alexa Of telecoms and the scramble for the ME and (North) Africa - Daily Nation

Of telecoms and the scramble for the ME and (North) Africa

Thursday August 13 2009

A woman uses her phone

A woman uses her phone while selling bananas. PHOTO | FILE | NATION MEDIA GROUP 


While capitalism, it appears, has come off life support another vital change is being played out: The geographic balance of power is shifting and the pendulum is in motion anew as the scramble for the telecoms market in Africa and the Middle East returns to its South-East origins. The telecom network powerhouses are no longer Telecom, Vodafone or Telenor, but instead Zain (also know as MTC), STC and Etisalat.

If you ask them, the Middle East and Africa is a reservoir of potential mobile phone, internet and mobile banking clients begging to be adopted between now and, roughly, 2011.

These three Gulf companies have set themselves the ambitious goals of entering the top-10 of global telecom providers. But so far the extraction and distribution of services remain relatively expensive and slow.


However, hopes are that these hurdles will be overcome as US and European markets become replete and actors like Motorola join the race, forcing a wave of deregulation across the region.

A majority of the stakeholders made their ambitions clear in the first half of this year.


In April, Etisalat’s chairman announced the company’s aim to become one of the largest 10 operators worldwide. The vast takeovers, partially based on huge money reserves following years of conservative spending practise, have already begun in Iraq, Oman and India. Iran and Syria are either underway or on the bidding table.

Another runner with matching ambitions is Zain, otherwise known as MTC. The company is currently in the top 20 of global phone operators and it is said to have 64 million customers in 22 countries (23 including Saudi Arabia), split between Africa, the Middle East and Europe, in that order.

Following an aggressive expansion campaign across the region the company, formerly known as Mobile Telecommunications Company, is about to launch mobile banking services in East Africa to a mind-boggling 100 million people. But in difference to its main competitors Etisalat and STC (the state-owned Saudi telecom company), Zain’s acquisitions are to a great extent funded by loans.

“While western economies are burdened by unemployment, budgetary constraints and obliged to reform their welfare states, the Middle East has accelerated its growth thanks to a reduction in the political control of their economies. Just look at STC’s expansion plans after the Saudi telecoms market was opened up, “a MENA investment specialist said to me recently.

Keynes of course would have said that the more market reforms you accumulate, the faster is your longer-term growth and, quite rightly, STC’s predictions are that mobile telephone usage in the home country and its immediate neighbours will be up by more than 130 per cent by 2011.

In their grandiose schemes to take over the world, Zain, MTC and STC have together either earmarked or paid a figure totalling $8.5 billion (Sh663 billion) and it is not even close to what the region is really worth. The companies are at present bidding for 120 million additional customers while demonstrating ever-rising profits. And the region is still in growth mode.

Deals are underway in Morocco, Egypt, Syria, Iran and Iraq by Orison Telecom and Tell. It is said that MENA mobile phone usage overall is only 39 per cent. But while European takers are moving away from their markets, Gulf and North African companies have already had their eyes on the ball for some time.

But is the telecoms sector ready to serve its customers? It is easy to agree on the facts – entrepreneurial capitalism good, statistic bias bad. Trends, nevertheless, should not be confused with social gain and it is with respect to social gain that one might find a slight dissidence.

Take Lebanon. Neither businesses nor households are able to access the best service at best price. Amid promises of planned telecoms privatisations there is no push for it, in part because foreign investors aren’t pushing sufficiently. As a result, mobile phone usage -- and connectivity rates are ludicrous. Given that, East Africa based mobile telephony giants really promise that the same thing will not happen to the 100 million or so people in the region who are due to subscribe to their mobile banking services?
Here, real corporate (social) responsibility is key. A business which desists to engage with its customers, the press, charities, activists and the government, and leads on empty promises compromises its own future because we know it is imperative.
A more productive preliminary analysis must also ask whether anything should be done and, if so, what? For political operative reasons the basis should be set against net neutrality. Government regulations will only strengthen main players without easing the control of others; regional, international and global. Smaller stakeholders have the option of merging while big players have the option to team up against the European actors.
Then there are the exchange rates, set to change at the peril of the pendulum and Gulf telecom executives.
So there is scope for more questions. Zain, STC, and Etisalat’s’ initiatives to train us in telecom efficiency is a step in the right direction and should be mimicked for a healthier tomorrow. But a future must also be sketched where local opportunities are explored and given the opportunity to optimise its local infrastructure.
As I reach for my ringing iPhone, I come across a page saying one of the big three has just lowered its MENA rates. Perhaps the pendulum isn’t swinging back just yet.