MTC: The regional force be with you

14 October 2005
Mobile Telecommunications Company (MTC) of Kuwait has grown rapidly over the past five years to become the region's largest telco in terms of subscribers and geographical coverage. MTC director-general Saad al-Barrak talks about his company's development, and the challenges it faces as it continues its expansionist drive

It has been a hectic past 12 months for MTC - how would you describe the last year?

Hectic is too mild a word. The last year has been a commercial volcano. When compared to last year, 2005 has seen more than 100 per cent growth. So for a company at this stage in maturity to double its size and more in one year has been a monumental landmark.

Earlier this year MTC bought Celtel to give it a firm foothold in Africa. Why did you believe Celtel was the right acquisition for you?

Africa is the fastest growing market worldwide in the telecoms sector, and according to the World Bank, the five fastest growing regions economically are China, Russia, India, Brazil and Africa. Looking at our geographical locations and history, Africa is the closest region to us and has therefore been our strategic focus. It's the fastest growing market with 850 million people, of whom 240 million live in the sub-Saharan region that Celtel serves. In this area, the mobile penetration rate is less than 4 per cent so the potential for growth is high. We also chose Celtel because of its business model, which sees it operating as a single company in 13 countries.

Furthermore, Africa has a number of small countries where it's becoming economically and logistically unviable to go and operate in one by one. So to manage them all through one company based in The Netherlands, governed by European corporate governance standards and international key performance indicators (KPIs) and benchmarks, and which is capable of attracting the best-of-breed management talent and managing a great economy of scale, makes Celtel very attractive to us. When we conducted due diligence, we were very impressed by the management, the know-how, the dedication, the company's culture, the systems they follow and the achievement and track record which together have given them the highest credibility.

Some people say MTC overpaid for Celtel. What do you say to them?

Value is like beauty, it's in the eye of the beholder. Numbers-wise, $680 [the purchase cost per existing Celtel subscriber] seems to be a very reasonable price, because usually a mobile subscriber's per subscription value worldwide is between $600 and $800. In the developed countries there's little to no growth, so I would put more value on the subscriber in the under-developed countries where growth is very high. We are talking about growing this company's subscriber base by 300 per cent over the next four years - up to 15 million subscribers, based on our most conservative scenario. Secondly an IPO [initial public offering] isn't an indicator, because public offerings differ from private placements where a single entity would make the acquisition and is willing to pay a large premium on the value. The IPO was expected to make $2,200 million-2,500 million, so if we take a 30 per cent premium, which is very moderate, we'll reach up to $3,400 million [on a private placement]. Knowing Celtel's strategic value is extremely important for us.

What are the main challenges you face when expanding or acquiring new licences, especially in such diverse cultural, linguistic and geographic areas?

I think the main challenge is managing growth in such a way that the acquired assets and companies would be compliant with our strategic direction and with the company's values and business ideals, and finding the best way to integrate all these into one cohesive group that moves harmonically to achieve our future targets.

MTC recently stated that it intended to end its relationship wi

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