Comms Middle East & Africa - Sept 2010 by ITP Business Publishing

SEPTEMBER 2010

Critical analysis for telecommunications executives

An ITP Technology Publication

Licenced by Dubai Media City

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Beyond borders Why satellite operators are investing heavily in MEA

Slow progress Growth continues to elude Yemenâ&#x20AC;&#x2122;s fractured telco sector

Leaseback learnings

Muneer Farooqui, CEO, Warid Pakistan

How to get sale and leaseback agreements right ďŹ rst time

WARID RISES

Thee Abuu Dhabii-oowned teelco explainss the rationaale beehindd its strateggy in Pakkistaan

COMMENT 1

COMMENT By Roger Field

Awarding excellence

ith the rapid pace of change in the region’s telecoms sector, it is not surprising that the year has once again flown by. And as we edge into the busy second half of the year, it is time to remind all the region’s operators, vendors and regulators that the CommsMEA Awards is less than three months away. The CommsMEA Awards, which is now in its fifth year and is widely recognised as the region’s leading awards event for the telco sector, aims to recognise the organisations and individuals that Last year’s CommsMEA Awards winners set a new benchmark for organisations planning have made an outstanding contribution to the to enter the 2010 edition, which will take place on November 30th in Dubai. region’s fast growing telecoms industry. There is no doubt that the past year has been filled The event will take place on November 30 at a five with some fascinating developments in the region’s star hotel in Dubai, with the winners collecting their telecoms sector, from the entry of Bharti Airtel into awards during a gala dinner in front of the leading the region in June, to ongoing liberalisation across lights of the Middle East and Africa’s telecoms sector. the Gulf, and numerous large investments in network This year, there are a total of 15 awards with infrastructure. categories covering operators, vendors, regulators and And it is against this backdrop of frenetic change application providers. and development that the CommsMEA Awards aims Companies interested in entering the awards can to celebrate and recognise the most significant visit the dedicated awards website at www.itp.net/ achievements of the companies, organisations cmeaawards2010, which lists all necessary information, and individuals that have led the sector’s ongoing including the awards categories and nomination development in the past 12 months. instructions. The nomination form can be downloaded Last year’s winners, which are listed along with from the home page. photographs on the Awards website, managed to set a The deadline for nominations is October 25, and new benchmark in terms of quality, and I recommend entries will be judged by a panel of respected industry that any companies interested in participating this year experts during the first week of November. start preparing their nominations as early as possible, To help with the judging process, the CommsMEA as the level of competition looks set to be even greater team also invites feedback from the region’s telecom this year. users about the operators and services that they think I look forward to receiving your nominations, and if deserve recognition at this year’s awards. It should you have an questions, please do not hesitate to get in also be stressed that third parties can also submit a touch with the CommsMEA team. nomination for an operator, vendor or regulator that For any questions related to the awards, including they believe deserves to be entered for an award. the nomination process and eligibility, please contact In addition, the Customer Service Provider of Roger Field at roger.field@itp.com or call +971 4 the Year Award will also be open for nominations 444 3419. For any sponsorship or advertising related from CommsMEA and itp.net readers, giving a fairer enquiries, please contact Terry Good at terry.good@itp. reflection of the actual customer experience. com or call +44 1493 728012.

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CONTENTS

THIS CommsMEA | September 2010 www.itp.net

LOUAI BESHARA/AFP/Getty Images

Syria plans to issue a licence for a third mobile operator and to grant full licences to the existing two mobile operators.

NEWS • • • • • •

Warid Telecom makes a play for high-end customers in a bid to drive growth.

FEATURE

ANALYSIS

Blackberry walks the line RIM, the Canadian company behind Blackberry, treads a fine line as it locks horns with governments in the Middle East and India over encrypted data.

Batelco profits slip 14% in H1 Syria to issue a third mobile licence TRA, Microsoft in cyber security pact MTN, Intel to expand MEA broadband Kenya telcos on interconnection issue Mobile apps gain attention at Gitex

Warid rising Warid Telecom, Pakistan’s fourth largest operator by subscriber numbers, is keen to steer clear of a fixation on price as it sets a course for growth.

FOCUS

Beyond Borders The MEA region is showing fast paced growth in mobile satellite services offering huge growth potential for international satellite operators.

The mobile satellite services sector has remained robust with traffic growing modestly and major players voicing optimism.

CommsMEA | November 2007 www.itp.net

CONTENTS

CommsMEA | September 2010 www.itp.net

Yemenâ&#x20AC;&#x2122;s telco sector has plenty of operators, yet mobile penetration remains stubbornly low.

31 PROFILE

A practical guide that looks at the legal and drafting procedures for sale and leaseback agreements.

Focus on Yemen Yemen may have more mobile operators than either of its neighbours, but political instability and a weak economy continue to hinder growth.

FOCUS

Mobile monitors Rising mobile data usage is forcing operators to rely more on network optimisation techniques that help to improve their network performance.

NGNs at a national level can have a huge impact on economies and society, according to experts at Booz & Co.

CommsMEA | November 2007 www.itp.net

FOCUS

Right move Experts from the field reveal a stepby-step approach to drafting sale and leaseback agreements for the telecommunications sector.

BACKCHAT

Leasing made easy George Acris of Arieso talks about the growing need for companies in the region to adopt the equipment rental model to save on cost and time.

www.comptel.com

Take Charge of Your Services!

Policy Control and Charging

NEWS BRIEFS Orascom Telecom in talks with VimpelCom Orascom Telecom is in talks to merge the bulk of its business with Russian mobile operator VimpelCom, in a deal that could create a company worth more than $25 billion, according to a report from Bloomberg. Naguib Sawiris, chairman, Orascom Telecom, would become a significant minority investor in the new company, which would include his Weather Investments SpA’s 51% stake in Egypt’s Orascom Telecom Holding SAE and Italy’s Wind Telecomunicazioni SpA, the report added, citing two people close to the deal. Earlier in the month, Russian newspaper Kommersant reported that VimpelCom Ltd was considering staging an acquisition of Orascom’s Italian mobile firm, Wind, and a 51% stake in Orascom, in a deal worth about $6.5 billion.

MONTH IN NUMBERS

$25 BILLION Value of a merged Orascom and VimpelCom, should a deal occur

80-100% Mobile tariffs in Arab world up to 100% higher than OECD nations

14% Batelco’s net profit dips in H1

CommsMEA | September 2010 www.itp.net

Region’s mobile tariffs 80% higher than OECD Mobile prices in Arab countries are falling but remain far higher than in OECD countries Photo by Spencer Platt/Getty Images

People in Arab countries pay 80% to 100% more for mobile services than people in OECD countries.

Bahrain’s Telecommunications Regulatory Authority (TRA) has released a benchmarking study for telecommunications services, which revealed that average mobile tariffs in Arab countries are 80% to 100% higher than the average in Organisation of Economic Co-operation and Development (OECD) countries including Australia, Canada, UK and USA. The TRA commissioned independent consulting firm Teligen to conduct the study on behalf of the Arab Regulators Network (AREGNET). They

compared prices for fixed voice, mobile, leased lines and broadband services within and between 22 Arab countries, as well as with the 30 OECD countries. “Generally prices in Arab countries have gone down, most with broadband services. But since prices have gone down in other parts of the world as well the gap between prices in Arab countries and prices in OECD / European countries remains,” the study states. It found that mobile tariffs in most Arab countries are above

the OECD average, and the price of broadband in the region is three times higher than the European average. In terms of leased line services, prices for high speed circuits in Arab countries are also generally higher than in OECD countries. It is the same story with fixed voice telephony, where prices are on average higher in Arab countries than in OECD countries, especially international call charges. “International calls out of the Arab countries are 4-5 times as expensive as the OECD countries on average, and even the cheapest Arab country is 11 times more expensive than the ‘best in class’ OECD country. “However, this is an improvement from previous year,” the report reads. Bahrain’s TRA used the study to highlight developments in the kingdom, stating that the fixed voice tariffs compare well with other countries in the region and OECD countries, with mobile operators also “doing well”, demonstrating the benefits of competition.

Batelco operating profits slip 14% in first half of 2010 Batelco has posted a 14% slide in group net profit in the first half of 2010, with the firm’s CEO warning that the Bahraini market now holds no further growth prospects following the entry of a third mobile operator. The Bahraini incumbent announced net profits of $124 million, and blamed the result on local competition and the funds required for its start-up venture in India. Group revenues during

the first half of the year stood at $453 million. “Reduced market share for mobile and broadband services in Bahrain and strong price erosion adversely affected our revenues and profits. We also expected lower profits due to funding the growth of our startup operation in India,” said Peter Kaliaropoulos, CEO of Batelco. Outside its home market, Batelco posted better results,

with mobile customers rising by 47% to 6.88 million, and with broadband services growing 54% to reach 230,600 customers during the first half of 2010. In Jordan, Batelco’s Umniah subsidiary saw a 14% increase in mobile users, while Sabafon - in which the group holds a 26.5% equity investment - saw its mobile base rise by 22%. The group’s entire customer base now stands at 7.3 million.

NEWS 7

Syria plans to issue a third mobile licence LOUAI BESHARA/AFP/Getty Images

Zain and Etisalat likely to compete to enter one of the region’s least developed markets

Syria represents a rare opportunity to Middle East telecom operators looking to expand in the region.

The Syrian government has approved a plan to issue a licence for a third mobile operator and to grant full licences to the country’s two existing mobile operators, Syriatel and MTN Syria, according to a report from the Syria Arab News Agency. Syria’s third operator will enter the market in a three-phase process that will include an “initial rehabilitation, investment and technical rehabilitation” followed by a “financial auction”, the report added. The cabinet has also granted an initial approval to offer full mobile licences to Syriatel and MTN Syria, which currently

operate services under build, operate and transfer (BOT) agreements. However, such a move will rely on the two operators honouring certain unspecified financial obligations to the public treasury, according to the report. The BOT contracts offered MTN and Syriatel little incentive to invest in their networks or build their customer bases, when they could have been forced to hand over all of their operations, to the government when the contracts expired. While no timeframe was given for the issue of the third licence, Kuwait’s Zain Group

is reported to be interested in entering the country. The operator, which recently sold 15 of its African mobile operations to India’s Bharti Airtel for $10.7 billion, said it was waiting for clarification about the terms of the licence, Kuwait’s al-Rai newspaper reported. UAE incumbent Etisalat is also believed to be interested in the licence. Mohammad Omran, chairman, Etisalat, said as early as last year that the telco would make a bid for Syria’s third licence, and added that the company was also keen to acquire a licence in Lebanon. According to US research firm Budde.com, Syria has the most regulated telecoms sector in the Middle East and one of the least developed, which has resulted “in a country where there is strong growth potential if the rules were to be relaxed.” Fede Membrillera, partner, Delta Partners, said he expected many telcos in the Middle East, and particularly the Gulf, to express an interest in the licence. He said that with a population of 26 million people and a low level of competition, Syria is an attractive market.

