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Wed 22 Mar 2006 04:00 AM

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Lone Ranger

Qtel has watched liberalisation affect its fellow regional incumbents, and in Oman it has even become one of those start-ups. Such experiences have left the telco patently aware of the challenges that competition brings to an incumbent and Alex Ritman talks to Nasser Marafih, head of the Gulf's last remaining monopoly operator about Qtel's current and future activities.

|~|NasserQtel200.jpg|~|CEO Marafih believes Qtel has a good chance of winning Egypt's third GSM licence, despite intense competition.|~|The impressive Qtel tower in Doha's prestigious West Bay district is so new it still smells of paint inside. Work is not yet entirely complete, but for the past six months or so Qatar's solitary telecommunications provider has been moving its people into the 27 storeys. The official ribbon cutting came on March 6 and the almost untouched media room has so far had two guests, the prime minister of Qatar, Sheikh Abdullah bin Khalifa Al Thani, and CommsMEA.

Whether it is intended or not, the new tower is symbolic for Qtel. Qatar is the last country in the Middle East not to liberalise its telecoms market. The monopoly licence officially lasts until 2012 but it is highly expected that competition will be introduced long before then and, like any incumbent anticipating company, Qtel wants to show its strength.
Commandeering the skyline, the new headquarters is an impressive showcase of this. It also perhaps sends a looming sign out across the region that the operator is not to be overlooked. With the exception of a mobile unit in Oman, Qtel has been quiet on the international stage, but all this is likely to change if things go to plan. The third licence in Egypt, a juicy prospect for many hungry operators, is a definite target.

“We are involved in that bid,” says CEO Nasser Marafih. “Basically we are preparing our offer. We believe that it is one of the most important licences in the region and are going all the way.”

But it will not go in alone. When Qtel took Oman's second mobile licence in June 2004, it partnered with Danish and pan-European operator TDC, launching Nawras in March 2005. It will be looking for a similar cooperation in Egypt, this time without the Danes.

“They (TDC) have decided not to get into this market, but we are doing it with others,” says Marafih, denying that the recent change in management at TDC has made any change to its investment strategies. “TDC would be our preferred partner, if they are willing. If not, then we will do it with others,” Marafih says. “We believe we have the ability to go it alone.” The difficulty for Qtel is the qualifying criteria. In Oman, bidders were required to have multiple operations outside their own countries, which is why TDC came on board. “In Egypt, they have demanded that you should have a minimum of five million customers.” Qtel's combined wireless subscriber base at home and in Oman falls short of this mark.

Financially, Qtel has no reason to feel an underdog to some of the more established regional operators that are set to bid for the third GSM licence in Egypt. In 2005, the company's entire operations brought in net profits of QR1.5 billion (US$412 million), so it clearly has a fair amount of money to play around with, and being a monopoly with significant government backing, it is likely to have a large amount of reserves to fall back on as well. “We believe we have a good chance,” says Marafih.

Other opportunities for regional movements may come in Tunisia, with the privatisation of state telco Tunisie Telecom. “We have not actually got involved directly, but we are in discussion with the people who are. We are still evaluating.” The third licence in Saudi due for award next year is another opportunity that Qtel is reviewing.

Despite having added few international assets to this point, Marafih denies claims that his company has been at the sidelines of regional development. “Qtel has been looking at these opportunities, but we are very diligent in what we do. We are careful; because we have to make sure that we review each properly. Sometimes they do not meet our criteria.” He acknowledges that it is not just greenfield licences that attract Qtel's interest, and that he has been looking at potential operations for acquisition. “Qtel is going to be a regional player, and we are going in that direction. But it is important for us to do it right.”

International growth is one thing, but Qtel will eventually find that it has to defend its own domestic market from competition. No date for liberalisation has yet been set by the government, but Marafih has known for some time that it is inevitable.

