With Qatar's second mobile operator soon to be announced, Dr Naser Marafih, CEO of the country's incumbent operator, Qtel, discusses the challenge of competition and opportunities in new markets.
While Qatar's telecoms sector is soon to get its first taste of competition, with a licence for a second mobile operator to be announced imminently, the country's incumbent operator, Qtel, is remarkably relaxed about the development.
Far from being worried about losing market share, Dr Naser Marafih, Qtel's CEO even sees benefits to a competitor operating in the market. "We welcomed competition from the beginning," Marafih says. "We believe that it will be good for the public to have competition. We welcome it because we also think it is good for the customer to have choice.
Whenever we consider any investment we take a full view and that has to fit with our purpose and portfolio within the region, and with our financial and operational criteria.
"It will also relieve us of some of our obligations because someone will share the building of the infrastructure...that would also optimise our investment as at least we would be sharing between the two operators.
Marafih also points out that Qtel is no stranger to competition, having started a strategy to diversify into new sectors and geographical markets in the past few years as part of an ambitious plan to become one of the world's top-40 telecom companies by 2020.
There are three main strands to the company's strategy: to develop consumer wireless technologies such as GSM; to move into the consumer data market including wireless broadband; and to move into the high-speed managed services sector for corporate and data customers, according to Marafih.
"We have been moving on all these fronts for the past two or three years to build up a portfolio of investment in the region, centred on these three pillars. Of course the region that we are focusing on is MENA and also Asia, where we are pursuing growth," Marafih says.
As part of its commitment to managed data services, Qtel acquired a 38% stake in US-based managed data services provider NavLink early in 2007, making it an equal partner in the company with US telco giant AT&T.
"We are planning to aggressively target the Middle East market. Through NavLink, Qtel provides its top-end customers with network solutions in the enterprise data market," says Marafih. "In early 2006, Qtel also set up the Qatar Data Centre, which hosts the region's first AT&T global node, providing multinational companies (MNC) with global connectivity.
"We are focusing on the Middle East because the region has potential for growth and we know the risk profile. Our regional ambitions are focused on, but not limited to, Asia and the Middle East and North African (MENA) regions," Marafih says.
Just last year Qtel acquired a majority stake in Wataniya, Kuwait's second licensed GSM operator, in one of its biggest acquisitions to date. It bought a 51% stake in the company, partly to strengthen its offering for the wireless consumer market. "Wataniya operates in six countries and they have a very good portfolio in countries where we believe the growth potential is very good," Marafih says.
"We will continue to see if other opportunities exist to also enlarge the investment in Wataniya. It actually has six operations, in Algeria, Tunisia in partnership with Orascom, Kuwait, Saudi Arabia with a company called Bravo, Maldives and Palestine, which is going to be launched soon.
But while acquisitions such as Wataniya can bring numerous advantages, they can also be costly. Qtel recently borrowed US$3 billion to refinance an existing $2.5 billion bridge loan which it signed in March 2007 to finance the acquisition. The loan is expected to help Qtel finance integration costs entailed by the acquisition and to expand Wataniya in Kuwait.
However, Marafih thinks Qtel can make major savings by integrating the two companies. "Of course our focus now is to integrate the operation," Marafih says. "This is actually the most important activity that needs to be taken. We think there are huge potential synergies in the group that have not been captured until now, but we believe that this is something that needs to be addressed straight away.
Our regional ambitions are focused on, but not limited to, Asian and Middle East and North African (MENA) regions.
We have already partly integrated Wataniya Group into Qtel group. We have moved the office from Dubai to Doha and we have started to look at some of Wataniya's key operations, especially in Algeria." He added that Qtel has gained about one million customers in Algeria since taking control of Wataniya.
Qtel's aim to become one of the world's top-40 telecom companies also means that it will need to make further acquisitions, Marafih says. "The timing of future acquisitions and the companies themselves has to be analysed diligently. Whenever we consider any investment we take a full view and that has to fit with our purpose and portfolio within the region, and with our financial and operational criteria.
He added that Qtel is also in the final stages of preparing to launch its services in Palestine, has started a small operation in Maldives and is interested in other markets such as Algeria.
These forays into foreign markets have also strengthened the company's position in Qatar and the company has learnt much from its experiences in Oman and other countries, according to Marafih. "We have built a very good portfolio in Qatar, not just of mobile services, but also other services in the country," he says.
And while Qatar already has one of the highest mobile penetration rates in the region Marafih thinks there is plenty of room for growth in the market, and therefore space for a second operator.
"On the mobile side the penetration is very high but we believe there is more room for growth and the market is still growing. Growth is going to continue and we believe the market is big enough for another competitor to enter.
"The biggest growth potential is in data, not only in Qatar but in the whole region. We are seeing an explosive demand for data services," Marafih says.
He adds that the sector is also likely to see media entertainment services move towards integration with the telecom business, and that this could create a new frontier for telcos in the region. "I think the growth is going to be in content, specifically in entertainment and multimedia services, that is going to be an interested area. We are excited because we still believe there is potential growth in the market, not only from looking at penetration levels but also at other growth opportunities.