Warid set to benefit from SingTel-led roaming initiative Singaporean operator SingTel is planning to launch a single network roaming rate across at least eight of the mobile operations that it has investments in, including Abu Dhabi Groupbacked Warid Telecom, India’s Bharti Aitel, and Globe Telecom in the Philippines. Muneer Farooqui, CEO, Warid Telecom, told

CommsMEA that SingTel and its partners plan to launch the single roaming rate by early 2011. “We call it ‘one network, one roaming charge’. We are working on it by the end of the year, at least amongst the eight operations of Singtel,” Farooqui said. Hopefully in will be in the market by the turn of the year. It would be a great advantage

for these operations, making it a global operation across borders,” he added. SingTel, which owns a 30% stake in Warid Telecom, also has significant stakes in Asian operators including Telkomsel in Indonesia, Globe Telekom in the Philippines, PBTL in Bangladesh, and AIS in Thailand, and Bharti Airtel.

BRIEFS Bahrain cuts off its anonymous mobile users Bahrain’s TRA and mobile operators, Batelco, Viva and Zain, warned users that they must properly register personal details by midnight on 31st August or their service would be cut off. The cut-off point was implemented to enforce TRA regulations introduced in July 2008, that were intended to prevent the illegitimate use of mobile networks by anonymous users, in the interest of security and safety. Previously mobile users could register pre-paid lines anonymously, but authorities in many countries found that anonymous mobiles were being used by criminals and others to co-ordinate illegal activities, and began requiring proper identification of would-be subscribers. UK’s C&W establishes base in the Middle East Cable & Wireless Worldwide, a UK-based telecoms integrator, has opened a new regional headquarters in Dubai Internet City to serve its growing customer base in the Middle East and Africa. The company has been working in the region for three years. It developed an extensive telecommunications network (MPLS) across the Middle East in 2008. The project included the deployment Points of Presences (PoPs) in Dubai, Abu Dhabi and Bahrain, connecting customers based in the UAE back into the MPLS network.

CommsMEA | September 2010 www.itp.net

GE Satcom

Reaching up GE - Satcom is expanding its satellite connectivity over Africa and the Middle East. GE - Satcom is a leading provider of satellite communication services, currently deploying networks in 130 countries, with access to over 30 satellites with multi-region coverage. Visit us at Gitex 2010 17 - 21 October, Dubai Stand Z-08 info@gesatcom.com www.gesatcom.com

NEWS 9

Du upbeat following second quarter results UAE’s second operator posts strong results and plans further fixed line growth UAE telecom operator Du posted record revenues for the second quarter of 2010, with a 30% year on year increase to AED 1.7 billion ($462 million). The operator reported its highest ever quarterly net profit before royalties, at AED 275 million, ($74.8 million), a 42% increase from the first quarter of the year, with growth across fixed line and mobile subscriptions. The company said that it added 182,100 net active mobile subscribers in Q2 2010, taking its total to 3,921,100, nearly one third of the UAE mobile market. Mobile ARPU remained stable at AED 111 compared to AED 104 in the second quarter of last year, the telco said. Du’s fixed line subscriber base also grew by 43,200 lines during the quarter, to 499,900, while revenues from fixed business, including telephony, TV and broadband increased 10% during the quarter to AED 290 million. The results contrasted with those of its bigger rival, Etisalat, which posted disappointing

Osman Sultan remains optimistic about the potential of the fixed line sector in the UAE.

results for the second quarter of the year in July. Etisalat’s net profits declined by 21% to AED 1.9 billion ($517 million), compared with AED 2.4 billion in the same period in 2009, while its Q2 revenue remained unchanged from a year ago, at AED 8.1 billion. Osman Sultan, CEO of Du, said that the operator continued to grow its market share in the UAE by bringing its total active

mobile subscriber base to almost 4 million. He added that the company was also “buoyed” by the recent announcement by the TRA regarding infrastructure sharing in the UAE. “We believe this [infrastructure sharing] is a great opportunity for the consumers first and the entire telecommunications sector in general in the long term, giving Du access to a much broader market, and offering consumers a greater choice of telecommunications products and services,” he said. “We are confident that our fixed line business, which remains one of the most developed and technically advanced in the region, will enable us to acquire further market share, supported by the innovative services we have consistently endeavoured to provide our customers, such as the recent introduction of recordable set-top boxes for our television services and our current video-on-demand offer,” Sultan added.

Zain Iraq set to expand operations into Kurdistan Operator plans to invest up to 20% of its revenue each year to expand its network Zain Iraq is planning to expand its operations into Kurdistan in January 2011, and expects to boost its subscriber base by up to two million next year, according to a report from Reuters. Emad Makiya, who recently replaced Ali Al Dahwi as CEO of Zain Iraq, said that Kuwaitbased Zain Group will continue to invest in Iraq, which is a key high-growth market, and expects the revenue for 2011 to increase

by at least 15-20%, according to the report. With mobile operators AsiaCell and Korek already oddering services in Iraq’s northern region, Zain Iraq will become the third operator in Kurdistan. Makiya said that Zain Iraq planned to invest 16-20% of its revenue every year into upgrading and expanding its network in the country for at least the next three years, as it

seeks to expand in one of the region’s least developed markets. Reuters also quoted the CEO as saying that the key focus, aside from the expansion in the Kurdish region, will be to commence 3G services in Iraq. Zain Iraq posted a 10% rise in revenue reaching over $723 million during the first-half of 2010, while the revenue for 2009 increased by 4% to reach more than $1.3 billion.

BRIEFS TRA signs cyber security pact with Microsoft The UAE’s telecom regulator, the TRA, has signed an agreement with Microsoft Gulf’s Security Cooperation Program (SCP) to jointly promote the security of information systems and networks in the country. The TRA signed the deal through aeCERT, its initiative to improve ICT security in the UAE. The SCP is a no-fee program that helps companies and individuals to improve their ICT security by promoting “cooperative projects” and information sharing to help organisations reduce incidents of security breaches and minimise the impact of attacks. Nawras plans IPO in Oman Nawras, Oman’s second operator, is to be listed on the Muscat Securities Market, and preparations for the IPO are “going on according to the plan agreed with the relevant public authorities”, the company said in a statement. Nawras is hoping to raise up to OMR400 million ($1.03 billion) from its IPO, which is believed to be scheduled for September 20, according to a report from Reuters, which cited a source familiar with the matter. The IPO will be open to both local and international investors, the report added. Nawras has already completed five years of operations in Oman, which is a legal requirement for the launch of the IPO.

CommsMEA | September 2010 www.itp.net

NEWS 11

ME telcos need to improve customer service Operators need to improve on customer service to gain growth, says Value Partners Middle East telecom operators need to improve their investment in, and the sophistication of their customer care services, to gain competitive advantage, according to management consultancy firm, Value Partners. The consultancy says that with fixed and mobile markets maturing, operators are looking to maximise the value of their existing customer base, and that while customer service plays an important part of this growth, telcos need to pick their customercare channels carefully. “Customer care - traditionally perceived as a ‘necessary cost,’ - is rapidly becoming a key success factor,” said Zoran Vasiljev, managing director, Value Partners Dubai. “On the one hand, customer satisfaction is a critical enabler for upselling, cross-selling and retention strategies, and customer service on their key sales channel. On the other hand, effective channel shifting strategies and continuous productivity improvements in call centre operations are essential building blocks of efficiency programs.”

Vasiljev: Telecom operators in the region must focus more on customer service initiatives.

Value Partners reports that it has worked with companies that have increased their customer care budgets by up to 15% over a period of several years, without seeing a corresponding increase in customer satisfaction. Vasiljev said that operators are turning away from Interactive Voice Response (IVRs) as a customer care channel, as it generates diminishing returns, and instead are focusing on shifting to new channels for customer support, taking a

customer-centric approach to redesigning call centre operations and looking for the most competitive supplier for highest quality/lowest cost customer care. Key areas of concern are ‘Recaller’ customers - customers calling back shortly after having spoken to an agent, or having visited the website, which can account for up to 35% of calls, and improperly prepared presales staff, who do not provide information to new customers about billing or services, resulting in more calls. Value Partners says that clearer scripts and corresponding agent incentives, and training that goes through post-sales needs can help alleviate these issues. Operators also need to look carefully at how they address multi-channel customer care, and particularly that they do not rely solely on online, static FAQs. Value Partners recommends looking at multiple channels and developing more advanced self-care options, such as using Human Digital Assistant technology, to give more interactive customer service.

MTN and Intel collaborate to expand MEA broadband US chip maker Intel Corporation and South African telco MTN Group have signed a Memorandum of Understanding to accelerate the deployment and penetration of broadband access in Africa and the Middle East. The collaboration includes initiatives such as broadband access through WiMAX deployment, affordable PC bundles for ordinary African consumers and entrepreneurs,

and cost-effective internet browsing devices. Intel’s venture capital division, Intel Capital, and MTN Group will also invest in emerging technology companies that demonstrate a potential for advancing the ICT sector by developing products that contribute to solving problems that are specific to African businesses and communities. Other areas of collaboration

include joint CSR efforts by MTN and Intel to develop technology skills among students and teachers. “Strategies developed by MTN and Intel to connect the next generation of broadband users in MEA region were a perfect fit, which is why we went into discussions to collaborate,” said Gordon Graylish, vice president, sales and marketing group of Intel Corporation.

BRIEFS Thuraya sets its eyes on aviation sector UAE-based satellite operator Thuraya has launched a new satellite aeronautical service that provides voice communications onboard aircraft. Offered under the brand AviationComms, an initial service offering is already operational in over 200 helicopters and business jets. It is based on Thuraya’s compact narrowband terminal, which provides voice, fax and 9.6Kbps circuit switch data, as well as GmPRS data at speeds of up to 60 Kbps. The firm says it is working on a broadband terminal that will provide higher data speeds of up to 444 Kbps in standard mode and up to 384 Kbps in streaming mode, as well as voice and optional onboard GSM services. Samatel joins Oman’s growing MVNO list Samatel, the latest mobile virtual network operator (MVNO) in the Sultanate of Oman, has launched its services for residential and business customers. Samatel is operating on a technology platform provided by Effortel, a mobile virtual network enabler (MVNE). Samatel is primarily targeting under-served segments of the market, with services and competitive pricing tailored to these users’ needs. Samatel SIM cards, which feature a new number series, are available in select outlets in Oman.

CommsMEA | September 2010 www.itp.net

NEWS BRIEFS Bharti to acquire Telecom Seychelles Indian mobile operator Bharti Airtel said it plans to acquire Telecom Seychelles for $62 million. The announcement follows closely from Bharti’s acquisition of most of Zain’s African assets in June. Manoj Kohli, CEO international and joint managing director of Bharti Airtel, confirmed in a statement that the company’s board of directors had approved the deal. “Telecom Seychelles has world-class operations that include state-of-the art 3G services. These operations will benefit further by leveraging the efficiencies of scale of our African operations,” he said. E-Marine signs up with EASSy E-Marine, a submarine cable specialist based in Dubai, has signed an agreement with East African Submarine System (EASSy), one of the biggest submarine cable systems linking Africa to the rest of the world, to maintain up to 8,600 km stretch of the EASSy submarine cable network. The agreement also includes E-Marine providing secure storage for supplies and accessories in its state-of-theart Bonded Cable Depot in the Port of Salalah, Oman. This cable system is expected to significantly improve access to highspeed Internet access and data services in 21 African countries, and will also offer additional redundancy.

CommsMEA | September 2010 www.itp.net

Kenyan telcos clash on interconnection issue Zain accuses Safaricom of limiting its capacity to make cross-network calls ISSOUF SANOGO/AFP/Getty Images

Kenya’s telecom regulator, the CCK, is working to reduce the price of telecoms services in the country.

