Qtel is looking at opportunities and talking to potential clients

The telecom sector saw an upturn rather than a downturn in 2009. Companies in the sector expanded into international markets as average revenue per user (ARPU) rates came down and their home markets became saturated.

This trend was seen not only in the UAE but also across the GCC.

Qatar Telecom (Qtel) had the first advantage in its home territory and as a result controls a large part of the market. Competition in the form of Vodafone Qatar finally appeared in 2009.

Last March, the company, which operates in 17 countries outside Qatar, forecast its net profit in 2009 would grow by between nine and 11 per cent from QR2.3 billion (Dh8bn) in 2008.

The operator currently has more than 53 million subscribers globally and is among the world's top 20 telecom companies. Emirates Business spoke to CEO Dr Nasser Marafih to obtain an insight into the company's global strategy and growth prospects in Qatar.


At the end of 2008, Qtel was on the global list of the top 20 telecom companies with an ARPU of $50 (Dh183). Have you been able to maintain that?

The roadmap was set out two years ago and that vision has been put into action by looking at acquisitions in a number of markets based on the financial strength of the company. There was access to funds and growth was built on this foundation. This could be achieved either by greenfield operations or acquiring companies. There are limitations on greenfield operations and it wouldn't make sense to venture into markets that are already crowded. Therefore the acquisition strategy involved looking at available operators in the market. There are opportunities in the market but the saturation of licence fees and the expectations of the existing operators have increased. They have to give up assets and therefore its becoming clear that to survive they have to align themselves in the Middle East and Asia.

Therefore for Qtel it was important to become active in Asia.

Africa is supposed to be the next big market for telecom operators due to the heavy mobile phone penetration. Why are you not interested in that market?

We did look at Africa but it was a key decision not to enter the market. When we compared the risk profiles of Asia and Africa the former was much more attractive. The African market is crowded, while in Asia mobile phone call charges are still reasonable and we will see other operators from the region follow suit.

Qtel operates in 17 countries outside Qatar. Do you have a set target to increase that total in 2010?

There will be further expansion, which is part of our vision, but it will be achieved through the organic growth of the existing companies' businesses. I cannot give you predictions as it would depend on the opportunities and we are always talking to potential companies about investments. We are continuously looking at opportunities and talking to potential operators in both Asia and the Middle East.

Have you been able to maintain the ARPU rate at $50?

It varies depending on the country. If you look at the GCC countries, Qatar is in the range of $45, while elsewhere in the Gulf the figure is lower, ranging from $10 to $15. In Asia, it is lower at $4 to $8 but the volumes are much larger. Even in the home market, the volumes have increased, therefore the ARPU rate has decreased. User profiles have also changed with competition stepping in. Customers are being shared with competition now. For Qtel, however, it is about stabilising growth by building on data and value-added services (VAS) to improve ARPU. In other markets, such as Indonesia and Kuwait, data services will be pushed to increase ARPU rates.

Did you increase your capital expenditure in 2009?

It is important to maintain capital expenditure and calculate the return on investments. Even in the global economic crisis there was a positive side as countries such as Iraq grew by doubling their customer base in the past two years and the same pattern was seen in Algeria. In some countries, where Qtel was in the second position, we gained market share to reach the number one spot. This was achieved by speeding up data services and expanding the infrastructure.

How much capital expenditure did you make in 2009?

In total, $6bn to $7bn was kept aside for investment, of which most was used in investing in major markets. Capital expenditure is normally 10 to 15 per cent of the total investment.

Did you see telecom operators opting to share infrastructure in 2009?

It's already happening in Qatar. You do not gain a competitive edge by building and continuing to build your own infrastructure. Qtel is sharing infrastructure in Indonesia and encouraging sharing in all the markets we operate in as we realise that moving forward investment in infrastructure no longer provides an advantage. To improve revenues from customers it is essential to create value-added services users.

Telecom operators in the region are investing heavily in fibre networks. Are Qtel's networks complete in this regard?

