MTC scales down its deal with Vodafone

Regional mobile group, MTC has renewed its marketing deal with Vodafone, but the two companies have scaled down the terms of the partnership they formed in 2002.

A spokesperson from MTC told Arabian Business that a new two-year deal between the two firms had begun during September, involving ‘segmented dual branding’. Through it, both companies’ brands will only be used to advertise MTC’s mobile services at Kuwait’s ‘borders of entry’, including its international airport, as well as products that have been developed jointly by the two firms.

The move appeared to contradict recent comments made by MTC managing director and deputy chairman Dr. Saad Al Barrak, which suggested the firms’ arrangement was going to come to an end.

The companies’ original deal, the first of its kind in the Middle East, saw the Gulf operator adopting the MTC-Vodafone brand in Kuwait during 2002. It also gained access to Vodafone’s lucrative international roaming services, shared marketing initiatives, and the endorsement of the largest mobile company in the world.

The two companies then extended the partnership in 2003 when the Kuwaiti firm secured the rights to launch a new mobile network in Bahrain. In a statement, MTC said that arrangement would continue in its current form.

Speculation over the two companies’ relationship had arisen last year when they bid separately for a second mobile licence being offered in Oman, and when MTC did not use the Vodafone brand in its subsequent international expansion. Al Barrak also strongly hinted in September that the Kuwaiti arrangement would end when it expired last month, and that the operators would finish their deal for Bahrain in 18 months’ time.

“As a small operator [in 2002], we had to kiss their feet,” Al Barrak commented. “Many thought the deal was a stupid idea, and they could be right, but it was the only way to tango with a giant. As far as we are concerned it’s done. We have learnt what we need to [from Vodafone] and now are ready to shape our own destiny.” In a warning to global GSM players like Vodafone and Orange, he added: “Either we become like them or we buy them”.

According to a statement from MTC, the two companies have also extended the cooperation side of their agreement, which MTC said would see its Kuwaiti division gaining greater access to Vodafone’s services. The two companies have also pledged to continue launching two new products in MTC's markets per year.

“The modification of the agreement in Kuwait is due to nothing other than a change in the situation of MTC since the initial agreement was signed,” MTC's statement said.

“MTC Kuwait in 2002 was a one-country operator — today MTC is present in 18 countries across the Middle East, Gulf and sub-Saharan Africa. The sheer magnitude of these changes entails a new structure to the previous cooperation agreement that better serves MTC and Vodafone.”

Beyond Bahrain and Kuwait, MTC now has operations in Lebanon, Jordan, Iraq, and 13 countries in Africa through the acquisition of Celtel International in May. It reported last week that its subscriber base had reached 12.45 million by the end of September, beating the target it had previously set to have five million subscribers in place by the end of 2005.

Its Iraqi operation, MTC Atheer recorded the highest sequential growth rate of 61% in 3Q05, reaching 925,000 users. Overall, the group’s subscriber numbers grew by 17.38% from the end of June to the end of September. MTC also said it would complete a share rights offering by the end of the year and is eyeing opportunities for further expansion in the Middle East.

“Leveraging off the post-rights enhanced financial position, the company will be evaluating several attractive expansion opportunities arising over the next 18 months such as the expected third licences in Saudi Arabia and Egypt,” said the mobile operator's chairman, Asaad Al Banwan. The company has also already expressed an interest in acquiring a 35% stake in Tunisia's incumbent telco, Tunisie Telecom and has been short-listed in the process to acquire Turkish operator Telsim.