Kenya’s two leading mobile operators, Safaricom and Zain Kenya, became embroiled in a dispute over interconnection capacity in August after the country’s regulator, the CCK (Communications Commission of Kenya), cut mobile interconnection rates by 50% last month. The dispute arose after Zain accused market leader Safaricom of offering only limited capacity for cross-network calls originating from Zain’s network. Zain, which reduced its tariffs to other networks by 50% in

May, said that its customers were experiencing call congestion when calling Safaricom’s network and the operator added that it had sent an official complaint to the CCK. Rene Meza, managing director, Zain Kenya, said that his company had requested for a “swap-out” of some circuits linking the two operators. He added that such a request could be completed within minutes at no cost, yet Zain was unable to get a commitment from Safaricom as to when the process would take place.

But Michael Joseph, CEO of Safaricom, refuted the claims describing them as “insincere” and “premature”. “We are quite surprised by the claims made by Zain that we are trying to stifle the delivery of their traffic to our network. “Zain is fully aware of the procedures that all operators must adhere to when seeking to increase their inter-connect traffic capacity,” Joseph said. “Under the terms of the agreement, the inter-connect pipe belongs to them and they should have upgraded it long before [18 August] to accommodate their changed tariff plan.” Joseph added that the interconnect agreement between Safaricom and Zain provides for a minimum notice period of seven working days before a request for increased capacity can be effected. “Safaricom has now and in the past continued to adhere to the terms of the inter-connect agreements signed with all operators and wishes to urge other operators to do the same,” he added.

Starcomms launches inter-standard roaming service Nigerian fixed-wireless operator, Starcomms, has launched an inter-standard roaming service allowing its CDMA subscribers to roam on the networks of both CDMA and GSM companies in 221 countries, globally. The new roaming service offers Starcomms customers seamless access to international mobile roaming on all wireless technology networks, which significantly expands Starcomms’

network coverage outside Nigeria, and simplies the roaming experience of customers travelling abroad. Earlier this year, Starcomms signed an agreement with MACH, a hub-based mobile applications exchange solutions provider, and inter-standard and converged solutions provider Accurius, for the launch of the inter-standard roaming service. “Our focus in providing

international roaming opportunities is not just about the service, but about the quality of customer experience whilst roaming with their Starcomms service,” said Tushar Maheshwari, chief communications officer of Starcomms. He added that customers travelling outside Nigeria would now feel “at home” with all their contacts having access to them seamlessly.

NEWS 13

Mobile apps to make appearance at Gitex ALBERTO PIZZOLI/AFP/Getty Images

Gitex to feature dedicated event to showcase mobile applications and content

Mobile apps will have greater prominence at Gitex this October, reflecting the growth of the sector.

Dubai World Trade Centre (DWTC), organiser of Gitex, one of the region’s leading IT and telecom exhibitions, has announced the addition of a dedicated event for mobile applications at this year’s show. The Gitex Mobile Apps & Content World has been introduced to reflect growing demand for application and content downloads for mobile devices, a market that analyst company research2guidance expects to reach a massive $15.6

billion by 2013. The event will bring together participants from the telecoms and consumer electronics sectors, including Nokia, RIM and Binatone, alongside apps developers such as Haiku, Globo Mobile, Evento, Winjit, CoolPad, and ValueLabs. Helal Saeed Almarri, CEO of DWTC, said: “The Middle East is well known for its demand for the latest mobile hardware and software, and apps and content are at the cutting edge of this

highly lucrative sector. In order to take advantage of a market it is necessary to fully understand its progress and demand, and Gitex Mobile Apps & Content World will serve as a dynamic platform where international vendors and consumers can do exactly that.” The event will include a series of open panel debates, to discuss global and regional potential of apps and content, and in particular, mobile marketing. DWTC has also formed an industry partnership with the Mobile Entertainment Forum (MEF), a global trade body for mobile media companies. Sarah Roberts, MEF general manager, EMEA said: “Our industry partnership is a reflection of MEF’s support for this sector and mobile media innovation in general across the Middle East. Gitex Mobile Apps & Content World provides an ideal platform to bring together international and regional mobile experts to stimulate growth and creativity in the mobile application and content ecosystem.”

Facebook finally goes ‘Places’ with new service New service lets people share information about their location using a mobile device Social networking site Facebook has launched a location-based service called ‘Places’ that lets users share where they are, and the friends they are with, using a mobile device. “You have the option to share your location by ‘checking in’ to that place and letting friends know where you are. You can easily see if any of your friends

have also chosen to check in nearby,” said Michael Sharon, Facebook product manager for Places, in a company blog post. Facebook users who want to try Places need to download the most recent version of the Facebook application for iPhone. Alternatively, they can access Places from touch.facebook.com if their phone’s browser supports

HTML 5 and geolocation. The user simply has to tap on the ‘Check In’ button, and will then see a list of places nearby, and any place not featured on the list can be easily added. After checking in, the system will create a “story” in a user’s friends’ News Feeds and show up in the Recent Activity section on the page for that place.

BRIEFS Android Trojan can be easily removed The first Trojan-SMS malware that targets Google’s Android OS has started infecting smartphones. Named Trojan-SMS. AndroidOS.FakePlayer.a, security specialists Kaspersky Lab reports that it has already been found in “a number of mobile devices”, without revealing concrete numbers. Disguised as a media player application, users are asked to install a file of about 13KB that sports the standard Android extension .APK. Once installed, the Trojan uses the system to send SMSs to premium rate numbers without the user’s knowledge or consent, which means money gets transferred from a user’s account directly to that of the cybercriminals. “The Trojan-SMS category is currently the most widespread class of malware for mobile phones, but Trojan-SMS.AndroidOS. FakePlayer.a is the first to specifically target the Android platform,” stated Kaspersky. “This case is one of the indicators of the platform’s growing popularity, but not the only one. Unfortunately, we don’t have an exact number of infections but we think that this number is not very big. SMS Trojans (for different platforms like J2ME, Symbian, Windows Mobile and now for Android) are the most ‘popular’ malicious programs today in the segment of mobile malware,” explained Denis Maslennikov of Kaspersky Lab.

CommsMEA | September 2010 www.itp.net

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NEWS

BLACKBERRY’S ENCRYPTION WOES Blackberry treads a fine line as it attempts to appease governments in key markets The past month has been tough for eRsearch In oMtion, the Canadian manufacturer of Blackberry, with the governments of India, Saudi Arabia and the UAE threatening to ban services unless they were given greater access to the encrypted information tramsmitted by Blackberry devices in their respective countries. It started with the UAE’s telecom regulator, the TR A, which said early last month that it would suspend IR’M s Blackberry services, including email and web browsing, from October 11. The TR A said in a statement that its decision was due to “the failure of ongoing attempts” spanning two years to bring Blackberry services in the UAE in line with the country’s telecoms regulations. The regulator added that it had already informed the UAE’s two telecoms operators, Etisalat and Du, of its decision. The problem soon started to spread, with other countries appearing to follow the UAE’s lead. Saudi Arabia’s telecoms regulator announced a ban on BlackBerry’s eM ssenger function and the regulator ordered operators to block the service. But IR’M s biggest headache came from India, where it has about one million users. The Indian government said in mid-August that it would ban BlackBerry’s corporate email services from August 31 unless IRM gave Indian security agencies access to data from its services. As the month drew on, Blackberry appeared to be making significant progress, with Saudi Arabia’s regulator announcing that it would allow BlackBerry eM ssenger services to continue after it made p ‘ ositive progress’ in talks with IR,Maccording to a report from eRuters.

eM anwhile, talks between UAE authorities and IRM to resolve the dispute also appeared to be making progress by mid-August, according to a report from Bloomberg. Speaking at a meeting of UAE diplomatic staff in Abu Dhabi, the UAE’s ambassador to the US, ousef Y Al Otaiba, said that talks were “going on and doing quite well”. By the end of August, IRM also appeared to be making headway in India, with the government offering the company a 60-day reprieve. The development came after the government accepted proposals from IRM for “lawful access” by India’s law enforcement agencies to the “communications passing through IRM systems”. The government added that it was putting IR’M s proposals into effect immediately. The government’s iM nistry of Home Affairs added in a statement that “the feasibility of the solutions offered would be assessed thereafter”, and added that the Department of Telecommunications would study the “feasibility of all such services” being provided through a server located only in India. “Any communication through the telecom networks should be accessible to the law enforcement agencies and all telecom service providers including third parties have to comply with this,” the statement added. “The iM nistry of Home Affairs will review the situation within 60 days by which time the Department of Telecommunications is expected to submit its report.” iN ck oJ tischky, principal analyst, emerging markets, Informa Telecoms &eM dia, said that with some 600,000 Blackberry sales expected in India this

“The fact that there will be a significant increase in the size of India’s addressable market that can afford smartphones means it is even more important for RIM to focus on India.” Nick Jotischky

INDRANIL MUKHERJEE/AFP/Getty Images

ANALYSIS 15

RIM was granted a 60-day stay of execution by India’s government.

year, the country remained an important, growing market for IR.MHe added that India’s smartphone market will reach about 12 million by the end of this year, and is set to grow to 40 million by the end of 2015 . “The fact that there will be a significant increase in the size of India’s addressable market that can afford smartphones means it is even more important for IRM to focus on India,” he said. But while IRM may have assuaged the concerns of India and S KA in the short term, such ad-hoc compromises are likely to encourage more governments to demand access to its users’ data. Indonesia and eLbanon are already reported to be voicing concerns about a lack of access to IR’M s data. IRM may be making headway on a case-by-case basis, but it may need a broader approach to the issue if more governments start threatening to block its services.

DATA FILE

60 DAYS

The extension that the Indian government granted to RIM on August 30, allowing it to continue to pursue a compromise agreement.

40 MILLION

The number of smartphones in India in 2015, according to Informa Telecoms and Media.

600,000

Expected Blackberry unit sales in India in 2010, according to Informa Telecoms & Media.

www.itp.net September 2010 | CommsMEA

OPINION

Finding Syria’s potential Syria’s telecom market finally looks set to realise its potential as the government hints at liberalisation.

ews that Syria’s government had finally approved a decision to award a licence for a third mobile operator came as welcome news to most Syrians, who are tired of paying over the odds for substandard telecom services. The government’s announcement that it also planned to award the country’s two existing mobile operators, Syriatel and MTN Syria, with full mobile licences, is also a sign that the market looks set to be transformed in the coming years. Indeed, the build, operate and transfer (BOT) licences that the two telcos have been operating under have long been at the centre of Syria’s inability to develop its mobile network, and the telcos cannot really be blamed. Most operators would shy away from investing heavily in developing their business if they were operating under the assumption that they could lose everything based on the decision of a third party. A similar scenario is being played out in Lebanon, where Orascom and Zain Group also operate networks under BOT contracts, and a similar level of apathy is present in Lebanon’s telecom sector as in Syria’s. While Syria’s government failed to put a timeframe on the issuing of the third operator, or the process to award full

CommsMEA | September 2010 www.itp.net

licences to the existing operators, some industry insiders think it will happen soon – perhaps even by the end of this year. Certainly, the Syrian market is attractive for a potential operator. The country has a population of some 20.5 million people, of which about 36% are below the age of 15, offering huge growth potential in the coming years. Furthermore, the legacy of the BOT contracts is also a benefit for a would-be third entrant, with mobile penetration rates languishing at about 44% at the end of 2009, according to data from UAE-based research and consultancy firm, Delta Partners. Added to this is the fact that Syrians are widely viewed as being eager for improved telecom services, and they are likely to respond well to new service packages, and the reduced tariffs that would follow liberalisation. For these reasons, Fede Membrillera, a managing partner at Delta Partners, predicts that most of the region’s telcos will be interested in the new licence. He is also convinced that the political risks of entering the Syrian market will preclude any telcos from outside the region from trying to

win the licence. So far, the two most likely contenders for the Syrian licence appear to be UAE incumbent Etisalat and Kuwait’s Zain. Indeed, Etisalat’s chairman, Mohammad Omran, last year expressed an interest in making a play for Lebanon and Syria. Zain, which is already present in Jordan and Lebanon, might be even more eager to gain the licence, to complete its presence in the Levant. But it is likely that all of the larger players, particularly

operators in the Gulf, will analyse the situation closely. It will also be interesting to see the influence that Syria’s proposed liberalisation exerts on Lebanon, which will become further isolated as the only country in the region with a mobile duopoly working under BOT contracts. Pressure is likely to increase on the Lebanese government to liberalise its telecom sector, which could ultimately lead to a far healthier telecom market across the Levant.