Qtel has invested in fibre networks over the years and is pushing fibre home services in some key areas in Doha. We are still building our networks in the country and will complete them in the coming years. The first phase has already started in a couple of areas and we want to make sure we use the right technology. The quality of services has to be maintained. The complete roll-out will happen in another two to three years. We are holding discussions with the government as we have to achieve certain rates of penetration in technologies. Broadband is currently being made available across the country using wireless technologies. Qtel is also pushing LTE wireless and fibre-to-home services. This will give customers speeds of up to 100mbps and enable them to access technologies such as IPTV and HDTV in the near future.

What about other markets you operate in? Is there a focus on WiMax and fibre optics?

In Qatar, we have an integrated platform providing all the services, which has come from the investment made in the past. Qtel will leverage on that in Oman, where we are going to start deploying fixed and internet services. At this stage we are using WiMax and fibre in the backbone. In the other markets, we have a company to provide broadband wirelessly based on 4G. This is being done by Witribe, which is already providing services in Jordan and Pakistan. In Qatar, we are using WiMax to complement fixed networks to provide high-speed internet. Therefore it's being used as a complementary technology. This is mainly because GSM is well established and fibre is already there.

Would you use services from Witribe in the Gulf markets?

There is already penetration of 3G technologies in these markets and therefore it wouldn't make sense to use these services. But these services could be used beyond the Arab countries where there are only fixed WiMax networks. WiMax has more spectrum than 3G and therefore becomes important as WiMax becomes a luxury. Licence fees are also cheaper for WiMax compared with 3G. Qtel wants to provide similar services to the Philippines and Pakistan and then move to new markets.

What have been the highlights of 2009 for Qtel?

Consolidation and the introduction of VAS into the market were major highlights. Also pushing data services and at the same time strengthening our position by venturing into new markets where others might shy away. The major challenge in 2010 is finding the right data applications that can be used by people in banking, e-government and e-health irrespective of the connection method. As connection speeds improve customers will use more of these services.

Are you threatened by content providers such as Google?

It is a positive sign that providers such as Google enter the market. They will create a need and a push for such services. Its not that telecom companies don't have a good relationship with customers, but content providers will need to reach out to these customers. Today, mobile phone is demonstrating services beyond PCs and it is becoming increasingly important to find the correct content provider to form a partnership with.

They are not competition as they don't invest in telecom infrastructure, but access it.

Telecom players are good at building infrastructure and internet companies don't have the ability in this area. It makes sense for them to focus on content and delivery. In such an environment it becomes important to become seamless as an operator and partner with these companies. This can be done by forming agreements and sharing infrastructure. Qtel has done it in the past with companies from the music and movie industry. A similar model can be replicated with these internet companies.

Now that Qtel has established its brand, would you consider launching a Qtel branded mobile handset such as UAE telecom operator etisalat?

We have seen that customers have their own tastes in mobile phones. It's not our priority and therefore we would not want to compete with device manufacturers. This can be done in a bundled manner. We have already introduced BlackBerry and the iPhone is coming to Qatar. This is the business model we will follow by introducing different devices into the region.

Qtel is not in the device business, this was clear from the beginning. We support device manufacturers.


PROFILE: Dr Nasser Marafih CEO, Qatar Telecom and Qtel International

Marafih holds a BSc in Electrical Engineering and a Master's and PhD in Communication Engineering, all from George Washington University in the United States. He joined the University of Qatar in 1986 first as a lecturer and research assistant and then as assistant professor in the Electrical Engineering Department.

Marafih began his career at Qtel in 1992 as an advisor from the University of Qatar and was involved in the introduction of the first GSM service in the Middle East in February 1994. Later in 1994, he joined Qtel as Director of Strategic Planning and Development.

He led a number of strategic initiatives, including the introduction of internet services in Qatar in 1996 and played a key role in the privatisation of Qtel in 1998.

Since becoming CEO in 2002, he has led the company through its transformation from a local telecom provider to an international player.

Marafih is a non-executive director of Liberty Telecoms Holding of the Philippines and sits on the boards of the Al Thuraya Satellite Company, Tunisiana, Asiacell, Nedjma, Wataniya Kuwait and Wataniya Palestine.

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