Mobile telecoms operators in the Middle East are to seek partnerships with media companies and banks as they try to find new business models that will allow them to respond to falling profit margins and the fast-developing broadband mobile market, say industry leaders.
Speaking at the Arab Advisors Group Media and Telecommunications Convergence Conference 2010 in Amman on 7 June, senior industry executives said that, faced with a sharp decline in profit margins as the region’s mobile markets reach saturation, mobile operators need to broaden their services in order to maintain growth. But, to deliver mobile services such as mobile television broadcasting, mobile banking and commerce, and mobile social networking, the operators must seek partners in these industries.
“The scale of the operation is no longer enough,” said Ghassan Hasbani, chief executive officer of Saudi Telecom’s international business. “It is about scope. And scope means broadening services through partnerships and integration. Companies are increasing the amount of content going through networks. But the telecoms operators are not the ones generating that content. So they will need to form partnerships with media companies to form content. And with banks for mobile commerce. They will also have to invest in more infrastructure.”
“There is a need to have more alliances with other companies in order to provide total solution in media or business solutions,” says Etisalat chairman Mohammad Omran. “This is the only way we can offer total business solutions to the customer.”
“Telecoms companies traditionally think in terms of penetration,” said Saad al-Barrak, managing director and chief executive officer of Zain Saudi Arabia. “But we need to think in terms of expansion. It requires a different way of thinking. Penetration is dead. There are multiple green field areas to go into.”
After almost a decade of expansion, the region’s mobile operators are now facing a period of consolidation as the region’s mobile markets reach saturation. But many say that it is likely to be international operators, rather than regional companies that will lead mergers and acquisitions activity.
“We are going through a transition at a global level,” he said. ” These changes will drive consolidation. We will see a diminishing number of single-market operators in the next four to five years and more global operators, simply because margins are so low. It will be the same in the infrastructure side where companies are driven to go global.”
“We cannot ignore the fact that players outside the region are looking at the region,” said Hasbani. “So it is inevitable that we will see some consolidation in this part of the world. In the long-term, we will see in-market consolidation i.e. mergers and acquisitions by companies within the region. But in the short-term, it will be cross-market consolidation, from companies outside the region.”