KEY FACTS

44% 20.5 MILLION 9.8 MILLION

Mobile penetration rate in Syria at the end of 2009 (Delta Partners)

The population of Syria, according to a World Bank estimate.

The number of mobile subscribers in Syria at the end of 2009

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WORLD NEWS USA Flint set to launch MVNO in US US telecom player Flint Telecom Group plans to enter the US prepaid wireless telecoms market as an M O operating under the Flint M N V obile brand before the end of the year. Flint M obile, which will offer voice, text and data services, plans to differentiate itself in the US market by allowing customers make domestic and international calls at the same rates as calling cards, without the need for a credit check. This will relieve the consumer of the need to dial cumbersome access numbers and codes. iVncent Browne, CEO of Flint, said:“When starting out, M O companies usually face N V expensive and time consuming brand building and customer acquisition costs. Our substantial local market knowledge and existing distribution channels will allow us to get better and faster results at significantly less costs, giving us greater profit margins.”

NOAH SEELAM/AFP/Getty Images

CHILE Chile plans LTE auction

INDIA Aircel introduces GSM services in Punjab Indian mobile operator Aircel has launched GSM -based mobile services in the Punjab circle, according to the Hindustan Times. The operator also revealed that it expects to invest around 10 billion rupees ($213 million)to expand and enhance coverage across the region by the end of next year. Gurdeep Singh, chief operating officer of Aircel, said:“We have invested 3.5 billion rupees to enter the Punjab market, and we intend to raise the investment to 10 billion rupees by the end of 2011.” Aircel has also revealed that it expects to launch 3G services by the end of December 2010 in all 13 circles where it has successfully acquired concessions. Singh said that while the launch of 3G could be in two phases, Aircel will attempt to roll out in all the circles by the end of 2010, as spectrum will be released in September.

CommsMEA | September 2010 www.itp.net

Subtel, the telecoms regulator in Chile, confirmed that it will launch an auction for wireless spectrum licences in the 2600M Hz band for TE L services in December. The regulator added that it expects to award concessions no later than June 2011, according to a report from BN americas. “In December we will launch the auction. Then a three to five month process will follow, meaning we hope to award the spectrum no later than June, which will coincide with the introduction of number portability and greater competition,” Jorge Atton, Subtel’s chief executive, was reported as saying. He added that by this time, N extel and V TR , which both won mobile spectrum in 2009,should be operating. This, combined with the TE L licences, would help create greater competition, leading to lower prices and improved services, he said.

WORLD NEWS 19 POLAND Two operators to trial LTE in Poland Poland’s telecom regulator, the Office of Electronic Communications (UE K), has granted permission for two of the country’s operators, CenterN et and oMbyland, to set up test transmitters for TE L trials. These trials are to be carried out in the 1800M Hz band in oLdz and Aleksandrowie K ujawskim, according to Polish news site rcom.pl. Both CenterN et, and M obyland, a wholly owned subsidiary of Aero2, signed a letter of intent last August to share the usage of their spectrum to roll out TE L services.

MONTH IN NUMBERS

$213 MILLION

The sum that Indian mobile operator Aircel plans to invest in its mobile services in the Punjab circle by the end of 2011.

ARMENIA ArmenTel to upgrade its network with HSUPA ArmenTel, the Armenian fixed and mobile operator, has introduced High Speed Upload Packet Access (HSUPA)technology on its network, increasing its uplink connection speeds to an average of 3M bps. “Due to the recent introduction of HSUPA technology, we have managed to increase the outgoing traffic speed from a subscriber to the operator by 10 times,” said Igor K limko, CEO of ArmenTel CJSC. “With the expansion of the 3G network in eYrevan, we have completed the first stage of tripling the 3G network capacity in Armenia, and now it is the turn of regions, where the works on network expansion will be completed by the end of 2010,” he added. The CEO was also quoted as saying that ArmenTel now plans to deploy more than 100 base transceiver stations across the regions to significantly expand 3G network coverage.

30%

Household broadband penetration in Montenegro, with more than 60,000 households in the East European country now having a broadband connection.

$782 MILLION

The sum that US fixed operator Windstream Communications plans to pay to acquire Q-Comm, a fibre transport and competitive local exchange carrier.

PAKISTAN PTA teams up with operators on infrastructure sharing The Pakistan Telecommunication Authority (PTA)has signed an agreement with the country’s mobile network operators on infrastructure sharing to be valid for three years, says a Pakistan Observer report. The agreement may be extended subject to all involved giving consent to an extension once the initial period is over, the report said. Under the agreement, M obilink, CM Pak ong),Telenor Pakistan, Warid Telecom, and Pakistan Telecommunications M (Z obile are to look for striking commercial deals with other operators aiming at 1.5tenancy ratio in the next three years.

www.itp.net September 2010 | CommsMEA

WARID PAKISTAN

PROFILE 21

WARID RISING Abu Dhabi-backed mobile operator Warid Pakistan is making a play for Pakistan’s high-end customers. By Roger Field

akistan, much like its neighbour India, is widely viewed as a telecom market dominated by low AR PU users, with subscribers spending an average of just $2 to $3 a month on mobile services, according to data from Irelandbased eRsearch and M arkets. Furthermore, with five mobile operators, Pakistan is also fiercely competitive. But while such a price sensitive environment might be expected to provoke most operators into a destructive price war, Warid Telecom, the country’s fourth largest operator by subscriber numbers, is keen to steer clear of a fixation on price. Indeed, the operator, which is 70% owned by the UAE’s Abu Dhabi Group, and 30% backed by Singapore’s leading operator, SingTel, is far more set on developing its reputation as an operator committed to the quality of its network. And to this end, the company is making a play for high-end customers in a bid to drive growth. And while the company’s position as Pakistan’s fourth largest operator out of five players may have disappointed some, u Mneer Farooqui, who took over the reigns as CEO in aMrch after serving for four years as CEO of Warid Bangladesh, is optimistic that Warid could soon move up the rankings. The company currently commands a

Muneer Farooqui, CEO, Warid Pakistan, says that the company aims to grow by tapping demand from high-end customers.

market share of about 17% and has some 17 million subscribers. This compares with the market leader oMbilink which has about 32 million subscribers, number-two player Telenor with about 24 million subscribers, and Ufone, which has about 20 million subscribers. The fifth operator, oZng, a unit of China oMbile, was launched in Pakistan in 2008 . Despite Warid’s current fourth position in the market, Farooqui is optimistic that the company can move up the rankings. “The reason for that is the unique selling proposition that Warid carries, which is helping us grow further in the market, is the quality of the network. Warid qualified as the best network in terms of quality on technical parameters and as the best network service provider,” he said. This has helped Warid attract a greater

number of high-end users and business clients, and the company now has the second biggest post-paid subscriber base in the country, according to Farooqui. “That is another endorsement. Globally, the post-paid subscriber base reflects on the kind of a network it is and on how loyal the customers are. We are almost on par with the incumbent. We have a high share of the post-paid business as well,” he says. According to Farooqui, about 3% of the company’s users are post-paid and therefore, pay a monthly line rent and also a higher denomination subscription. While this might sound modest, it equates to over 050,000 post-paid users, which have been instrumental in raising Warid’s combined AR PU to about $3.5 . Farooqui estimates that post-paid AR PU is between $12 and $14 compared with pre-

www.itp.net September 2010 | CommsMEA

PROFILE

WARID PAKISTAN

“The regulator would like 3G to be ubiquitous and available all over the country, but that has a cost attached to it which depends on what the operators have to pay in terms of licence fees.” Muneer Farooqui paid AR PU of $2 to $2.5 .

CLEAR VISION In a market with five operators, Farooqui insists that the one of the main ways Warid differentiates itself from its rivals is through the simplicity of its packages. Prior to launching its network back in aMy 2005 , the directors of Warid researched the Pakistani market and found that there were “a lot of complex post-paid packages” in the market and it was difficult for end-users to differentiate between them, according to Farooqui. “M any times there were hidden charges and what you see is not what you actually get, so what we decided upon was quality and simplicity. These are the core values of our organisation,” he says. “Based on that we made it very simple and we developed simple packages and there were no hidden costs. That helped us a lot.” Since entering Pakistan, Warid has worked with network vendor, Ericsson. oMre recently Warid also started working with Huawei on the radio side of the network, although Ericsson remains its core vendor. Warid also outsources its network operations to Ericsson, and it was the first operator to introduce the concept of managed operations to Pakistan. “It has definitely helped us and we have benefited, because we wanted to concentrate on our core business of selling airtime, not running the network,” Farooqui says. Among the high-end users that Warid has been targeting are corporate and business users. “They are the opinion

CommsMEA | September 2010 www.itp.net

leaders and decision-makers in this society and so we definitely give due attention for the corporate clients. We have got good corporate clients on board as well. Our credibility has helped us to gain and retain them.” The introduction of mobile number portability in Pakistan in 2007 also helped Warid attract additional post-paid customers. A lack of number portability had been a barrier to post-paid users who wanted to shift to another network, and Farooqui says that Warid won “a good share” of the portability numbers.

ADDING VALUE

downloads and ring back tones are very popular here as well.” Farooqui also sees ongoing growth opportunities driven by Pakistan’s large youth sector. The company has already launched a special package called Glow, which is aimed at the youth segment. Indeed, with about 35 % of the country under the age of 15 , the youth sector looks set to increasingly influence the country’s mobile operators. Applications that bring websites such as Facebook to mobile devices, video downloads and ring back tones are proving particularly popular among this group, according to Farooqui. Warid also launched Blackberry services in 2008 , and while Farooqui admits the service is “not a huge segment”, it has helped

While Pakistan’s mobile market is dominated by voice services, Farooqui says that Warid’s subscribers are becoming more aware of various mobile applications and that a CRISIS RESPONSE significant proportion of users are moving towards GPR S and EDGE data Amid the ongoing flood crisis in Pakistan, the country’s services. mobile operators have been battling to maintain The operator is also communication networks in the worst affected parts of introducing a greater range the country. of value added services “Along with the other operators Warid is doing its utmost. AS) V ( and now offers its We have made every effort to keep the network running,” customers a choice of about Farooqui said. 60 different AS. V The He added that while about 80 of the operator’s 4,600 cell popularity of data services sites had been affected by the flooding, almost all were and AS V is evident from back in order, although the company tragically lost one the strong customer uptake, young engineer who had been working to keep the network with about % 9 of Warid’s up and running. revenues now generated by Farooqui added that the Abu Dhabi Group has already AS, V according to Farooqui. pledged some 100 million rupees ($1.2 million) to help with “The top earner is SM S the flood relief effort, and that Warid Pakistan’s employees followed by GPR S and data had also donated a full day’s salary to the cause. services,” he says. “V ideo

WARID PAKISTAN

PROFILE 23

“The initiatives that the regulator has taken here in this country have paid-off, while Bangladesh is still facing difficulties because of the strictness on the regulatory side.” Muneer Farooqui

the company secure a share in the higher end of the market, he says.

