By Ed Attwood
Skype says it wants to help, not hinder, Middle Eastern telcos, but the persuasion job is far from complete.
Estonia's most famous export says it wants to help, rather than hinder, Middle Eastern telcos. The persuasion job is far from complete as Arabian Business meets Skype's main man in the MENA region, Rouzbeh Pasha.
Mention Skype, and your average telco executive is more likely to throw his arms up in the air than consider a partnership. It's a revenue stealer, they claim. Not only that, but this is also a firm that makes all its money piggy-backing on the existing telcos' infrastructure. In other words, it's the succubus of the international telecoms world. But there's also no doubt that Skype has been a phenomenon.
The company claims to now have a whopping 520 million users worldwide - the rough equivalent to around eight percent of the global population, if each of those users is considered unique. All in all, the figures are pretty impressive for a concept that was first dreamt up by a pair of Estonian developers back in 2003.
And as traditional markets have become more and more saturated with users, Skype, like every other tech firm with pretensions to global expansion, has for some time seen the Middle East as a potentially massive cashcow. As a result, the firm's affable head of Middle East and Africa, Rouzbeh Pasha, seems pretty confident about Skype's prospects, and with some justification. "There are 300 million people in the Arab world [Middle East and North Africa]," Pasha smiles. "And we are seeing more and more users join the internet from emerging markets. It's our belief that working with telco operators in emerging markets is an important driver for growth in the region."
The one snag is, of course, that local regulators haven't quite got on board with the Skype vision. Access to the Skype.com website - which users can visit to download the software and obtain instructions - is banned in a number of countries in the GCC, including the UAE and Kuwait. From the UAE perspective, the Telecommunications Regulatory Authority (TRA) says that only the local licensees - that's Etisalat and du - are allowed to offer Voice over Internet Protocol (VoIP), the medium through which Skype operates.
However, even VoIP services provided by the local licensees do not include the ability to call internationally. And analysts seem to have no idea when this situation will be remedied. "Operators and regulators in the GCC tend - with the occasional exception - to be quite cautious so I'm not confident that there will be rapid progress towards enabling Skype," explains Matthew Reed, a senior analyst at the Dubai office of Informa Telecoms & Media.
When quizzed on this vital issue, Pasha is reluctant to be drawn. "We have a government-related (GR) team that deals with those issues globally," he says, choosing his words carefully. "Skype is available all over the world, and that team keeps a dialogue with various regulators. Right now, they're having that dialogue in various markets and hearing what the other side has to say."
And despite the fact that the website is unavailable in most portions of the GCC, the technology can still be used if the Skype programme has already been downloaded onto a PC, laptop or other hardware - such as an iPhone, for example.
So if dedicated Skype users can still use the product in the region, what's the problem? Pasha believes that a symbiotic relationship between the VoIP pioneer and a traditional telco can yield beneficial results for both sides, at a price that is inexpensive to kick-start. This concept is one that is taking time to bed in, but the Skype boss says Hutchison Whampoa-owned 3 - the fourth mobile operator in the congested UK market - has begun to reap the rewards of its brave decision to link up with the VoIP oufit."At the time, it was a bit of a leap of faith for them  as critics claimed that working with Skype would hit their revenues," explains Pasha. "But working in this way brought such great value to users that some were prepared to ditch their old operator and subscribe to 3's service, because they wanted to use Skype on their mobile phones."
Not only that, but 3 also found that the users who had previously been put off by the high prices of regular mobile international calls to the extent that they were carefully avoiding them altogether were being drawn back to that service. In effect, as Pasha says, a high-quality experience combined with an existing telco's influence in the market can provide both parties with a revenue boost. "In emerging markets, my aim is to replicate that model," he remarks.
"The telcos in emerging markets have the right infrastructure, and we want to work with them to show them how they can complement the offering they have." For instance, if users want to use Skype on your iPhone - and many do - a data package is required. "So all of a sudden, from a person who's not interested in any data traffic, you have a person who is requesting a premium data package with the operator," Pasha continues. "This is revenue that would not have been there otherwise; so Skype is clearly an application that is driving usage."
But despite Skype's entreaties, there's no sign yet of local regulators taking the bait. "There is, arguably, a case for operators to partner with VoIP providers such as Skype in order to encourage customers to subscribe to data plans - in which case the operator will be hoping that the data-plan revenues outweigh any calling revenues that they forego; or an operator that is a new entrant or a challenger in the market might partner with Skype or similar in order to have something distinctive to offer (as 3 in the UK has done)," says Informa Telecom & Media's Reed. "But I don't think GCC operators are in any rush to experiment with those models just yet."
Further confirmation of Skype's intentions towards the MENA market was the launch of the Arabic version of the website in November last year. Pasha hails this as a major victory for user feedback, and a testament to the fact that as Arabic-speaking users are making up a significant portion of the company's recent growth. And by any margin, that growth has been astounding.
Despite only being five years old, Skype tops the list of global operators of international communication minutes - in effect, the total amount of time the world's population is spending using one company's services. According to analyst firm TeleGeography Research, Skype represented eight percent of this figure in 2008, a figure that grew to an astounding twelve percent in 2010. "Another key point is that Skype has been one of the main drivers to actually increase the overall number of minutes being used full stop," outlines Pasha. "So before, while people might have stayed on the phone for ten minutes, Skype's innovation means that they are increasing that to fifteen or 20 minutes."
With growth in minutes is an ever-expanding growth in the user base. Pasha claims that the firm exceeded its own expectations by garnering an additional 130 million worldwide users in 2008, but that figure rose by another 160 million in 2009, a hefty proportion of it based in the MENA region. Given the size of some of the operators in the region - like MTN, Zain and Orascom, you might assume that these figures must be exerting some sort of attraction in this highly populated region, but again, Pasha is coy as to the extent of negotiations.
"Each company is different from the other," he observes. "Just because they are all operators within the same field doesn't' mean that they're following the same strategy or have the same objectives in the market. So some are more receptive - some are less receptive. But there is definitely work for us to do in this region."
Much of what Pasha says is based around offering a strong user experience and listening to feedback. He even puts this above revenues, which are steadily climbing from $160m to $189m between the second and third quarters of the last financial year. But another vital area where he feels Skype can assist Middle Eastern businesses is with regard to cross-border trade. "In the Arabic-speaking world, and particularly in the small and medium sized enterprises segment, there's a lot of cross-border trade taking place," Pasha outlines. "Cheaper forms of communication are the underlying enabler for a lot of these businesses; it makes them more efficient and can help the economy of the region at the same time."
An additional benefit that the firm is working on is more efficient video-conferencing. The major concern for emerging markets is that operators cannot assume that users have the latest equipment in terms of the required bandwith. "So we're working hard to bring those down, so that the newest versions of Skype can run on older computers with much less bandwith," the Skype executive claims. "We want to make it a product that is as available to people in emerging markets as it is in advanced markets."
As Pasha says, communication is a basic need for all people. That's a mantra with which local telcos and regulators would no doubt agree. And with or without the agreement of the TRA et al, either Skype or its VoIP competitors are going to play a growing role in the telecoms landscape in the MENA region for years to come. While Skype may laud its previous successful ventures in more open markets, it remains to be seen whether local players will end up taking a punt on a partnership. If that milestone is reached, the floodgates could well open.