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Wed 22 Mar 2006 04:00 AM

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Paradise at a Price

Wataniya Telecom Maldives in partnership with Huawei Technologies has built out one of the most technically sophisticated converged 2G/3G networks in the region. CommsMEA reports from the islands on how logistical challenges in deploying and growing the business were overcome and Wataniya's plans to be the market leader within 12 months.

|~|Huawei200.jpg|~|L to R: Mark Hanna, CEO Wataniya Telecom Maldives; Edward Deng, president global marketing, Huawei; Ibrahim Zuhair, deputy minister of transport and communications, Maldives.|~|Arriving at Male's international airport, one would not expect to encounter a mobile communications network that is amongst the most advanced in the region. The initial inability to roam onto either of the two mobile operators' networks at the airport island appears to confirm the first impression that this is probably a country and city in which advanced services may not be at the top of the national agenda and hence may not be particularly robust.

This was probably an accurate description up until a little over a year ago, when a new mobile player, Wataniya Telecom Maldives was licensed to become the island state's second GSM provider, breaking the monopoly telecoms provider Dharagu. The licence fee amounted to US$1 million and other bidders included Telekom Malaysia, Syriatel Mobile Telecom and the Bharat Consortium. According to the International Finance Corporation, a significant financier of the project, the total cost of the network roll out would amount to US$70 million, including start-up losses as well as the financing of a fibre optic submarine cable. Other financiers to the project included the OPEC Fund as well as the local Bank of Maldives.

In less than nine months after being awarded the licence, Wataniya was able to commercially launch services and offer GSM coverage to 98% of the population of the Maldives in August 2005. As a country, the Maldives consists of a collection of over 1,100 islands, 202 of which are inhabited. The capital city Male has a population of around 85,000 inhabitants, with 40% of the country's total population under the age of 15.

“Voice rates have more than halved since the entry of Wataniya into the market,” says Mark Hanna, Wataniya Telecom Maldives CEO. “As a result there has been a drastic drop in ARPU, though it is still at levels higher than expected in this market,” he adds. According to Wataniya International's consolidated results for the fourth quarter of 2005 to end-December, monthly post-paid ARPU in the Maldives amounted to around US$71 while prepaid ARPU stood at around US$14 per month. Blended ARPU came in at around US$21.

Prepaid subscribers account for over 90% of Wataniya's subscriber base and are likely to remain an overwhelmingly large constituent given the logical difficulties in sending out bills in the post across the Maldives. The postal service is notoriously slow, so it remains impractical to expect post-paid subscribers to wait to receive a copy of the bill before they are able to ascertain how much is to be paid and when. However, servicing of prepaid accounts is not without its challenges as the distribution of top-up cards on a regular basis to island centres with significant populations is often a difficult thing to achieve.

Wataniya Telecom Maldives enjoys revenue levels that rival those found in some of the most sophisticated mobile markets in the world and the contribution made by data services as a percentage of overall service revenues is equally impressive. The operator reports that non-voice applications account for 12% of ARPU and with a move to offer mobile broadband services over 3G later this year, that figure is only set to rise further.

“The broadband experience in Male has been horrible,” Hanna states matter-of-factly. “Outside of Male, there is basically no fixed-line coverage so the demand for an alternative broadband access technology is high.”

Wataniya launched with an EDGE capable network in place and Hanna says that the technology has been competing effectively with other broadband technologies, hitting real speeds of up to 148Kbps. Third-generation technology is live in Male, though it will be some months before it is fully commercialised, and Hanna is in no doubt that it will be a great success when it is. “Mobility and the ease of access to data is the future.”

The operator has relied upon Huawei Technologies for the delivery of its entire core network, which is IP-based with softswitch. This has enabled Wataniya to roll out a converged 2G/3G network, which is capable of offering high-speed data access in areas of high demand, and basic 2G voice coverage in areas where sophisticated access to data is not a crucial requirement.||**|||~|watmaldives200.jpg|~|Distribution of prepaid cards across the Maldive's 202 inhabited islands is a significant challenge.|~|“Huawei is the first operator in the world with a converged 2G/3G platform at the core,” claims Edward Deng, the company's president of global marketing. “We have moved from a network focus to a customer focus approach and we are trying to create maximum value for customers,” he adds.
Wataniya Telecom is definitely benefiting from the robust nature of its network as well as the rapid build out given that in less than six months of operation it has been able to capture around 20% of total market share, counting around 60,000 subscribers. Given the total size of the population is estimated at between 280,000 - 300,000, Wataniya's impact on the market has been phenomenal, though Hanna is still pushing for even larger gains.

“My intention is to see Wataniya take a leadership position in terms of subscriber numbers in this market within the coming 12 months,” Hanna states. “Ultimately I envision a situation in which Wataniya will enjoy a 70% market share and the competition the rest,” he adds.

The introduction of new service and pricing bundles - which are often later replicated by the incumbent - is one of Wataniya's strongest competitive tools, and the operator intends to continue using them to great effect. “The fact that the Maldives is comprised 99% of water and 1% of sand offers some very real challenges when it comes to network deployment,” comments Perihane Metaweh, chief technology officer of Wataniya Telecom Maldives. “We have come to market with a number of innovations such as a 2G/3G deployment from day one, flexible charging, hybrid packages and the offer of high-speed wireless access.”

The operator is moving quickly in adding new capabilities to its network and part of that includes the deployment of an e-recharge platform that will allow subscribers to top-up their prepaid accounts and complete basic financial transactions on their handsets utilising over-the-air technology. “We are working with the IFC developing mobile payments, basically mobile banking. The Bank of Maldives, which is the only retail bank that has got branches outside of Male, so a lot of people do not have access to banking in their own back yard,” says Hanna.

Distribution challenges aside, Wataniya is looking to build up its retail presence and currently runs a flagship store in Male and six other shops in the more densely populated islands across the Maldives. Hanna estimates that before Wataniya launched, prepaid products were available in about a dozen stores in the whole of Male, a number that has since swelled to around 150 in the six months of the presence of competition.

The operator is also developing a virtual private network access solution targeted at the corporate clients present primarily in the capital, Male.

Despite Wataniya's desire to grow its subscriber base rapidly and thereby incorporate lower ARPU subscribers, Hanna says he does not support the idea of offering subsidised handsets in order to entice subscribers to take out subscriptions. “I believe the incumbent offers a bundled product, where you receive a low-end handset together with a SIM card and some airtime, but I do not feel this is necessary in order to sign-up subscribers,” Hanna says.

Like other emerging markets, high-end handsets are in strong demand despite the absence of 3G services on a commercial basis. “There is a high demand for high-end handsets in the Maldives, with purchases of 3G devices even before the services are available,” Hanna explains.

International links for both mobile calls as well as data traffic is a crucial element of Wataniya's business given the high number of foreign tourists attracted to the islands every year. The operator is in the process of building an undersea fibre optic cable to India, which will connect into the FLAG global network and is part of FOG (Fibre Optic Gulf) network. Cable laying is set to start in June with the link becoming operational by September. Wataniya is confident that Dhuruga's current monopoly on the operations of an international gateway will be broken upon completion of its undersea cable, and that it will be offered an international licence in its own right.

Network sharing between the incumbent operator and Wataniya had been discussed prior to the new entrant's launch, though no agreement was reached prior to launch as the incumbent attempted to protect its position. However, since market entry this position has altered drastically with Wataniya now boasting as many as two times more towers than the incumbent. Hanna is confident that the two players will pen some kind of sharing agreement in the near future.||**||

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