GROUP EFFORT Warid Pakistan benefits significantly from its relationship with its two shareholders, UAE investment vehicle the Abu Dhabi Group and Singaporean telecom giant, SingTel, which bought a 30% stake in Warid Telecom in 2007. “SingTel is one of the world’s biggest operators. With their expertise backing us, we receive a lot of support,” Farooqui says. Eight mobile operations, including Warid Pakistan, operate under SingTel’s global umbrella and these operations work closely together to share best practices. The group holds regular director-level forums, allowing the group’s CEOs, CTOs, CFOs, and CIOs to meet up and exchange ideas and best practice enabling them to learn from each other’s experiences. Furthermore, as one of the world’s largest telecom operators, SingTel also has plenty of experience to pass on to relatively new

Warid Pakistan is headquartered in the city of Lahore.

operations such as Warid. Farooqui adds that SingTel is also able to help operators in the group gain better prices from vendors and suppliers.

PATH TO 3G Pakistan’s nascent mobile data market looks set to receive further impetus from the government’s plan to offer 3G licences. While a precise timeframe has not yet been announced, the regulator has been in discussions about 3G with the mobile operators. But there are serious concerns among the operators about the possible cost of the licences, particularly in the wake of the recent 3G auction in India, which netted the Indian government about $14.6 billion but left some of the operators with a dubious 3G business proposition. “The regulator is pretty upbeat about bringing 3G licences to the country,” Farooqui says. “We are evaluating this business proposition at the moment, but at the end of the day, everything will boil down to the price tag the regulator puts on the licence for this venture. The licence fee alone could make or break this project. “We hope that the primary role of the regulator will remain to increase the size of the cake, including the growth of the data or 3G margin,” he says. “That would make it a win-win proposition for all of the stakeholders, including customers, operators and the regulator itself, instead of going for any sort of short-term gain that would discourage FDI and investment from the operators.” Farooqui is optimistic about demand for 3G in Pakistan, but insists that operators’

interest in deploying the service will hinge around the cost and terms of the licences, as this will ultimately influence the final costs of the service to end-users. “There is a niche target market for 3G services in the metropolitan areas of Pakistan. People have money in their pockets and are willing to spend. With a zero upfront cost licence fee, operators would love to go for 3G operations. “The regulator would like 3G to be ubiquitous and available all over the country, but that has a cost attached to it which depends on what the operators have to pay in terms of licence fees.” But while Farooqui admits there are concerns about the 3G licences, he also lauds the regulator’s achievements to date. His views have been influenced by his experience of running Warid’s operation in Bangladesh, where the regulator has a poor reputation for developing the telecommunications sector. “So far, the PTA has been very conducive. I was part of the Bangladesh operation of Warid for almost four years and I would definitely say that Pakistan is much better off. The initiatives that the regulator has taken in this country have paid-off, while Bangladesh is still facing difficulties because of the strictness on the regulatory side. He adds that Pakistan has benefited from initiatives such as the deregulation of international gateways and mobile number portability, which helped grow teledensity. “There are now almost 100 million mobile subscribers in Pakistan, driven by phenomenal growth in the last few years, and it us the operators and regulator that have made it happen,” he says.

www.itp.net September 2010 | CommsMEA

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FOCUS

SATELLITE SECTOR

BEYOND BORDERS The MEA region is shaping up to become a major market for mobile satellite service operators. By Roger Field and Nithyasree Trivikram

hile many fixed line and mobile operators have been battered by the economic slowdown, the mobile satellite services (MSS) sector has remained remarkably robust, with traffic growing modestly and the sector’s major players remaining optimistic about growth. n I deed, according to recent research from NSR , a US-based market research and consulting firm specialising in satellite and wireless technology, the sector continued to grow in 2009 “by a few percentage points” and is forecast to achieve a retail value of 1$0.9 billion in 2019, up from about 4$.2 billion in 2009. NSR ’s research also predicts a growth in MSS units, from 1.9 million units in 2009 to more than 5.7 million in 2019, at a compound annual growth rate of 11.6%. “The MSS industry has weathered a storm in the past 18 to 24 months and held

CommsMEA | September 2010 www.itp.net

on despite a general investor confidence crisis and the economic recession,” says lCaude oRusseau, senior analyst, NSR . “W ith government funding and private investors supporting the industry, it has continued to show growth in traffic while targeting a larger set of customers in the maritime, land-mobile and aeronautical markets,” he says. oRusseau also sees significant potential for the satellite sector in the ATCA ( ncillary Terrestrial oCmponent) space, with demand for services such as mobile data backhaul growing rapidly.

CONSOLIDATION AHEAD But with only about 2 million subscribers worldwide, the MSS satellite sector is also relatively small, and this could lead to consolidation in the sector. “The challenge is that expected

consolidation in the MSS industry has not happened yet, despite the market not being adverse to it,” oRusseau says. “There are still too many players vying for a piece of a relatively small pie compared to other telecommunications markets, which stretches an already fragmented industry, especially in the legacy maritime sector.” He adds that while consumption of data airtime remains low, the satellite data market should grow with increased “capabilities and integration” with positioning, navigation, safety of life, security and tracking applications. Globally, the MSS sector is dominated by n I marsat, which commands a 53% market share;rIidium, which has a 24% market share;and Thuraya, which has a 13% share of the market, according to NSR ’s research. However, the picture is probably quite different in the Middle East and Africa,

SATELLITE SECTOR

FOCUS 27

“The mobile satellite services industry has weathered a storm in the past 18 to 24 months and held on despite a general investor confidence crisis and the economic recession.” Claude Rousseau, NSR

Ahmed sees demand from sectors including financial services.

where oRusseau guesses that regional player Thuraya is likely to have the biggest market share, followed by UK player n I marsat and rIidium, which is based in the US. But while consolidation might be expected globally, in the MEA region, there remains plenty of demand for MSS, providing potential growth opportunities for all of the main players. “As far as mobile satellite services are concerned, we see a growing demand and more service providers and operators addressing the markets in the Middle-East and Africa,” oRusseau says. “The need for mobility is increasing in the region and demand for vertical markets such as government, military, NGOs, satellite news gathering, oil and gas as well as maritime users is growing, in large part thanks to low infrastructure build-out but also for improved connectivity demand brought about by remote office locations and operational requirements.” h Wile industries including oil and gas, transportation, and defense remain the leading users of MSS, the key trends in the sector include growth in data products, rising bandwidth demand and continued support in government and military mobility markets, according to oRusseau. “A lot of demand over the past few years for satellites has been driven by two major factors – geopolitics and funding – usually one goes with the other.” He adds that each of the main MSS players has the potential to grow in the region. For example, n I marsat has seen “good growth” in the market because of its

strength in oil and gas and satellite news gathering, and in the government sector. However, he adds that Thuraya “cannot be underestimated” because it is launching numerous new products such as Thuraya P I, which is adapted for the aviation industry. “In my view, Thuraya will also be capable of providing good competition to n I marsat,” he says.

OPERATOR PERSPECTIVE This growth is something that Dan Mercer, regional P V, distribution channels, Europe, Middle East and Africa, is familiar with. After gaining a licence to set up business and market its products in South Africa last June, the US-based satellite operator has big ambitions for regional growth. The licence means that rIidium now has frequency allocation in the country and can market and sell its services there. rIidium, which has a number of licences in the Middle East and Africa, offers its products through service providers in many countries, and is confident that it will gain significant business in South Africa. Mercer says that rIidium is working with partners including Globalcom, Global

Plus and Satcom A Z , which each have their own niche markets. “R eally the biggest game is the ability to sell to government ministries and the MOD who of course are all large users,” he says. rIidium also has partnerships with more than 250 product suppliers that buy its modems and integrate them into their niche products, which are designed for various industries, according to Mercer. These companies will also now be able to

YAHSAT ENTERS THE FRAY Yahsat, a satellite operator owned by Abu Dhabi’s Mubadala Development Company, is the latest company to enter the region’s satellite services sector. The firm, which plans to launch its first satellite in the first quarter of 2011, will offer a range of voice, data, video and internet services for commercial and residential use. The company is already in the process of increasing the capacity for satellite service providers and operators in the region. “We have already leased a substantial percentage of our satellite capacity. In K-band, we have TV services. We have partnered with SES Astra – one of the leading UK-based satellite TV operators in the world,” says Shawkat Ahmed, chief commercial officer, Yahsat. In South Africa, Yahsat has tied up with ISP Box Telecom, while in Iraq it has formed an agreement with Delta Partners, a mobile distributor. Yahsat also has service partners in countries including Angola, Kenya, Pakistan and Saudi Arabia. Aside from sectors such as defense and transport, Ahmed also points to the financial services industry as having much potential to drive demand. He said the cost of downtime for financial institutions can be huge, and MSS can offer a reliable backup.

www.itp.net September 2010 | CommsMEA

FOCUS

SATELLITE SECTOR

“The emergency sector is also very important for us, whether it is first responders, fire, or the police. Iridium features heavily in that sector, which is predominently handset driven.” Dan Mercer, Iridium

market their products that contain rIidium technology in South Africa. Mercer points to maritime as a key target market in South Africa. About 40% of rIidium’s traffic globally is from international waters, mostly ships and some aircraft, he adds. Mercer also points to the military and tracking services as growth markets. “The emergency sector is also very important for us, whether first responders, fire, or the police. rIidium features heavily in that sector, which is predominantly handset driven,” he adds. One of the advantages that rIidium claims to have over its rivals is its pole to pole global coverage. “Other than us, people use the word g‘ lobal’ rather loosely,” Mercer says. “Global to us means that there isn’t a single point on the planet, from the poles to the equator, that rIidium doesn’t work from,” he says.

