The Middle East telecoms landscape shows one unique characteristic—it is still steeped in the traditional voice business. While, in the rest of the world, operators have adopted new business models for value-added services to offset the declining ARPU (average revenue per user), in this region, voice still remains the predominant revenue earner for service providers.
Though they have invested heavily in next-generation network technologies to cater for the growing bandwidth and QoS demands, the push up to now has been towards voice.
But now, with increasing competition and near saturation point in most markets, telecoms providers are forced to bite the bullet and go beyond just mobile and internet services to encompass application and integrated services to shore up their sagging bottom lines.
“It is a widely established fact that Middle East telecoms operators are already going beyond the traditional telecoms services, such as voice and Internet or data. This is an essential move for the telecoms operators to overcome slow-paced growth from the traditional telecoms services. As part of this move, telecoms operators are looking at ways to capitalise on the demand for ICT services such as managed and cloud, vertical-specific services, and digital services,” says Paul Black, Director of Telecommunications, IDC.
Niraj Singh, Business Services Director, Vodafone Qatar, agrees that telecoms operators have both a huge opportunity and responsibility to lead and innovate in this field. “Vodafone is fortunate to have deep expertise built up over many years and in many different markets around the world, as well as partnerships with global pioneers such as Google and Microsoft, ultimately driving us towards providing integrated solutions to customers. So we’re firmly positioned to drive integration and convergence in both the consumer and business markets. This is a strong differentiator for us,” he says.
As telecoms competition intensifies across the Middle East, customer experience is also taking centre stage, placing increasing stress on the operators to incorporate a wide diversity of services to attract new customers while retaining existing ones.
“Traditionally, regional operators have been focused on the deployment of basic telecoms infrastructure, customer acquisition, and development and delivery of data-oriented services, among others. Today, their focus has started to shift from customer acquisition to engagement-building and stickiness creation. As such, the regional telecommunications market is evolving from being purely service-focused to now being driven by customer value management and customer experience,” says Juan Jose De la Torre, Vice President, Mobile and Web, Intigral.
Another notable trend in the regional telecoms sector is the growing focus on digital services as a way to not only fulfill the needs of customers, but also to leverage their assets into OTT (over-the-top) services, which are usually delivered on mobile operators’ networks. While, globally, OTT players are perceived as a threat to telcos, many major operators in the region have chosen to collaborate. and open up their platforms for developers.
Singh explains why: “Over-the-top players provide fantastic offerings. They deliver some really powerful applications that are changing consumer behaviour and raising the bar on how services are delivered. Naturally, OTTs rely on robust and efficient networks, which in turn drives the demand and consumption of faster data and richer content, both in the business and consumer markets. Ultimately, we’re co-dependent, silent partners in a sector that has unlimited growth and untapped potential.
“For enterprises, we have consistently found that businesses regard IT and telecommunications as a very complicated area, with too many suppliers involved and too much finger-pointing if things go wrong. What we offer is a complete, fully secure, integrated solution which embraces OTT services in accordance with the CIO’s needs, along with the benefit of a dedicated customer care team and a support team that physically attends the premises if required.”
De La Torre echoes a similar opinion and says that telecoms operators should embrace OTT players as an important way to differentiate themselves and support their core telecoms services and products: “OTT services would be a threat if not approached with the right strategy, but it can also become an opportunity for telcos with a win-win situation.”
Gamal Hegazi, Solution Architect Leader, Alcatel-Lucent, adds that there is a strong need for regional telcos to reach for more value by generating revenues through applications and content. “The GCC operators adopted a walled-garden approach earlier but it is now leading to more open business models to encompass a co-operation model between OTT players and operators,” he says.
Though the improvements in network technology have enabled telecom operators to join and collaborate in the OTT space, Black from IDC points out only a minor portion will be able to monetise these services.
“The middle markets, in the last few months, have witnessed proliferation of OTT services in various forms. Although OTT services continue to gain popularity, the ability to pay for these services remains low throughout the MEA region. Despite trying different business models, both media companies and telecoms companies have only been able to generate limited interest among the consumers. In order to tap in to the latent demand that OTT services offer, the value chain players will have to take a holistic view of the opportunity and clearly define their respective roles. In other words, regional telcos will have to decide whether they will compete with pure-play OTT providers or collaborate with them. Some regional operators, such as Zain, Mobily, Nawras, STC, Viva, and Etisalat, are showing inclination to collaborate with OTT providers and act as channel partners for the services offered by them,” he adds.
