Market Report

30 September 2 October Jumeirah Beach Hotel, Dubai, UAE Visit our website: www.terrapinn.com/twme

blogs.terrapinn.com/telecoms

Our Mission
This report is designed to share with you the biggest drivers, disruptions, innovations and investments that are reengineering the telco industry in the Middle East. The telecoms industry is facing exciting and somewhat daunting times ahead. Weve entered an era where ongoing digitization is throwing up new revenue opportunities for telcos, whilst creating more competition, higher expectations with more investment needed. Operators are left with a stark choice: pioneer or perish! Research Methodology This market report has been produced by accumulating stats from our Telecoms World Middle East Survey, where insights from regional telecoms operators were derived through a multiple choice questionnaire. Specifically designed questions ensured we picked telco's brains on what were the most pressing challenges on their mind and what opportunities were they most excited about. A dedicated Content Manager also complimented this survey by delving into the latest reports, whitepapers and videos that seek to understand the disruptive changes to this dynamic industry. Insights were also taken from the Telecoms World Middle East 2012 event, whereby regional telco CEOs poured into Dubai in October 2012 to debate whats new, whats hot and whats next for this rapidly evolving industry. These research methods collide to provide you with an unrivalled outlook on upcoming investments, the latest services and business models that will lead to further innovation in the Middle East telco market.

blogs.terrapinn.com/telecoms

Thank you to our contributing organizations that shared their insights: Batelco, du, Saudi Oger, Vodafone Qatar, Mobinil, Etisalcom Bahrain, Ministry of Telecommunications Palestine, Omantel, Nawras, Zain Group, Etisalat, Orascom Telecom, Qtel, Mobily, Zain Jordan and Wataniya Telecom. In this market report we delve into the hottest trends and most lucrative opportunities: Connected economy, connected life: putting telcos at the epicenter The network: the gateway and backbone of the competitive telco Threefold service innovation and the rise of enterprise Going global: accessing markets that are ripe for the picking! Thank you for downloading our Telecoms World Middle East Market Report. We hope you enjoy the read!

Chloe Higman Conference Manager Terrapinn Middle East +971 4 440 2560 | chloe.higman@terrapinn.com

Join our Total Telecom Community

Visit out blog blogs.terrapinn.com/telecoms Join our Total Telecom Professional Network on LinkedIn Follow us on Twitter @totaltelecom

blogs.terrapinn.com/telecoms

Connected Economy, Connected Life

Middle East telcos are grappling to future-proof their business model, as ICT continues to converge with new industries. From health to transport, entertainment to banking, telcos own the connectivity that these industries are craving. With ongoing digitization of all industries, the telco business model is constantly evolving, demanding new capabilities to capture market share in new sectors. The CEO of du, Osman Sultan, opened Telecoms World Middle East 2012 with a bold statement: "Being connected is a basic human right. Connectivity is fast becoming the cornerstone of all businesses, all industries and all lifestyles. Regardless of economic climate, political turmoil or social change, the need to be connected is resilient to external pressures." As such, telcos have been presented with a vast and overwhelming opportunity to be at the epicenter of the economy and of life. To capitalise on this privilege, telcos must build a culture of continuous change whilst exploring and experimenting with innovation. Telcos need not think of themselves as gatekeepers, but as enablers of a connected economy and a connected life. OTT: Friend or Foe? While telcos might be dabbling in other markets, OTT players have stormed the telco industry transforming customer expectations, services and network requirements. Taken by surprise, telcos have struggled to monetize these OTT players, giving them a free ride on their network in order to satisfy escalating consumer demand for content services.What this means is that telcos are footing the bill without reaping the benefits.

blogs.terrapinn.com/telecoms

Telcos are not in the frontline of revenue streams, but they are in the frontline of investments
Osman Sultan, CEO, du