NEXT GENERATION rIidium also hopes to gain an advantage over its rivals in the coming years by launching a new constellation of satellites that will offer improved coverage and data services globally. The company has secured financing and placed a contract with Teliasonera Space in France to build a new constellation of satellites, which is now in the design phase. The new satellites will be launched between the first quarter of 2015 and early 2017. rIidium will build 81 satellites in total, with 66 due to go live, six as orbiting spares,

CommsMEA | September 2010 www.itp.net

and nine as ground spares. One of the main benefits of the new satellites will be increased bandwidth capacity for end users. The existing satellites allow end users to access data at 128 Kbps, but this will increase to 1.5 Mbps with the new satellites. But rIidium is not the only player to be investing heavily in a new generation of services. The global market leader in the MSS space, n I marsat, also recently announced its intention to invest 1$.2 billion for its fifth generation of satellites. n I marsat said in August that it had agreed a contract with Boeing for the delivery of three 702HP Ka-band satellites. The n I marsat-5 constellation will enable the company to provide a global high speed mobile broadband service.

iW th operations expected to start in 2014, n I marsat-5 will support a next generation global service which will target a 1$.4 billion “incremental market opportunity” in S VAT v ( ery small aperture terminal) services in sectors including maritime, energy, government and aeronautical. The new generation of satellites from n I marsat will allow it to offer a mobile broadband service called Global p Xress, with speeds up to 50Mbps, to customer terminals that are 20-60cm in size. The investment is a direct response to the rising demand that n I marsat sees across various industries, according to Helene Baziz, senior area manager for n I marsat in the Middle East and Africa. Looking forward, Baziz confirms that n I marsat is pursuing new licences in specific

GLOBAL MSS OPERATORS: MARKET SHARE BY REVENUES, 2009

Inmarsat 53%

SkyTerra(LightSquared) 3%

Thuraya 13% Globalstar 5% Orbcomm 2%

Iridium 24% Source: NSR’ Mobile Satellite Services, 6th Edition

SATELLITE SECTOR

FOCUS 29

“Satellite services need to be addressed through simplified and tailored regulatory regimes that take into account technical and commercial aspects of the networks.” Ebrahim K. Ebrahim, Thuraya Ebrahim K. Ebrahim says regulation is a challenge in some markets.

geographies where there is a need for satellite communications. n I the region, n I marsat is currently licenced in Egypt, Algeria, Morocco, Kuwait and Jordan. The company is hoping to gain a licence for Libya and a full licence in KSA.

AVIATION TAKES OFF n I marsat is also developing a strong business in the aviation sector, by offering services that allow airlines to offer their passengers data services. Baziz says there is a “lot of interest” from various airlines in the region, many of which are already starting to deploy services on their fleets. The company already works extensively with UAE airline Emirates. The aviation sector is also a target for UAE-based satellite operator Thuraya. The company’s AviationC omms solution has already been installed on more than 200 helicopters and business jets, and the operator is also moving into the commercial aviation sector. Ebrahim K. Ebrahim, vice president, corporate communications, Thuraya, says the service matches the functions of GSM players and is confident that it will appeal to leisure and business travelers. Thuraya is also developing a broadband service that will be introduced “as part of a comprehensive portfolio” of aeronautical services, Ebrahim says.

REGIONAL FOCUS h Wile Thuraya might lack the global coverage of its bigger rivals n I marsat and rIidium, it has built a strong client base in

the region and is widely held to be the market leader in the Middle East and Africa region. Ebrahim says the Middle East market is growing “swiftly” and is a huge market for satellite communications, with multinational companies and NGOs relying on satellite services in many parts of the region. Thuraya has experienced particularly strong growth on the back of its Thuraya P I broadband service, which offers streaming speeds of up to 384kbps. Thuraya P I terminals are used for tracking of vehicles and shipments, the remote control of certain field operations as well as various SC ADA S ( upervisory oCntrol and Data Acquisition) applications, according to Ebrahim. The compact A-5 size of the terminal has also made it popular among media crews, particularly when broadcasting from remote locations.

REGULATORY ISSUES iW th a presence that extends across borders, satellite operators face a different set of regulatory challenges compared with other operators such as GSM and fixed line players. “The challenges faced by satellite operators lie in trying to run their business in a large number of countries while originating the services from one or a few countries,” says Ebrahim

of Thuraya. “Satellite services need to be addressed through simplified and tailored regulatory regimes that take into account the technical and commercial aspects of these networks, compared to the terrestrial ones,” he says. eRquirements such as local presence, a specific list of potential partners, establishment of local gateways and high license fees hinder the business growth for satellite operators and conflict with the purposes for which these networks were launched originally, according to Ebrahim. However, there are also some countries that are setting an example. “On the other hand there are other countries in the region in which the regulatory regime is very mature and where flexibility in meeting requirements is allowed as long as regulatory compliance is achieved,” he says.

SATELLITE DATA

$10.9 BILLION

The retail value that the mobile satellite services sector is expected to reach in 2019, according to NSR.

53%

The market share that Inmarsat holds in the global mobile satellite services sector.

The number of new satellites that US satellite operator Iridium plans to put into live orbit between 2015 and early 2017.

www.itp.net September 2010 | CommsMEA

SATELLITE SECTOR

FOCUS 31

ALL SYSTEMS GO

With operations in the broadcast and communications sectors, Arabsat has a clear view of the Middle East’s satellite sector. Khalid Balkheyour, the company’s president and CEO, tells Nithyasree Trivikram about the latest developments in the market and where he thinks the main growth opportunities lie. COMMSMEA: WHAT GROWTH PATTERNS DO YOU SEE IN THE SATELLITE COMMUNICATIONS SECTOR IN THE MENA REGION?

The MENA satellite sector is an integral part of the global telecommunications network worldwide, and therefore, global trends will potentially have regional repercussions with a local flavour. Our MENA region is no different and its satellite industry plays a leading role in embracing these changes and tailoring them to meet the growing needs of our customers. oCnnectivity to the n I ternet, be it through simple access or broadband access, is a clear trend that we have seen and expect to see in the future. Here at Arabsat we have developed a broadband satellite solution to meet this market’s requirements in the GC Cand beyond. eWexpect this high-tech solution to be fully operational next year. COMMSMEA: WHICH AREAS OF THE SATELLITE SECTOR ARE YOU LOOKING TO FOR GROWTH IN THE COMING YEARS?

Sometimes too, local trends help shape the makeup of our regional satellite industry and, from that perspective, Free-To-Air F ( TA) channels are an important contributor to our growth. Other growth patterns that we have seen and that we are pursuing include the HDTV market, which is still evolving as most available content is not yet HDTV -ready. But, we believe that HDTVadoption will accelerate in the next few years since HD content is increasingly available and TVsets are becoming affordable. eWare even eyeing 3D, but still further down the road. COMMSMEA: TELL ME ABOUT THE TWO OPERATING STATIONS OF ARABSAT IN

RIYADH AND TUNISIA? Arabsat’s operating station in iRyadh, the Dirab Station, is the primary control station for all Arabsat satellites. Tunis station is a secondary station for the same purpose. Both stations are operating in tandem to provide full redundancy and guarantee service continuity in case of a technical difficulty. They also handle the satellite station to keep our satellites’ position and performance within their nominal targets. iRyadh station also includes Arabsat Operation eCntre, a 24/7 call and customer care centre that performs required testing for customers’ networks and monitors quality of service on board all satellites. eWhave seen the need to provide some of our customers with teleport services for n I ternet backbone access, for example. And it has been our strategic view so far that building partnerships with specialised teleport service providers in MENA and Europe is the best answer to meet our customers’ requirements in operational and economical terms. COMMSMEA: WHAT REGULATORY CHALLENGES DO SATELLITE OPERATORS FACE, PARTICULARLY IN TERMS OF OPERATING IN SO MANY DIFFERENT COUNTRIES IN THE REGION?

Arabsat has acquired all necessary licenses for its operations in the region in coordination with the n I ternational Telecommunication Union T I( U), the international regulatory body in charge of the satellite industry. T I U has stringent requirements including the necessary co-ordination with all existing and planned networks in order to ensure minimum service interruption. iW th the burgeoning number of operational satellite

Khalid Balkheyour, CE0, Arabsat, said the industry is being challenged by a severe lack of spectrum.

networks, it is becoming unworkable to lead a co-ordination to a successful completion due to the lack of spectrum. The lack of additional frequency resources allocated by the T I U to the satellite industry is one of the most important issues facing the satellite industry today.

KEY FACTS The Arab Satellite Communication Organisation (ARABSAT) was established in 1976 by the member states of the Arab League. The organisation was given the goal of serving the telecommunication, information, culture and education sectors. Arabsat’s satellites carry about 340 TV channels and 160 radio stations, reaching tens of millions of homes in over 100 countries across the Middle East, Africa and Europe, including an audience of more than 164 million viewers within the 21 Arab countries alone.

www.itp.net September 2010 | CommsMEA

COUNTRY PROFILE

YEMEN

YEMEN’S TELECOM LIMBO Yemen’s telecom sector struggles to realise its potential as instability and a weak economy hinder growth.

hile its Gulf neighbours, Oman and Saudi Arabia, continue to develop and modernise their telecom sectors, Yemen has remained the region’s perennial under-achiever. The country, which has a population of some 22.8 million, has made attempts to improve its telecoms sector in recent years, and at first glance, Yemen’s telco market looks reasonably competitive. iW th three GSM operators, a mobile D C MA operator, and a fixed line operator, Yemen has more operators than some other markets in the region, including the UAE, Oman and Syria. But a combination of low per capita income, political instability, and what amounts to a GSM duopoly between

CommsMEA | September 2010 www.itp.net

MTN Yemen and Sabafon appears to have hindered growth. Yemen has three GSM operators:MTN Yemen and Sabafon, which both have similar market shares, and Y-Tel, which entered the market in about 2007 but failed to gain traction. But another mobile operator, Yemen Telecom, which is 55% owned by the state incumbent PTCand uses aD C MA network, is a significant player in the market, with a similar to market share to MTN and Sabafon. According to Dubai-based research and consultancy firm Delta Partners, the market share of the four mobile operators in 2009 stood at:37% for MTN;31% for Yemen Mobile;and 29% for Sabafon, while Y-Tel trailed on 5%. Delta Partners forecasts

that these four operators will achieve markets shares of 38%, 30%, 24% and 8% respectively, by 2014. Yemen Mobile, which offers mobile services using a D C MA network, may be the second biggest mobile operator at present, but is also likely to find ongoing growth more difficult compared with its GSM competitors, according to Fede Membrillera, a partner at Delta Partners. “From a market evolution, we expect MTN to continue to be the market leader. Probably, Sabafon is growing, and clearly, the one that has less room in the long run for growth is Yemen Mobile, the D C MA player,” he adds. “For D C MA, there is a requirement for a different kind of handsets s( ubsidised

YEMEN

COUNTRY PROFILE 33

“What the regulator needs to do is to open the market, allowing operators to offer 3G services, and make sure the political situation doesn’t hinder the growth of the telco sector.” Fede Membrillera Delta Partners’ Fede Membrillera says that Yemen has too many operators for the size and value of the market.

handsets) and for a low value market, it is always difficult to handle it. So, Yemen Mobile has a relevant challenge in this area,” he says. But in a sign of just how difficult it is to extract reliable information from Yemen’s telecom sector, estimates about the market vary considerably. UK-based research firm Onda Analytics estimates that at the end of 2009, Sabafon had a 34% market share with 2.5 million subscribers, while its closest rival, MTN Syria had a 31.9% market share with 2.3 million users. Yemen Mobile, meanwhile, had a 29% market share, with some 2.18 million users, while Y-Tel had managed to attain a market share of just 4.5%, with 329,000 users, according to Onda Analytics.

