The Middle East has proved to be one of the few bright spots for new business in telecommunications over the past 12 months. Buoyed up by an increase in business activity, regional governments have pushed ahead with a new round of investment in telecommunications and IT infrastructure, aware that failure to do so will harm their long-term economic aspirations.
Siemens has been a major beneficiary of the regional upturn, supplying information and communication (IC) technology and fixed and mobile telephone systems right across the region. It has also won several prestigious turnkey contracts.
'The importance of the Middle East and North Africa has increased dramatically compared to other regions,' says Kai Uebach, Siemens' head of sales for mobile information & communication networks in Europe, the Middle East and Africa. 'There is a lot of investment in second generation [2G] and increasingly in second and a half generation [2.5G] technology. In each of the past two years we have been able to double the volume of orders in the mobile network business.'
More business is likely to come from the Gulf, where the award of second and third cellular phone licences is imminent in most countries. Says Uebach: 'The markets are accelerating. We expect new licences in Bahrain, Oman, Saudi Arabia, the UAE and Iran. I believe that these licences will turn out to be very successful and will give us a chance to supply state-of-the-art networks.'
The development is likely to be supported by the gradual easing of government control and increased private-sector involvement. In the Gulf, Kuwait is leading the way, with one private and one state-owned operator in charge of the two existing GSM networks. Kuwait's development has not left Siemens empty-handed. The German company has supplied the full range of infrastructure equipment for new mobile phone operator National Mobile Telecommunications Company (Wataniya Telecom) and is also a supplier to Mobile Telecommunications Company.
With strong growth forecast in the mobile telephony sector, value-added services through new technologies promise further lucrative business. In particular, application-based services such as picture postcards and commercial micro-payments are expected to generate fresh business over the medium term.
'The region is heading towards more application-based services,' says Uebach. 'It follows the trends set in the US and especially in Europe.'
The rising demand for service applications means the number of intelligence networks (INs) - the basis of most application-based services - will increase. Having established itself as main supplier of INs in the Middle East, Siemens IC mobile networks division is set to benefit significantly.
The company's business will be further boosted when installation of the first third generation (3G) networks kicks off in the region over the next two to three years. 'The first network should be up and running in the UAE by the end of 2003 or in early 2004. Kuwait will be the next station,' says Uebach.
Outside the Gulf, North Africa and countries such as Syria hold some promise for Siemens. The needs of these telecoms markets vary significantly from those in the Gulf, however. In some countries, penetration rates remain low and both cellular and fixed network infrastructure urgently requires investment.
Algeria, for example, is ripe for development. With mobile phone penetration less than 1 per cent and a population of more than 30 million, the market is set for serious business. Siemens had a first taste of what is to come in July, when it was awarded a Eur 176 million ($161 million) contract to supply equipment for Algeria's first private GSM network, being developed by Egypt's Orascom Telecom. An additional licence is expected to be tendered within the next two to three years.
In Egypt, Siemens has a long-standing presence. Since 1989, it has held a 75 per cent stake in Egyptian German Telecommunication Industries (EGTI), a joint venture with Telecom Egypt that produces telephone exchanges and trunks. Siemens' biggest success has been the full restructuring of the Cairo telephone network. Under the umbrella of the Egypt 2000 project, Siemens' IC networks division has improved Cairo's network infrastructure.
Siemens has been active in Egypt's telecoms sector for decades and has installed a significant volume of telephony infrastructure throughout the country. The company is now implementing projects in the canal area, Sinai, Upper Egypt and Cairo.
Similarly, Siemens can draw on an extensive reference list in Iran. The company is now involved in the upgrade of both the local mobile and fixed telephone networks. In addition, Siemens is a 20 per cent shareholder in the Shiraz-based Iranian Telecommunication and Manufacturing Company (ITMC), which manufactures digital EWSD telephone exchanges. Uebach says the tender for a second mobile phone licence is expected in 2002.
With business in the region set for growth, Siemens is also looking to expand its regional presence. In the short term, it plans to increase its existing 150-strong sales and service team in Dubai.
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