the brand has been adopted in Qatar and is being phased in across the group’s other operations.
“We had been thinking about this [rebranding] for the last three years but we were looking for the right time to do it, because we believe it is important that the group is brought together under the same umbrella with the same focus,” Marafih says.
“Of course we want to do it in the right way. We didn’t want to just launch it without a proper rollout plan,” he adds. “It has already been rolled out in Qatar, which was well received, and we now have almost 100 percent brand awareness in the market.”
The new operation in Myanmar will also take on the Ooredoo name and the brand is currently being implemented in Tunis. Marafih confirms that another two operations will be rebranded this year, while Nawras in Oman will follow in 2014.
The CEO says that having a single brand will help bring costs down, especially for marketing. It is also expected to help give the group greater critical mass in the regional media. “It was difficult to do that with local brands,” he says. “We are now a big group, with 93 million subscribers. So it is important that we bring the group together under a single identity.
“In order to survive in this very competitive market operators have to be more customer-centric and that is why we believe it is important for us to try to change the mindsets of our people in our companies to focus externally more on the customer,” Marafih says.
While Ooredoo’s efforts to reduce costs and increase efficiency could be viewed as an admission that growth opportunities are limited in its existing markets, Marafih insists that there remain revenue streams to be tapped, even in saturated markets.
Indeed, while many of its markets are now saturated in terms of mobile services, the company sees significant opportunities to offer services to businesses and other organisations.
Ooredoo has already served the enterprise sector for many years, particularly in its home market of Qatar, but there remain opportunities to expand its range of services and also to launch enterprise services in more markets.
“In Qatar we are seeing good growth in B2B market and also with SMEs. If you look at our region it is still not well developed and we believe that in future small businesses could be an important market, and there are limited players that could actually cater to them,” Marafih says. “We already have some experience of enterprise business especially in Qatar and Indonesia, and we can capitalise on that in some of our other markets. That is what we have done in Oman to a certain extent but we are trying to push the growth even further.”
But while Marafih is optimistic about growth opportunities, whether in existing markets or through acquisition, he concedes that heavy-handed regulation and high taxes on telecom operators remains a major challenge.
“The biggest challenge that we face today is the regulators’ view that there is still huge growth, which is not the case in my view. They are still trying to tax operators more but also charge them more for spectrum,” he says.
He adds that Ooredoo, along with other telecom groups in the region, must continue to deploy new infrastructure, including LTE, throughout its operations. But with profit margins declining, Marafih is doubtful whether operators can generate the levels of income they have enjoyed in the past.
“The challenge for the industry in the coming years is to have proper dialogue with regulators and policy makers to make sure that they don’t exaggerate their fees or to tax operators more,” he says.
source: Arabian Business
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