SLOW PROGRESS However, both Delta Partners and Onda Analytics agree that the pace of growth in Yemen’s mobile market has been painfully slow. “Despite competition between four mobile operators in Yemen, penetration has increased slowly in recent years, up from 20% in 2006 to 30% at the end of 2009,” says Daniel Jones, a partner at Onda Analytics. “Low average income levels mean that mobile telephony is outside of the reach of many, keeping penetration low.” Furthermore, a fast-growing population means that many Yemeni’s are outside of the addressable market, with 44% of the country’s population under 15 years of age, according to Jones. Onda Analytics predicts modest growth

the mobile penetration rate of the total in Yemen’s mobile sector, and expects the addressable population – which takes into country’s mobile subscriber base to reach account Yemen’s population between the 53% penetration in 2014, with 14.3 million ages 15 and 65 – to rise to about 90% to subscribers. 95% in 2021, from a total subscriber base of “Although this represents significant about 17 million customers. growth, this penetration rate is still much For Membrillera, there are a number lower than any other country in the MENA of reasons for this slow pace of growth region, due to its poor economic situation compared to other markets. and young population,” Jones says. He points out that a virtual duopoly Membrillera adds that Yemen’s mobile between Sabafon and MTN has done little penetration “should be higher than what it to encourage growth. is now” when compared with the country’s “Both have quite similar networks. They GDP. “The telecom penetration at the both have around twelve hundred thousand current GDP level should ideally be 50%,” sites, although MTN has a much wider he says. However, mobile penetration across the entire population is forecast to FIXED MONOPOLY grow to reach 56% only in 2021. By 2012, Delta Partner estimates that Yemen will The fixed market in Yemen is a monopoly run by TeleYemen, have about 12 million mobile which is wholly owned by Yemen’s Public Telecommunication subscribers, representing a Corporation (PTC), the state-owned incumbent which also rise of 80% compared with owns 55% of Yemen Mobile. the end of 2009, according to TeleYemen was formed in 1990, as a joint company owned Membrillera. by PTC and UK operator, Cable and Wireless. As the contract “Penetration will be period expired at the end of 2003, PTC bought out all of Cable driven by both network & Wireless’ shares. PTC then signed a management contract expansions and by reaching with France Telecom to operate TeleYemen for five years, from further in the deep end of the January 2004 to the end of December 2008, and this was pyramid,” he says. extended until 31st Dec 2010. However, Delta Partners PTC claims that the new “managements goals” are to has also calculated Yemen’s restructure TeleYemen, and to “develop and enhance its mobile penetration of businesses to go on line with the International Standards.” the addressable market, TeleYemen offers its customers various services including, as oppose to the entire direct international telephone, prepaid calling cards and population, and this gives a Internet services. It also offers satellite based services through very different figure. a relationship with UK satellite operator Inmarsat. Delta Partners expects

www.itp.net September 2010 | CommsMEA

COUNTRY PROFILE

YEMEN

“Low average income levels mean that mobile telephony is outside the reach of many, keeping penetration low.” Daniel Jones

distribution network than Sabafon, which is probably why they get a higher market share,” he says. “It’s only MTN and Sabafon making great money in this market. For a new entrant, it is difficult. “From a market perspective, operating in this market is quite challenging, especially due to the political situation.” Meanwhile, Y-Tel’s failure to gain traction in the market has also hindered competition, and therefore the growth of the entire market. The company’s failure to win a decent share of the market has led to speculation that the operator will be sold. “It has been on sale or looking for a strategic partner for quite some time now, but hasn’t been able to attract anyone till now,” Membrillera says.

have a 3G licence. Operators are facing many more challenges due to the political and market situation itself. “With the regulator, the transparency is not there. What the regulator needs to do is to open the market, allowing operators to offer 3G services, and make sure the political situation doesn’t hinder the growth of the telco sector,” he says. Looking forward, Membrillera says the future of Yemen’s telecoms sector is “not easy to predict”. “Any operator will

definitely think a couple of times before getting into this market,” he says. With an ARPU of around $4 Membrillera says that most operators “wouldn’t pay anything” for a mobile licence in Yemen. “There are too many operators for the size and value of the market,” he says. “I believe that the country still has growth potential. If the economy becomes more stable and the political situation is more relaxed, then I see growth potential,” he adds.

HISTORICAL CUSTOMERS AND PENETRATION (MILLIONS, %) Subscriptions

Penetration

6.0

DATA SERVICES Despite the growth that is expected in the mobile sector, it appears that Yemen’s Ministry of Telecommunications has no plans to offer any 3G licences. Jones says that while it is difficult to gather any information on regulatory issues in Yemen, it is clear that there has been no 3G licensing for the GSM operators. “I would imagine that the GSM operators would like to see 3G licensing to allow them to offer 3G in Sana’a,” he says. For Membrillera, the lack of 3G licences is yet another indicator of the limited progress being made in the market, and also of the political problems that underlie this lack of progress. “The internet penetration is extremely low, almost inexistent. None of the operators

CommsMEA | September 2010 www.itp.net

4.5

25%

3.4 19% 2.2

15%

10%

2006 Source: IMR, UN, WCIS, Paul Budde, Delta Partners

2007

2008

2009

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FOCUS

NETWORK OPTIMISATION

MOBILE

MONITORS As mobile data use surges, operators will increasingly rely on precise network performance data to improve their services. By Roger Field

hile network optimisation techniques have brought major benefits to mobile operators in recent years, methods of actually testing and monitoring their networks have remained stubbornly crude. Indeed, so called ‘drive testing’ remains the most common means of testing network capacity, although the technique gives only limited insights into a network’s efficiency – or lack of it. But this is a situation that one UK-based company is keen to change. Arieso, which is headed by CEO Shirin Dehghan, offers a new breed of mobile network management software that allows mobile operators to monitor the flow of all the traffic on their networks, giving them a rich source of data on how to improve quality and efficiency. While Arieso is best known in its native Europe and the US, where it has numerous tier-one customers, it is also making inroads in developing markets. And after signing a deal with South Africa’s MTN Group in July, the MEA region is now well within Arieso’s sights. But for Dehghan, the challenges that mobile operators face are in many respects universal. A surge in data use, driven largely by smartphones, and increasingly unpredictable usage patterns have created a need for more precise ways of monitoring the flow of information on networks.

CommsMEA | September 2010 www.itp.net

MTN Group worked with Arieso to prepare its network for the FIFA World Cup, which led to a broader deal between the two companies.

Dehghan says that in the next “three to five years” mobile operators will have to monitor and run their networks in a far more “customer-centric” way, which will mean a shift away from methods such as drive-testing to more precise means of gathering and interpreting network data. “[Drive testing] has been fine so far because operators have primarily had to deal with voice and SMS, and voice has been a service that has been fairly predictable in terms of busy hours,” Dehghan says. “But with more data applications and smart phones, patterns of usage have changed dramatically between different groups such as business users, consumers and teenagers. They have their own peak times and the dynamics of the traffic is such that operators can’t rely on just sending a van out to check performance.” This is something that Arieso claims its software achieves. “Our software essentially taps into the messages that are being transmitted back and forth between the base station and the mobile handset, and gets an understanding of the mobile experience at the time they are making the call,” Dehghan says. However, Dehghan adds that the “golden nugget” of the software is that it also allows operators to see where all of the calls on their networks are being made from,

without the need for GPS in the handset or the need for location-based information to be transmitted with the call. “Our technology uses the standard information that a call needs to be transmitted and held, to locate where the user is at the time of the call,” she says. “By using a statistical capability of millions of calls taking place in the network, we are able to present the operator with a very accurate view of the network performance, including where the data hotspots are, where the roamers go, and what types of handsets perform better than others according to subscriber experience. “This is extremely useful to the operator because so far they have been almost blind as to what is going on in their networks with the exception of some drive testing. “The idea is to use every call to understand where the coverage holes are, because if I am inside the building and there are a lot of people getting poor coverage, that will show up in our software.” Operators can also input subscriber data into Arieso’s software to gain more specific data on network aspects such as specific user groups and geographic areas of the network during certain times of the day. The software will then “come up with suggestions” as to how the operator could improve the configuration of the network in order to use their assets more efficiently,

NETWORK OPTIMISATION

FOCUS 37

“Operators in developing markets are trying to expand and there is still a lot to go after. It creates an atmosphere for good ideas and new technology.” Shirin Dehghan

Arieso CEO, Shirin Dehghan, says operators will be forced to run their networks more efficiently in the next few years.

or whether they need to do something more drastic, such as invest in WiFi technology to offload traffic in certain buildings, for example. Given the level of data that the software provides, it is surprisingly simple to install, Dehghan says. “In terms of installation, it is server-based. It is an enterprise solution that is installed on specific hardware. Sometimes the operator provides that hardware and sometimes we do.” Arieso extracts the data from the OSF (operation systems function block) of the operator’s network, if the infrastructure vendor supports it. Alternatively, it can “tap straight into” the IUB interface of a UMTS network and extract it from there using hardware probes.

COMMON ISSUES Given that the software allows operators to look at their networks in a holistic way, they can select specific aspects of the network to be monitored. For example, an operator might want to monitor the experience of iPhone users compared with Blackberry users, or to see the performance of the network for corporate users of a specific company or organisation. While the types of problems that the software reveals vary between operators, roughly 40% of the issues occur at the radioend of the network, according to Dehghan. Typical issues on the radio side include too much demand, with some cell sites coming under huge pressure from data use. Here, operators need to understand when and where the peak usage occurs, so that

they can expand or improve the capacity.

GROWING BASE

and there is still a lot to go after. It creates an atmosphere for good ideas and new technology,” she adds. “Just like MTN – they want to be at the forefront and to be able to do things in a more cost-effective manner, and we give them the means to do it.”

Arieso, which is headquartered in the UK and has offices in Hong Kong and Atlanta, works with about 60 operators worldwide. In terms of Arieso’s client base, MTN has been the biggest customer win so far, and the Middle East MTN GROUP INKS DEAL WITH ARIESO and Africa is a region that the company is “targeting South Africa’s MTN Group, which operates in 21 countries very aggressively”, according in Africa and the Middle East, signed a deal with Arieso in to Dehghan. July. The agreement made Arieso the preferred supplier of Arieso has “many other software and systems for subscriber-centric network design, tier-1 customers” using its planning and optimisation to MTN Group. technology in developed Under the terms of the agreement, all 21 of MTN’s markets, predominantly the operating companies can use Arieso’s full suite of mobile US and Western Europe. network planning and optimisation solutions to manage and In a sign of the strain that improve the performance of their 2G and 3G networks. smartphones are placing Shirin Dehghan, CEO, Arieso, said her firm had worked on networks, the operator with MTN in preparation for the FIFA World Cup, to help the that was the first adopter operator equip for the surge of traffic from people visiting of Apple’s iPhone in the US South Africa for the event. used Arieso’s technology to “There was a huge amount of preparation and some of help improve its network, the work we did really impressed them [MTN],” Dehghan Dehghan says. said. She explained that Arieso and MTN used the After signing the MTN Confederation Cup and some high profile rugby matches in deal, Dehghan is optimistic 2009 as a “warm up” for the World Cup. about the developing Arieso demonstrated how its software could monitor the markets’ potential. traffic in specific locations – in this case the stadia – and “There are some help MTN understand the sudden changes in demand on interesting networks the network. The software also allowed MTN to see where and there is often a very roaming users were going, and where they were using their entrepreneurial approach mobile phones. in the developing world,” “MTN boosted coverage in those areas, so that they Dehghen says. wouldn’t lose roaming users to competitors,” Dehghan said. “Operators in developing markets are trying to expand

www.itp.net September 2010 | CommsMEA

FOCUS SALES AND LEASEBACK

RIGHT MOVE Lenka Glynn and Kelly Tymburski offer a practical guide to legal and drafting considerations of sale and leaseback agreements in the telecoms sector

n our last article, we examined some of the more common commercial considerations relevant to sale and leaseback transactions in the telecommunications sector. In this article, we put the spotlight on some of the relevant legal and drafting considerations the parties should take into account in relation to the suite of documents that will affect their sale and leaseback transaction. The type, structure and scope of transactional documents will need to complement the way in which the transaction is to be structured and sequenced. Therefore, establishment of an optimal sale and leaseback transaction structure is the first step the parties will need to take on the way to preparing the relevant transactional documentation. In a classic sale and leaseback, chronologically the first step is the sale of the asset portfolio from the seller / lessee (“Seller”) to the purchaser / lessor (“Purchaser”) in

CommsMEA | September 2010 www.itp.net

exchange for a purchase price. This would then be followed by the leaseback from the Purchaser to the Seller of some or all of the assets, in exchange for lease payments. However, many variables may impact on the transaction structuring, including:

As such, the sale and leaseback transaction may require a number of stand-alone documents (e.g. corporate documentation, a purchase / sale agreement, a lease agreement, finance-related documents, a managed services agreement and/or a build-to-suit agreement), a single master agreement linking all parts of the transaction or a combination of these approaches. The optimal choice of such a structure is very much a question of the facts surrounding the proposed transaction and the relationship of the parties.

