Krishna Gopal (Global) - Telecoms Across the World

In this blog post, Krishna Gopal looks at the telecommunication market across the world, comparing regions such as Africa and the Middle East.

When you look out of your crawling cab on your drive to Victoria Island from Murtala Muhammed Airport in Lagos, Nigeria what strikes you is the gaggle of hawkers trying to sell you all kinds of wares right there on the streets. Well, you could even buy a mobile top-up card or a pre-paid SIM sitting right in your car if are courageous enough to roll down the window that is - the transaction is like buying a pack of cigarettes. While this is one extreme, it is a pointer to the widespread usage of mobile phones in Africa. In a continent where land line penetration in the interiors is abysmal and a large part of the population is un-banked, the mobile phone perhaps offers a viable medium to mitigate this lack. No wonder platforms like M-PESA for mobile payments have really taken off in Africa and have significant stakes from leaders like Vodafone.

On the other hand in the GCC / Arab world, the connection between the mobile phone and your car is completely different - almost as if talking and driving is a given. There is a very remote chance that the cop will catch you or if does, book you because chances are he is doing it too.

These two examples bring out the startling contrast between low ARPU Africa and the high ARPU GCC.

There are 251 wireless operators in the MEA region and if you add the fixed line operators, the ISPs & the satellite phone providers the figure is closer to 350 telecom service providers.

As per reports by leading analysts like Gartner the services market size for the telecom vertical is about US$ 2 billion per annum (including Turkey and Israel). Most organizations don't include these two nations in their MEA sales geography. Network equipment providers like Ericsson, NSN, Huawei, Alcatel Lucent etc. do a significant portion of services work along with their hardware supply for telcos. Turkey plus Israel plus NEP revenues are estimated to be around $0.8 - $1 billion. That leaves $1-$0.8 billion for the others.

"Others" include MNC services companies like Cap Gemini, Atos, Accenture, Bulle, EDS, Celfocus etc;

Indian IT vendors like TCS, Wipro, Infosys, Tech Mahindra, HCL etc; product companies that also do some services work like Clarity, Cerillion, Tecnotree, Convergys, Oracle, Redknee, Subex etc and a host of local vendors in every country including names like Giza Systems, Emitac, Bahwan Cybertek, Dimension Data etc.

All these vendors put together are estimated to be around 80-100 in number. If we do the rough math then the average annual expected telecom services revenue per vendor is around $8-$10 million. The real challenge therefore is to find a workable model for your company and its offerings that enable you to drive revenues well beyond the average.

The best bet would be to carefully choose a combination of country/s and Group Operators to focus on because it is not a good idea to spread too thin. The approach would have to combine going after low hanging fruits and investment accounts / countries. "Low hanging fruit" to my mind is a much abused word because if it's all that low hanging it is visible to all and is perhaps already taken. But yes there could be some offerings of yours that may solve a pressing problem at an operator.

In the GCC region, the subscriber growth days are almost over barring perhaps Saudi Arabia. This means the focus now is on cost control and profit maximization. The implication for services marketers is a focus on Managed IT services, Business Analytics and Network Inventory and Optimization. Managed Services seek to take out fixed costs and replace it with variable costs besides bringing in great accountability and reduced costs due to standardization. Business Analytics is about identifying and retaining your most profitable customers and selling more to them and Network Inventory / Optimization is about sweating the network assets of the operator.

In Africa as penetration levels rise, I see a need for upgrading some of the early software systems that were deployed at the time of launch. So there will be opportunities in the standard BSS space like Billing, CRM, Order Management etc. However budgets will be a constraint given the lower subscriber base of less than half a million per operator with the smaller telcos. I see France Telecom, Vodafone and MTN as high potential groups to focus on. If you have an existing relationship with IBM then Bharti could also be a potential target. Value Added Services and Mobile banking are other areas but require a great deal of persistence to build out the ecosystem and reap revenues over time.

In the Arab world it would have to be the STC group and the Qtel group. Etisalat is in a process of management change as well as a change in its outsourcing mentality. They are also in the process of talking to one of the large IT vendors on a Strategic Outsourcing deal. Once this happens the opportunities for a smaller vendor is downstream.

While the opportunities for growing revenues exist in MEA, a word of caution - do ensure that you and your delivery team are watching the EBITDA continuously and critically. MEA customers can be extremely demanding and seem almost unrealistic if you compare them with your US/Europe counter parts. Don't sacrifice EBITDAs in your quest for growth!

By Krishna Gopal, Independent Consultant in the Middle East & Africa. Follow him on Twitter/krishg40 or read his regular blog here: