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Thu 1 Nov 2007 04:00 AM

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Embracing competition

There is seldom a quiet week in the MENA region's comms sector. In the past couple of weeks alone there have been some major announcements from regional telecom companies, mainly about foreign expansion, with some key deals announced.

There is seldom a quiet week in the MENA region's comms sector. In the past couple of weeks alone there have been some major announcements from regional telecom companies, mainly about foreign expansion, with some key deals announced.

For example, Kuwait's Zain said it plans to buy 75% of Ghana's Western Telesystems for US$120 million from the Ghanaian government. Meanwhile, Etisalat raised its stake in Tanzania's fourth operator Zanzibar Telecom to 51% and also revealed an interest in buying a stake in Oman's main telecom operator Omantel.

This activity is typical of an industry that is seeing increased levels of deregulation across the region, with countries including the UAE, Bahrain and Jordan continuing to move towards more liberal markets with greater levels of competition.

But while many of the Middle East's incumbent operators are enjoying the fruits of liberalisation by expanding into foreign markets, competition on the domestic front is more muted.

The UAE's restriction of VoIP (Voice over Internet Protocol) services is just one example. It is also likely to become the focus of further attention since the popular social networking web site MySpace - which is accessible in the UAE - forged a deal with VoIP operator Skype.

The agreement will allow MySpace users to use the Skype service without downloading the software, raising the spectre that people in the UAE will be able to make free international calls.

Understandably telcos in the Gulf fear VoIP as the high population of expatriates means international calls offer significant revenue.

In the long term, telecom companies in the Gulf will have to accept competition from technologies such as VoIP, as well as from numerous other services from rival companies.

But incumbent operators can learn much from their foreign counterparts in more developed markets, many of which underwent the painful process of privatisation years ago.

BT is one case in point, with the UK incumbent now far more successful than analysts thought possible when it was privatised in 1984. BT execs cite the company's adaptability as one of the key reasons for its success. Adapting to the ongoing change in the MENA telco place is tough, but companies can learn a lot from markets that have already liberalised.

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