But the telco is fighting back Far from out of the race, telcos are recognising that collaborating, rather than competing with OTTs, is the way to win in this content-hungry environment. OTTs have undeniably captured consumer mindshare and money with their cutting-edge services that boast inspiring design and advanced usability. Rashid Abdulla, CEO, Batelco argued that telcos do not have the right DNA to replicate OTTs service creation yet have very tangible assets to remain at the epicenter of the world of content. So what are those assets? Telcos own connectivity their network is the gateway to this world of rich multimedia services. This asset coupled with an unrivalled customer base and advanced billing capabilities, arms telcos with bargaining power to carve out a more competitive position in the future. By backing partnerships with OTT players, rather than seeking to eliminate them, telcos can enjoy an innovative and diverse product portfolio whilst monetizing the data traffic on their network through service delivery platforms. They have a strong hand; they just have to learn how to play it.

A win-win with OTTs is more than possible putting us on the threshold of fantastic new services
Ross Cormack, CEO, Nawras

blogs.terrapinn.com/telecoms

C-Suite insights on re-invention for relevance With the world of content opening the telco industry to a plethora of new players, telcos have found themselves fighting for the customer. Our Telecoms World Middle East 2012 CEO debate revealed that staying relevant to the consumer was front-ofmind for those leading the regional telecom industry.

The biggest challenge for operators right now is creating and maintaining a relevant relationship with the customer with services and experience
Hatem Dowidar, CEO, Vodafone Egypt

History has shown that OTTs will come and go, whereas telcos have longevity in the market
Daniel Ritz, Chief Strategy Officer, Etisalat Group

Telcos need to exist with a relevant voice in the new fast moving digital space
Osman Sultan, CEO, du

Operators need to reinvent themselves

Hisham Akbar, Deputy CEO & COO, Zain Group

blogs.terrapinn.com/telecoms

The Network
The data explosion from all these new services is putting immense pressure on the telco network. LTE has emerged as the champion of networks, capable of managing the exponential growth in data traffic. LTE investment and roll out is well underway in all corners of the world. LTE allows operators to optimise bandwidth on the network and offset some of the pressure generated by data consumption. LTE can also optimise network costs by eliminating the costs associated with operating multiple infrastructure sites. LTE is expected to completely revolutionise customer experience by enhancing the quality and reliability of the network and enabling real-time streaming and rapid downloads. LTE is a game changer for operators, who are now armed with future technology to create next generation services. Investment is therefore crucial to meeting the rising connectivity demands of GenM. Daniel Ritz, Chief Strategy Officer of Etisalat Group argued that regulators cannot step in to finance network investment as it is too dynamic to be regulated.

blogs.terrapinn.com/telecoms

In our recent survey, we asked regional operators which technology investments are vital to successfully roll out new services.

59% 59% 35% 21%

say that LTE is an essential investment

32%

say its important, with only

9%

stating this was not a priority for their business

say that Content Delivery Networks are an essential investment

say its important, with only

6%

stating this was not a priority for their business

say that WIMAX is an essential investment

14%

say its important, with an outstanding

65%

stating this was not a priority for their business

blogs.terrapinn.com/telecoms

Our survey suggests: LTE is a must-have not nice-to-have technology for operators looking to innovate their offering. Given nearly 3/5 of respondents cited LTE as an essential investment, the Middle East can expect to witness commercial launches and nation-wide roll-out. With only 6% of respondents not prioritising CDN, it is anticipated that content services will continue to reign consumption on the network, and this demand for multimedia will only increase. It is also indicative of telcos prioritising user experience of data consumption. WIMAX technology is struggling to attract investment from Middle East operators, with our survey revealing that over 65% of telcos are spending their budget elsewhere. Bringing LTE to market Rolling out the network is just the beginning. Developing a go-to-market strategy for LTE is crucial to secure ROI on investment, accelerate uptake and exploit the networks advanced capabilities. When LTE first exploded onto the scene in Sweden back in 2009, the availability of LTE devices was limited. With this gradually trending in the right direction, a range of LTE devices now exist to propel LTE subscriptions. So how should operators design pricing plans for LTE? Whilst most consumers cant imagine their lives unconnected, operators are faced with a pricing predicament. Kim Larsen took to the stage at Telecoms World Middle East 2012 to share LTE launch strategy and ambitions. As the former SVP of Next Generation Technologies for Deutsche Telekom, Kim perfectly surmised the root of the LTE tariff predicament:

Consumers now take the internet for granted

Kim Larsen, Director of Technology Transformation, Qtel

blogs.terrapinn.com/telecoms

Consumers buy services, not connectivity. They expect connectivity. Here lies the operator tariff challenge. While LTE provides higher bandwidth and lower latency, which justifies a premium offering, it is the LTE services which determine the subscription rate. The LTE generation of services is set to be dominated by video content. In more developed LTE markets, in Europe and Asia for example, LTE tariffs were considerably higher than 3G tariffs when initially launched. However, market competition has lowered the premium, where it is anticipate that growing competition will erode the tariff even further. Thus Middle East operators need to strategically map out cost and usage caps which deliver revenues whilst propelling uptake. So in with the new and out with the old? While LTE investment and rollout is likely to dominate network innovation over the next 12 months, it is crucial that operators avoid neglecting legacy networks. LTE reach will be concentrated in urban areas in its early deployment, therefore maintaining core network architecture is vital to deliver consistent connectivity to all customers.

blogs.terrapinn.com/telecoms

Threefold Service Innovation

Retail, wholesale and enterprise services are being injected with innovation. With customers demanding more bespoke, personalized and interactive services, operators are being pushed to re-design product portfolios and set new benchmarks in service creation and delivery. Data consumption, digital service demand and the rise of OTTs are irreversible trends that are spinning the telecoms industry into redesign. As Martin shared the secrets to creating brand advocacy at Telecoms World Middle East 2012, he touched upon the key capability that will define competitive advantage - the need for speed. Getting innovation to market quickly, and re-engineering the process of order management, will set apart those pioneering the industry to those playing catch up.

Innovation is instantly copied

Martin Lyne, CMO, Nawras

Re-inventing Retail No content service has experienced such phenomenal and rapid growth as the apps offering. Pioneered by Apple, there is now of rush of device manufacturers, telcos and content owners seeking to replicate Apples success. The Apps market seemed to appear from nowhere. Typical of Apple innovations, they spread like wild fire, disrupting business models, communication and entire industries. With consumers app happy, telcos need to carve out a relevant position in the app and content ecosystem to thrive, not just survive. Operators often find themselves in the firing line regarding their ability to attract developers and source and produce engaging multimedia.

blogs.terrapinn.com/telecoms

The risk of OTT market entrance is that brands are becoming more relevant to the customer, sidelining the telcos as dumb pipes. Telcos need to start claiming revenues alongside OTTs and define a monetisation strategy which delivers their fair share of the prize. User interface design is earning more attention from operators. OTTs have upped the stakes in interface design, creating one touch services that prioritise simplicity and user experience. Whilst there is increased technical complexity with new services, this complexity must be removed from the user experience, humanising the technology. Data Dependent Wholesale Wholesale has never had more opportunity to rival retail in the revenue stakes. While OTTs, content owners and MVNOs might be challenging retails market position, they are wholesales most lucrative customer. As capacity markets have become increasingly commoditised, carriers have realise they can no longer rely on the facility leasing agreement which used to make up their profits. Instead, carriers need to focus on how they can create bespoke data-driven services, aligning future service plans with network innovation to optimise the wholesale portfolio. With CDN spend on the up, carriers are now empowered to adopt a service-orientated business model that capitalizes on content aggregators. By having a network equipped with enabling platforms to monetise bandwidth, carriers can cash in on data demand.

blogs.terrapinn.com/telecoms

The Rise of Enterprise With ICT becoming the cornerstone of all businesses and all industries, the enterprise opportunity is huge for operators. mHealth, mAdvertising, smart cities, cloud, M2M and managed services are only a few of those services which are creating lucrative revenue opportunities for telcos. Building capability in enterprise solutions will earn operators a competitive advantage, allowing them to create a diverse and profitable enterprise portfolio with global potential and scale. At Telecoms World Middle East 2012, Sprint shared LTE service innovations, with M2M at the epicenter of opportunity.