• the relationship between the Seller and Purchaser on the corporate level; • financing of the purchase price; • scope of the parties’ rights and responsibilities in respect of the transferred assets following the conclusion of the transaction; and • regulatory and tax implications

DEFINING THE ASSETS

The transactional documents should effectively facilitate the implementation and completion of the sale and leaseback, bearing in mind that the parties will rely on the transactional documents as a guide to following their respective agreed steps and obligations relevant to the transaction.

Just as identifying the sale and leaseback asset portfolio is imperative from an operational standpoint, ensuring it is also adequately defined in the transactional documents is equally important. Perhaps the most detailed and accurate way to do this is by reference to a property schedule, where all of the relevant assets are listed and identified

SALES AND LEASEBACK

FOCUS 39

“In sale and leaseback transactions, the leased-back assets are frequently critical to the Seller’s business continuity. At a minimum, the Seller should ensure that the use and access rights it obtains in relation to the assets are sufficient to operate its business.” in as much detail as possible. The information required for the schedule noted above may be very extensive. For example, a large telecoms transaction involving multiple leasehold tower sites should identify these sites with reference to the relevant leases which govern them – many of which may have lease registration numbers that should be listed, for certainty, in the schedule. Conditions precedent: Because of the frequent interdependencies inherent to sale and leaseback transactions, parties commonly find themselves in situations where they do not wish to take certain actions prior to agreeing terms and conditions that will govern the transaction, but at the same time they do not want such terms and conditions to become effective until the action in question has been taken. For example, where the Purchaser is required to obtain a telecommunications licence in order to own telecommunications infrastructure, the Purchaser is unlikely to apply for and obtain such a licence until the terms of the transaction are agreed between the parties. However, the parties can agree that the terms will only become effective upon the successful securing of such a licence. Therefore, obtaining such a licence would become a “condition precedent”. Price and payment terms: It is essential that all relevant payment terms are adequately addressed in the transactional documents. For example, the parties should consider whether the purchase price will be paid in

full upfront or over time in instalments, and should also implement a sensible formula for adjusting the purchase price to accommodate potential changes in the transaction. The parties should also decide whether lease payments will be made at regular intervals throughout the year or as an annual lump sum, and if such amounts will be payable in advance or arrears. Additionally, where the site or sites at issue are being shared (or will be subject to future sharing arrangements), the parties should also agree a formula for lease adjustments reflecting the fact that certain portions of the lease payments, such as the cost of maintenance and utilities, are likely to be shared amongst tenants proportionately. Dealing with Caveat Emptor: In most jurisdictions, the law provides certain protection for buyers as to the nature and extent of the assets and liabilities they are acquiring. However, such protection is often insufficient – especially in countries where the principle of caveat emptor (literally meaning “buyer beware”) applies. Not only does this underscore the need for the Purchaser to conduct extensive due diligence of the assets it is acquiring, but from a legal drafting point of view it also frequently necessitates the inclusion of often comprehensive representations and warranties. These representations and warranties may include those in respect of the title, condition and fitness for purpose and existing liabilities attached to such assets. Furthermore, the applicable law may set out implied warranties or obligations, which

may apply even if not expressly set out in the relevant transactional documents.

BUSINESS CONTINUITY In sale and leaseback transactions, the leased-back assets are frequently critical to the Seller’s business continuity. At a minimum, the Seller should ensure that the use and access rights it obtains in relation to the assets are sufficient to operate its business. It will also be important to clearly specify the obligations of the Purchaser (as lessor) in respect of the maintenance and operation of the leased-back assets, so that these assets are capable of being used for the purposes specified by the Seller. The Seller may also want to reserve rights for itself that fall outside those typically associated with conventional lease arrangements, such as a right to preapprove additional tenants or a right to upgrade or expand the assets. However, the nature and scope of such rights will be very much dependent on the particulars of the transaction. Transitional provisions: Transitional provisions are relevant to any period where there is a ‘gap’ in what would otherwise be a relatively clear division of responsibility between the parties. The parties should implement provisions setting forth their respective rights and obligations during any such periods; for example, who will be responsible for the maintenance and upkeep of the assets at such times. Where such transitional obligations are complex or extensive, the parties may wish to

www.itp.net September 2010 | CommsMEA

FOCUS SALES AND LEASEBACK

“Because of the ongoing and frequently complex relationship between the Seller and Purchaser in a sale and leaseback transaction, negotiating mutually agreeable termination provisions can sometimes be challenging.” consider preparing a detailed Transition Plan as a schedule to the relevant transactional document. Termination provisions: Because of the ongoing and frequently complex relationship between the Seller and Purchaser in a sale and leaseback transaction, negotiating mutually agreeable termination provisions can sometimes be challenging. In particular, grounds of termination for the lease agreement is frequently a subject of heated debate, since it is a very important issue for both parties. The inability of the Seller to access or use the assets under the lease agreement (for example, a mobile site where key infrastructure is located) could have devastating business consequences. The Purchaser, however, will want to make sure its termination rights (and other available remedies) have enough teeth to compel the full and timely remittance of ongoing lease payments and therefore protect its investment. There may also be circumstances (such as a repeated or material breach, or where a condition precedent is not satisfied) where the parties – and in particular the Seller – may want the transaction to be unwound or reversed. Clearly, the triggering of such a consequence is significant, and the parties will likely agree that it should be contemplated in the transactional documents in case of severe breaches or other situations.

EMERGENCY EXIT Exit provisions come into play where an agreement is terminated (in whole or in part)

CommsMEA | September 2010 www.itp.net

Lenka Glynn: Many issues affect the value of an asset portfolio.

Kelly Tymburski: Due diligence is vital for business continuity.

and some form of termination assistance is required. Essentially, exit provisions seek to establish an orderly and agreed procedure to assist the parties in unwinding their relationship and transitioning relevant assets and/or services from one party to another where an agreement, or part of it, has come to an end. The procedure should set out the steps and actions each party will need to take in the event of such termination. It may be worthwhile for the parties to prepare and agree a comprehensive Exit Plan, which can be attached as a schedule to the relevant transactional document. The issues and considerations discussed above are merely a sampling of some of the

legal issues which are more conventionally encountered in the context of sale and leaseback transactions , particularly in the telecoms sector. Preparing comprehensive documents for sale and leaseback transactions is critical to ensure that such transactions proceed as contemplated by all of the relevant parties, and that the rights and obligations of those parties are clear throughout the lifecycle of the transaction. By Lenka Glynn, Partner and Head of Telecoms, Media and Technology (TMT) for the Middle East, Africa and South Asia, Pinsent Masons LLP and Kelly Tymburski, TMT Associate in the Dubai office, Pinsent Masons LLP.

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RESEARCH

ME BROADBAND SECTOR SET FOR UPWARD GROWTH

UAE FIXED BROADBAND REVENUE TO TOP $1BN IN 2015

FTTH set to create a seachange in broadband, while WiMAX gains traction in some markets

Fixed broadband revenue set to rise more than 30% by 2015 as the UAE moves to an all fibre network

THE NUMBERS

Revenue from fixed broadband services in the UAE is expected to rise by more than 30% in the next five years as the country moves to an all fibre network and the broadband penetration rises, according to a report from Pyramid Research. Fixed broadband in the UAE is expected to generate $1.01 billion in 2015, a 30% increase from the $695 million that Pyramid Research predicts will be generated in 2010. Furthermore, a key change over the next five years is the switch from copper to fibre fixed-line infrastructure that is currently underway and is due to be completed by 2011, the US-based research company said. Hussam Barhoush, senior analyst at Pyramid Research, said that as broadband penetration rates increase, it will become critical for operators to provide value added services in order to raise their current monthly ARPUs. He points to pay-TV as a value added service that is likely to see significant growth. Du, the smaller and newer of the UAE’s two operators, initially took the lead with fibre deployment, although Etisalat has since caught up, according to Barhoush. “Abu Dhabi, was the first capital in the world to be all fibre, as Etisalat connected the city to the ‘eLife’ FTTH network,” Barhoush said. Etisalat plans to have upgraded its entire fixed network to fibre by 2011.

UAE COMMUNICATIONS MARKET REVENUE, 2008-2015 $7

60%-70% The percentage of homes across the Middle East that have access to multi-channel TV.

70% 30%

The broadband market share that Mobily has gained in Saudi Arabia.

The broadband market share gained by Zain Bahrain and Mena Telecom in Bahrain using WiMAX.

CommsMEA | September 2010 www.itp.net

Pay-TV Broadband Internet Dial-up Internet Fixed VoIP Fixed circuit-switched voice Mobile data Mobile voice

$6 $5 $4 $3 $2 $1 $0

2010E

2011E

2012E 2013E 2014E 2015E

PYRAMID RESEARCH

nternet and broadband penetration rates remain low in many of the countries in the Middle East, with access speeds often relatively slow and tariffs high compared with other parts of the world. However, the region is making a strong push towards higher broadband penetration, according to a report from research firm, Research and Markets. The region’s young population, which will have grown up with the internet, will be a driver for growth, while liberalisation and increased competition are also helping to drive a wide range of services, according to the report. Qatar, Bahrain and the UAE show high household broadband penetration, particularly amongst nationals, while Saudi Arabia has low broadband penetration, although it is now rising quickly. While ADSL is the prevailing broadband Internet technology in the region, the report says that WiMAX offers a promising future in some countries in the region. In Bahrain, services from Zain Bahrain and Mena Telecom have gained over 30% of market share. WiMAX is also having a significant impact in Saudi Arabia and Jordan, the report said. All of the GCC operators offer HSPA mobile broadband services. Saudi Arabia’s second mobile operator, Mobily, has claimed a 70% share of the country’s broadband market, the Research and Markets report stated. It is also said that Fibre to the Home (FTTH) is likely to revolutionise the broadband market in the most advanced countries, with the UAE to have a nationwide fibre network in the next two years.

Revenue (US$ billions)

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