“We started a transformation programme almost three years ago to prepare for competition,” he claims. “Part of it was to focus on things internally, to be more efficient and outsource what was not core. Another thing was to focus on the customer, and we created a number of initiatives to ensure we became more customer orientated.” Marafih says that the regional growth plan, including the move into Oman, was also drawn up as part of this transformation programme. “We are confident that we are going to be ready when competition comes.”||**|||~|Qtel-Tower200.jpg|~|Qtel's new tower in the West Bay district of Doha was officially opened on March 6 by Qatar prime minister Sheikh Abdullah bin Khalifa Al Thani.|~|As with most competitive telecommunications markets, the main arena for battle is in mobile operations and Qtel is trying to increase its customer focus so that when an alternative arrives, churn is kept to a minimum. “We have been in the business of acquiring customers up till now. When competition comes the marketing will have to change as we become more involved in retaining them,” says Henrik Hansen, senior marketing manager for wireless.

3G is a technology that many operators, once deployed, shout from the rafters to existing and potential customers. Qtel will be launching its own 3G services commercially in the second quarter of the year at the latest, says Abdulaziz Ibrahim Fakhroo, senior manager for wireless networks. “We will be the third 3G operator in the Gulf,” he claims, noting the offerings of MTC-Bahrain and Etisalat. But Qtel will be taking a different approach to marketing the technology. In fact, customers may not even hear the term '3G' when it comes to the services that will become available.

“We are going to be service driven, rather than technology driven,” says Hansen. A study conducted in the UAE showed that, of those asked, fewer than 2 out of 10 accurately knew about Etisalat's 3G Mubashir services, and this is something Qtel would like to avoid. In order to get the country involved in the whole 3G experience, Qtel will be showing trials in shopping malls, getting involved with universities and institutions, and basically doing its best to tell users what the technology can power. Following the initial stage of video telephony over 3G, Hansen says Qtel will launch a multimedia portal offering video clips and downloads.

Preparing for 3G, in December 2005 Qtel announced a joint collaboration with Texas University at Qatar, University of Qatar and the College of the North Atlantic at Qatar, to conduct research and studies into the technology and 3G services. The first such research programme of its kind in the region, the move perhaps showed Qtel's commitment to 3G as a genuine platform for advanced services, rather than a promotional tool. “We want to enhance the knowledge of 3G, not only among people who work in the technology for the operator, but among university graduates, and teachers,” says Fakhroo. “Were trying to push 3G in all directions.”

Hansen claims that the average mobile phone lifespan in Qatar is just three months, and with this sort of replacement cycle, getting enabled handsets into the marketplace should not be a problem. “There are currently around 50,000 3G handsets in the market,” he says.

Wireless may be the talking point, but fixed-line networks are enjoying a resurgence as broadband networks are deployed. With the gradual move towards IP-based technology and Next Generation Networks, it is becoming harder to distinguish the access layer and what will become central will be the intelligence that resides in the network.
Despite the small size of the country, Marafih believes that Qtel has built the largest IP MPLS network in the region, bypassing old legacy technologies. “We have started gradually deploying an NGN network. We have a clear roadmap where we will replace the old TDM network with NGN.” Using a multi-vendor strategy the deployments started in 2005, with the replacement of the old switches set to go on over the next three years.

With an IP-based platform, triple-play services are the inevitable applications to drive revenues. According to Marafih, trials have already started in Doha and he expects them to be completed by 3Q06. “I think we will hopefully be among the first in the region to provide these services.” Providing video is not simply a case of providing sufficient bandwidth, it requires complicated arrangements with content providers and broadcasters. Fortunately for Qtel, it has sufficient experience with Qatar Cablevision, its wireless cable television system that was inaugurated in 1993. “We cover most of the country with this service, but with triple-play we will be covering everybody, because it is done through DSL technology,” says Marafih. The current offerings through Cablevision provide around 90 channels, and the deals drawn up will be a useful tool when transferring over to triple-play. “We have agreements with most of the major content providers such as Orbit, Showtime and Star. It's just a case of expanding that agreement, and of course bringing additional content.”||**||

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