The Middle East presents a huge opportunity for the global M2M market
Ron Jubainville, Head of International Product Marketing, Sprint

Enterprise will require investment - Investment in knowledge and investment in technology.

Launching venture funds that fuel innovation and create ecosystems for apps, content and enterprise should be prioritized
Hatem Dowidar, CEO, Vodafone Egypt

blogs.terrapinn.com/telecoms

Services Survey We asked regional operators what services they were currently offering, what service they planned to launch and what services they were not planning to offer.

mCommerce Consumer Cloud Enterprise Cloud mAdvertising mHealth M2M App Store IPTV Mobile Gaming

blogs.terrapinn.com/telecoms

IPTV is currently offered by over 50% of respondents, with a further 33% planning to launch IPTV in the next 12 months. With network innovation improving live streaming and download speeds, this service is set to soar.

Consumer Cloud is on the threshold of market entry with 62% planning to offer this service over the next 12 months.

App Store launch has received mixed reviews, with 21% of respondents opting out of this service. This is indicative of operators dabbling in different business models, whereby some seek to source and create apps and others compete with an access role.

mHealth is a growing enterprise service with 74% of respondent either currently offering or planning to offer this service.

M2M has not gathered as much momentum as initially anticipated, however with the LTE device market flourishing, over 50% of respondents are looking to launch this service over the next 12 months.

blogs.terrapinn.com/telecoms

Going Global
We asked regional operators which regions they thought presented good investment opportunities
12% 24%

41%

79%

3%

56%

18%

The Money on the Map: The markets which are set to capture more investment

18% Asia-Pacific 3% Latin America

24% Central Asia 79% Middle East

41% North Africa

56% Africa

12% CIS

blogs.terrapinn.com/telecoms

The Art of Acquisitions: Many Middle East operators have found a footing in new markets, expanding their brand and business into regions that hold great promise for revenue gain and customer acquisition. At Telecoms World Middle East 2012, Rashid Abdulla, CEO of Batelco argued that the future strategic direction is unclear as operators face rising pressure from shareholders to deliver traditional profit margins, which are eroding with the dominance of data services. Operators have faced gradual decline in revenues due to radical change in consumer communication and the rise of data traffic. There has been a notable political shift in the Middle East over the last 18 months, which has opened once-closed markets to investment. With Egypt, Libya, Bahrain, Lebanon, Afghanistan, Iraq and Syria suffering from political turmoil, investment is now necessary to re-develop these nations through connectivity. Managing risk, winning licenses and financing acquisition will be boardroom priorities for telcos looks to expand their footprint and capitalize on new markets. Market competition: Defining ideal market competition was one of the hot topics debates at Telecoms World Middle East 2012. Daniel Ritz, Chief Strategy Officer at Etisalat Group argued that 3 to 4 operators allowed for a market to be saturated with healthy competition. Too many operators overwhelm a market and serve only to damage the nations connectivity needs. MVNOs are somewhat making a comeback in the Middle East. With most countries having a limited number of operators, MVNOs can provide customers with an alternative service, foster a culture of product innovation and create lucrative wholesale opportunities for existing operators. Regulatory authorities across the region are issuing licenses for MVNO entry; however the Oman is still the only country in the region that can boast fully operating MVNOs.

blogs.terrapinn.com/telecoms

Wed love to hear your views on all of this...

Join the conversation
Click here to leave a comment our blog http://blogs.terrapinn.com/telecoms/ Click here to contribute to our LinkedIn discussion Click here to follow us on twitter @telecomblogger