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Tue 25 May 2004 04:00 AM

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MTN seeks foothold in Middle East

Pan-African operator, MTN, is eyeing the Middle East as part of its plan to become an international player in emerging markets.

MTN has reinforced its pledge to break into the Middle East telecoms market.

The pan-African operator pre-qualified for the much sought after mobile license in Saudi Arabia recently, as part of its bid to gain a foothold outside its home continent.

It hopes that a successful application in the Kingdom will give it a springboard to access new markets, but says it will press on with efforts to enter the Middle East if the bid doesn’t succeed.

“We need to gain a foothold in the region, and ideally we’d want to get a big one like Saudi. If we win the license, we can cluster smaller markets around it. But if we don’t get it, we’ll look at other opportunities,” Phuthuma Nhleko, MTN Group chief executive, tells CommsMEA.

MTN has already built mobile networks in six African countries, serving almost nine million subscribers.

As well as providing satellite and internet services, the group operates GSM networks in South Africa, Cameroon, Nigeria, Rwanda, Swaziland and Uganda.

This makes it Africa’s second largest mobile player in terms of subscribers and revenues, according to the ITU.

The operator is hoping to develop an international business specialising in emerging and green-field telecoms markets, both in the Middle East and Africa (MEA) region and abroad.

In the Middle East, in addition to the opportunity in Saudi Arabia, it has been involved in this year’s contests for mobile licenses in Oman and Iran.

“Our focus is on all emerging markets, so it’s a very logical step for us to explore outside Africa, including the Middle East and any other license opportunity that’s presented to us,” says Nhleko.

“We have a very rigorous international expansion division to help grow the group and fulfill that ambition,” he adds.

Competition for the license in Saudi is fierce, however.

Eleven consortia pre-qualified recently, including international and regional operators such as Vodafone, Deutsche Telekom, Orascom Telecom and MTC.

MTN and other contestants are also seeking clarification on universal service obligations attached to the license and the level of revenue the new entrant will have to share with the government.

“The key is whether there is a big revenue share or not,” says Nhleko.

The operator points to its experience in building new networks in difficult terrain as a key advantage in the Kingdom, however.

The new entrant is expected to focus at the start on expanding its coverage as rapidly, and to as many people, as possible.

“MTN has invested in markets that have been substantially challenging in terms of infrastructure [but] in every one of our operations, we have met universal service obligations ahead of target,” says Nhleko.

“At the onset, [the infrastructure] would be a next generation network to get the largest possible coverage. It would have an initial focus on voice but have the capability to roll out a substantial suite of mobile solutions depending on market demand,” he adds.

The operator says it would also aim to transfer advanced mobile services from its other markets when the demand arises.

In South Africa, MTN has migrated its network to GPRS and is in discussions with the regulator and other mobile operators about the introduction of 3G.

The operator’s innovative hybrid charging system may also be introduced, which is aimed at bridging the gap between pre-paid and post-paid users by enabling them to sign contracts but set limits on usage.

Nhleko also insists that the opportunity in Saudi remains attractive, despite the potential costs of roll-out and the possibility of new players being introduced in the future.

“STC is a strong player and we believe they will be very competitive, but there is growth in the market and scope for a second operator,” says Nhleko.

“Saudi may also introduce a third operator in 2006 but the second operator has a two-year window to capitalise,” he adds.

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