Du has come a long way since its launch as the UAE’s second operator in 2007. To say that the operator’s growth since then has been strong would be an understatement, and while it was admittedly growing from a low base in the early years, analysts have been surprised by its ability to continue a strong pace of growth even as it approaches a market share of 50% in mobile.
In the first quarter of 2013, Du posted a 40.5% rise in profit, beating analysts’ estimates as lower taxes, reduced operating costs and a rising customer base added to the bottom line. The firm made a net profit of AED467.9 million ($127.38m) in the three months to March 31, up from AED333.13 million in the year-earlier period, while revenues reached AED2.63 billion, compared to AED2.45 billion a year ago.
But as the operator nears a market share of 50%, and with its older rival becoming more innovative in terms of its competitive offering, it is widely expected that Du’s pace of growth will slow. Added to this, the operator also faces the challenge that is common to all of its peers around the world: voice and SMS revenues are declining while profits from mobile broadband are not yet, on average, picking up the slack.
It is in this light that Du sees a major opportunity to develop and grow its enterprise offering. Indeed, the enterprise sector offers a compelling growth story in the UAE, with many multinational companies having selected the country as their base for the wider region and thousands of SMEs present in the country. On top of this, there is a seismic shift in progress in terms of the way companies of all size manage their ICT resources, with infrastructure-as-a-service and cloud computing changing the way companies view communications. Furthermore, advances in fixed and mobile technology, with the deployment of fibre and LTE, is allowing a raft of new types of services to transform most industries, from healthcare to transportation, education and banking, to name just a few.
This is a trend that Hatem Bamatraf, EVP enterprise business commercial at Du, knows well. And since Du recently changed its organisational structure by splitting the company into consumer and enterprise divisions, it has become Bamatraf’s mission to see the enterprise unit reach its full potential.
“The main aim is to grow the enterprise business. We believe that there is a lot of opportunity and potential to grow that business even further. We don’t want to rely on connectivity only as a sort of business,” Bamatraf says. “We want to also provide business solutions and services to enterprise, so this is what we are looking at. Of course, increasing our connectivity space in the mobile and fixed, and driving customer acquisition in the market with new accounts and new enterprises, remains important. In parallel to that we are starting to fuel new revenue streams to enterprise, which is managed services and professional services, and of course the applications and solutions as well.”
The type of solutions that Bamatraf refers to include automation, infrastructure-as-a-service and various cloud-based applications. It also includes various packages and tariffs tailored for enterprise, such as the Office Connect plan, a connectivity package specifically customised for the small to medium-sized business market, which it launched last month.
“We are relying on those kinds of services that will enable new revenue streams, we are focusing on industries that we believe lack a lot of solutions or actually require solutions,” Bamatraf says. “We’re talking about solutions to transform their business, bring mobility to their business and save their operational expenditure, to outsource their IT department and so on. So we are focusing on services to provide those kind of managed services, outsourcing services and solutions to enable those verticals to make their life easier.”
Du is focusing on a number of sectors or verticals that hold particular potential and have specific requirements in terms of enterprise services: government, real estate, construction, hospitality, banking and oil and gas. However, Bamatraf describes the government sector inparticular as “very encouraging”.
“We see a lot of signs of opportunity there, especially the announcement to transform the entire government to be electronic, and now with the recent announcement by His Highness Sheikh Mohammed to be a smart government. This by itself creates a lot of opportunity to move in that direction and to be part of this chain where we should be an enabler for the government to transform, to be more intelligent,” he says.
But across most industries, a common trend is the move towards managed ICT services and cloud-based solutions. In some respects, the benefit of these solutions is a no-brainer. As Bamatraf states, most cloud strategies have an initial focus on cost reduction or improved cost efficiencies, and with about 50% of IT budgets dedicated to infrastructure acquisition and management, IaaS in particular can represent a significant source of savings. “Clouds reduce the cost, pain, and risk of using IT assets,” he says.
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“When you explain to any of the larger enterprises the benefits and the savings of managed services and cloud computing, it is immediately a convincing story. We see a lot of opportunity in that area, and we see lots of large enterprises are jumping into that area,” he adds.
Within cloud services, there is public cloud where services are offered over the internet – a medium favoured by many SMEs – and private cloud, where the cloud infrastructure is operated solely for a specific organisation. In either case, the savings for the enterprise are significant, and by outsourcing key aspects of their ICT requirements, these organisations are also able to focus more on their core business.
Indeed, for many organisations, managed services involve outsourcing their IT departments. “SMEs today want to focus on their core business rather than worry about solutions and the capacity of their email and capacity for their business support systems, so they will be more than happy if someone comes and provides them that type of service. We have to take responsibility for the IT, servers, storage and computing and just give you this as a service. We manage it end-to-end for a fee,” Bamatraf says.