Dial a cloud
In the past 18 months, many domestic telecoms companies have aggressively entered the increasingly crowded cloud marketplace. But what is the core strategy for these telecoms? Is the cloud a very natural place for them to go? And do they really have a chance of competing against industry leaders?
“As anticipated by IDC in 2013, the Middle East telecoms operators have approached cloud services with vigour over the last several months. Many regional telecoms operators, such as Etisalat and du in the UAE, Mobily in Saudi Arabia, Batelco in Bahrain, and Ooredoo in Qatar, have already invested in infrastructure as a service (IaaS). As they started gaining valuable experience, operators are now looking to expand their portfolio to include software as a service (SaaS). For 2014, we maintain a positive outlook for the cloud services market and believe that regional operators are well placed to capitalise upon the cloud opportunities,” says Black.
Niraj from Vodafone, which has partnered with the likes of Microsoft and Google, says the cloud space is evolving fast and still has a long way to go. “The growth opportunity is two-fold: firstly in educating businesses on the benefits of realising the full potential of the cloud by encouraging and stimulating wide spread adoption. And secondly, advancements in cloud technology mean that it is fast becoming a much more powerful business tool. CIOs have the opportunity to transform how their services are delivered to their employees. Mobility sits at the heart of this transformation.”
As telecoms providers iron out their cloud strategy, experts say they need to move quickly and cautiously. “Most telcos are now looking at cloud as a new growth area that level the competition between them and Internet players. Business cases are being drafted and market segements investigated to make the right targeting towards businesses, especially the SMBs. This is an area that needs detailed market understanding and prototyping to make the best reach and product positioning. It is not much a technology or solution challenge as much as it is a marketing and positioning challenge,” says Hegazi from Alcatel-Lucent.
Do telecoms providers have an edge over others in the cloud marketplace? Though this is a new direction for carriers, they do offer some advantages—namely, they already have a large, nation-wide network infrastructure and have an opportunity to provide value-added services wrapped around their core strength, which is connectivity.
“Cloud computing takes advantage of several traditional telco capabilities, such as data centres and multi-protocol label switching (MPLS) networks, and provides them with much-needed revenue diversification opportunities. Telcos’ established enterprise customer relationships, ability to offer service bundles, and ability to integrate billing, provide them with the advantages necessary to expand footprints in the cloud services market,” says Black.
Rise of the machines
According to various studies, M2M communications is now the fastest growing segment in the telecommunications industry, with annual growth of 28.2 percent, much ahead of business fibre deployments and business VoIP.
M2M means much more than smartphones and iPads, with a wider range of devices that can be hooked up to the Internet. What can telcos do to maximise opportunities in this space?
Singh says, “There is huge potential for growth in so many sectors, such as healthcare, consumer goods, transport, banking, FMCG, security—even family pet welfare! In order to sustain this growth, we continue to build out our strong infrastructure to meet the associated technological demands.
“A great example of how we’re doing this is with our global deal with BMW, where all new vehicles are embedded with a Vodafone SIM. This provides many practical functionalities, of course, but it’s also there to save lives. On impact, the vehicle automatically contacts emergency services, instigating an immediate search and rescue, saving minutes or sometimes hours for accident discovery and action. The technology is saving lives.”
With growing awareness about the potential benefits of M2M services, the majority of Middle Eastern enterprises are already working on some form of M2M service roll-out plan. As per IDC’s 2013 Middle East Enterprise Communications Survey, a majority of the survey respondents also favour service providers that can either develop or customise their own M2M applications. “In order to fulfill these requirements, telecoms operators will have to take the central role in developing a technical ecosystem around M2M, including devices, innovative applications, and delivery platforms, and should aim to provide business intelligence and/or analytics services on top of these applications. Regional telcos should aim at launching more innovative, industry-specific M2M applications and gain application development capabilities,” says Black.
With the continued liberalisation and uptake of 4G networks, there is a signification growth opportunity for telecoms service providers to leverage network resources and skills to move beyond commodity bandwidth to providing value-added services. In fact, it’s imperative for telcos to chart new courses to maintain their revenues and avoid being relegated to providing dumb pipes.
