Changing the game

Operators must figure out a sound strategy to cope with ongoing growth of OTT players
CEOs gathered to discuss challenges facing operators at a recent event in Dubai.
CEOs gathered to discuss challenges facing operators at a recent event in Dubai.

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With voice revenues declining and data use exploding, operators are finding it difficult to monetise data revenues. Another crucial issue is whether updating current infrastructure will burn a hole in operators’ pockets, or allow them to generate a decent ROI. Moreover, operators must figure out a sound strategy to cope with the ongoing growth of OTT players. CEOs from the region’s operators give their views.

The experts

Rashid Abdulla, CEO, Batelco Bahrain

Ross Cormack, CEO, Nawras

Ihab Hinnawi, CEO, Umniah

Mikkel Vinter, CEO, Virgin Mobile MEA

CommsMEA: Has your view of how operators can add value changed significantly over the last few years?

Ross Cormack: In the broadest sense it hasn’t changed because what we said we were going to do 20 years ago was to give users the ability to read newspapers off their phone in their pockets and message each other all around the place and so forth. So what we’ve actually succeeded in doing in the telecoms industry together with the OTT industries is, collectively, we have finally done what we said we were going to do 20 years ago.

Much more narrowly, yes my view has changed. The whole idea of partnering which we did pioneer very successfully in the SMS business is that we learned we didn’t have to do it ourselves but handed the control over for those services outside. Right now we are at a point of inflection which is very exciting. I think we’ve had the opportunity to really grab the tiger by the tail, because we are providing a lot of services together that people want. Telcos are suddenly saying how do we monetise it? On the other hand we’ve heard some other very encouraging bits of information about people saying from their own experiences. Our experience was we’ve lost a lot of SMS business over the course of this year, 16% of SMS disappeared, so we did all our DPI analysis and found that all of this business has gone to WhatsApp.

It was people preferring the customer experience of WhatsApp to the customer experience of SMS. It is an exclusive arrangement to introduce new services. What we’re doing at the moment is selling a little bundle of data where you can use WhatsApp for a week and we’ve also introduced a slight variance in the format where if customers use 500 baisa of any type of data in the day, then you get free WhatsApp usage for the rest of the day. It’s all about customer experience and you have to go back to what people want and how they prefer to pay.

CommsMEA: From Batelco’s perspective are you open to these sort of arrangements and do you have any such deals currently?

Rashid Abdulla: Looking to the bottom line for the next few years it seems to me that the more we invest the more we lose. The more we put in infrastructure development the more we cannibalise traditional business like SMS, and I think this is going to be here to stay for a few years and unfortunately we are going to have to be patient. We have a lot of hopes for the OTTs of the future. We do not think for certain services the region is not ready or the technology is not ready yet, but I think there is no doubt that the content and M2M, along with cloud computing, will pick up and become significant to our bottom line eventually. At the moment it does not even represent 2% of our bottom line. Now we are at the stage where we all know that minutes and charges for minutes to destinations like we are used to, is now changing to bytes. That is a transformation. Many telcos have been investing a lot into mobile infrastructure, but at the same time this has been cannibalising other traditional services. One day the OTTs will pick up and compensate, but for now what other choice is there other than become an enabler for the full industry?

CommsMEA: Should operators be considering ways to monetise data, and could they just charge more for it?

Rashid Abdulla: Obviously this is dependent on the competitiveness of the environment. Bahrain is highly competitive with three mobile operators, the market is mature so you are not talking about any more customers; you are talking about usage. It is about whoever gives more usage. Yes we are optimistic that the broadband penetration is nowhere near that of developed countries, but if you consider whether we should revenue share with these global content providers, I personally believe without them we would not have data. Without them our pipes would not be filled. But one thing that is important is to what extent can you provide this quality data and I think it’s time for us to be thinking about charging for quality data rather than raw data. I do not think that if someone wants to watch YouTube in HD quality they should be charged different from those watching YouTube in standard definition. We should not think about charging the buyer. Do you want a premium quality service for your pipes? That is what we should charge. If we start resisting or blocking sites that provide content I think operators will lose a lot of access to such data, unless it has its own, and as mentioned before we are not capable of creating data, so we have to depend on others’ data to fill our pipes.

This is something we need to discuss with our regulator as well and I don’t think the regulator has reached the stage where there are regulations in terms of quality. There are regulations for per minute charges and per byte charges and destination charges, but I don’t see any regulation at the moment of differentiating between the quality per bytes.

CommsMEA: Is network optimisation helping OTT players to route traffic more efficiently? Is there much that telecom operators can do for the OTT players, and are you doing that currently, and if not, why not?

Ihab Hinnawi: From that perspective I feel that you should have a conversion billing service. That is one of the major items that have to be invested in and we must have a system that can cater to doing that. I think back to the question of what can we do and where the revenue is coming from. If you look at the history of telecoms for the past 30 years, there were three curves, the first was voice, the second was messaging and the third one is the access that we have. All operators are busy in getting access to the subscribers, while still the penetration for mobile data is still on the low side, so we are busy in doing that. Maybe the only challenge that we are having is the margins coming from that revenue. The margin is really putting pressure to create agile operators, where we should produce the cost per bit. The question is what is the fourth curve? OTT is something we should embrace, we should work with them. We should learn how to compete and collaborate at the same time. Operators can stay with just enabling those OTTs.

CommsMEA: Can you make money from enabling the OTTs?

Ihab Hinnawi: Looking at the third curve we are still making money, but we need to transform to a becoming a more agile operator with thin operations, low cost, smart pricing and having a cost per bit where we can delay the curve down and extend the peak of the revenues coming from access. We are still making money out of access but we have a challenge on how to sustain this from an infrastructural point of view over the next 10-15 years. It’s a choice we need to take from now, and I think it is not the operators who will decide from today to transform the operations. It’s a matter of timing. All operators will be there eventually, but the first operators will put themselves on the forefront in the coming five to 10 years.

Looking at the fourth curve, its hundreds of applications and content that will create a different way of thinking, and I think we have to change our mindset as well. That is stuck at the point where we as operators think we control everything. I think this is slowly changing now.

CommsMEA: For MVNOs, when it comes to offering data it becomes more challenging on various levels. The wholesale prices you are being offered are not always as attractive as you’d like them to be because retail prices have been in such a state of movement that it’s difficult to have a wholesale data price. Secondly in terms of services and relationships with OTT players, do you ever get involved in that space?

Mikkel Vinter: First of all as an MVNO, compared to the telcos in this world, we have a much narrower segment. What we do is look at a specific segment from a different perpsective. Supposedly we have an easier time in homing in on what that segment wants and what they do, so we don’t have to spread our resources thin on going across the business part of things. We can focus, that certainly helps, and I have to politely but slightly disagree with your point about data. Yes, in some of our operations today, about 50% of our revenue is from data. I don’t see any inherent problems, of course you need to be on your toes with wholesale discussions and other discussions with your partner, but the basis of this model is if we are successful we put more megabytes on the network, and that’s a win-win.

CommsMEA: With all these discussions about big data, analytics, DPI, policy, from an MVNO perspective I’m sure you would want these capabilities in the network to be exposed to you so that you could use them. Are those discussions easy to have with operators or are they tough?

Mikkel Vinter: Honestly we don’t see the network information necessarily in the first line of discussions. As an industry we are not good enough to analyse customer behaviour. If a few weeks ago you search for tyres for a car, on Google you can see ads being presented to you for tyres. There are so many things we can do in telecoms, we have amazing databases and companies have driven into mining these databases, so it’s not what keeps me awake at night. It’s more about the network playing a greater role.

 

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