Security, which is increasingly a concern for organisations at present, is also a key component of managed services. “How can you protect your data and databases and network infrastructure within the premises? We see that this is a big headache for such SMEs specifically, and that is why we provide these types of services. We take it end-to-end and give you SLAs and KPIs that we are committed to deliver,” Bamatraf says.
Du offers its managed services in conjunction with various partners such as Cisco, Equinix, Microsoft, HP and EMC, allowing it to access the best expertise for each service. “Every space we go into, we find the best partner there and we try to make a deal with them and define the business model, how we will work together. In the data centre space, for example, we have Equinix as our partner there. In cloud computing we are dealing with Encloud.”
At present, Du uses the infrastructure of a partner to offer cloud computing services. But the telco is also now investing in its own cloud computing infrastructure and datacentres for its enterprise customers, Bamatraf says.
“This is an investment that we are making. We are investing as well with a lot of partners. We believe that the more partners that we have the better for us and our customers,” he says.
“When it comes to datacentres we have set up a partnership with Equinix, with a clear business model. We have built a datacentre and this is not for our own use, but for the enterprise business. This is an investment that we made in the enterprise domain,” he says.
Bamatraf reveals that Du is also now in “the final stage of evaluation” for selecting a vendor and supplier to build its own cloud computing infrastructure. “It is the classical approach of going to implement a cloud infrastructure, you have to go to RFP and then you have to evaluate.”
Du expects to make a decision and select a vendor before the end of the year. “By the end of the year we will decide on the vendor, the project plan and how long it will take us to build,” he says.
Bamatraf adds that in terms of the customer experience, Du’s provision of cloud services will not change as a result of having its own infrastructure and the service will still be managed in the same way, with a partner. “We thought that it is appropriate for us to have our own cloud infrastructure and offer it as a service to enterprise,” he says. “From a service perspective we are already there, it is just that when we build our own infrastructure we are not going to change our SLAs and KPIs. The user won’t see a difference. Our own business and margins will be different.”
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Another major initiative from Du in the enterprise space is Datamena, a carrier neutral business hub which was launched in October 2012 in partnership with Equinix. “It’s a hub for all of the carriers that are interested to exchange information within that region. The idea is to establish a hub similar to a free-zone concept where you bring companies together in one area and provide connectivity to those carriers to the outside world,” Bamatraf says.
He adds that the number of customers is increasing each month. “We have a lot of carriers signing deals each day. Each week we are convincing customers to put their servers and infrastructure in Datamena.”
In June, Vodafone Qatar became the latest customer, setting up a point of presence (PoP) at Datamena. The new PoP will increase Vodafone Qatar’s international connectivity and its ability to serve multinational customers.
Another area of huge potential is machine-to-machine communication (M2M). This will become an important revenue stream for operators, particularly as mobile saturation rises, reducing the potential for growth in that area.
“When you get to saturation of 200% in mobile, the population doesn’t give the same growth potential,” Bamatraf says. “In order to find new ways of connecting, we have to find things rather than humans beings to connect, and this is part of the idea of machine-to-machine. We are enabling most of the things around you to be able to be connected and exchange data and information.”
Eventually, it is envisaged that almost everything, from home appliances to cars, will be connected, particularly as the concept of the connected home grows. It is an idea that fascinates Bamatraf. “Think about the capability of allowing everything around you to be connected and be able to exchange information with you or with other machines,” he says. “We call it the internet of things where everything will talk to each other.”
While Bamatraf concedes that he can’t predict quite how M2M will pan out and affect people’s lives, he says that he is positive that it will provide “a massive opportunity.”
Du last month partnered with Dubai-based cloud specialist, Encloud, to launch a cloud-based service for enterprise. The new enterprise solution, called Business Cloud Platform, provides Du’s enterprise customers with access to various flexible cloud services, covering infrastructure platform and software.
The service offers “standard cloud building blocks” that support multiple market segments, from small to medium enterprises through to large enterprise customers, the telco said.
Du and Encloud are working with industry heavyweights Cisco, EMC and Citrix to deliver the service. The services offered can be tailored to the requirements of each customer, giving them complete control of their cloud investment and also allowing then access to new cloud products. Du said that the service offers flexible packages for virtual servers, virtual storage and data backup with bundled bandwidth. Customers can also subscribe to more advanced services such as private cloud, community cloud and virtual desktop. The service is available on a “pay-as-you-grow” opex model.
“Managed services provide companies with the opportunity to employ a full suite of IT services to suit their business needs, without having to directly employ professionals within their company. The launch of du Business Cloud Platform services brings further value to our managed services suite, giving our enterprise customers the freedom to focus on their core business while we take care of the rest,” Bamatraf said.