Sudatel Group CEO: Transforming the business

Tariq Hamzah Zein Elabdein comments the change that the company is embracing
Tariq Hamzah Zein Elabdein, president and CEO of Sudatel Telecom Group
Tariq Hamzah Zein Elabdein, president and CEO of Sudatel Telecom Group

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During his visit to the United Arab Emirates in May, Tariq Hamzah Zein Elabdein, president and CEO of Sudatel Telecom Group, was clearly a man on a mission. With a fully booked diary consisting of meetings with potential investors, Elabdein was keen to tell CommsMEA about the major transformation his team has planned for the telecom group. With plans to expand the company’s footprint in Africa and shift the group’s focus to services, Elabdein had plenty to talk about.

“We have a plan, I cannot disclose it right now, but Sudatel will continue to expand in the region, especially in Africa, we will continue to enhance our financial position among the giant operators,” he said.

The company is now focused on West Africa and the Sub Saharan region and plans to acquire new licences to offer telecommunications services. “We will be focused in the surrounding countries of Sudan, such as Mauritania, Chad and South Sudan. I think the future for any player will be in Africa.”

Sudatel is undergoing a transformation, following what operators are doing globally, as the group plans to change from a network centric entity to a customer oriented service provider. The company also aims to reach 16 million subscribers by 2020. “We have to address the need for our customers which will highly depend on the broadband, they want to connect to the internet and the behaviour of the customer will change. It [the demand] was voice centric, we have started to lose our momentum on voice and we have started to pick huge demand for data.”

In order to fulfil this transformation, Elabdein said that the company needs to build the right infrastructure and he believes that this is “a huge challenge” for the operator. “At the same time we need to convince the investors that this [the transformation] may take time so the momentum will come again and the moment of enjoying high profit and high dividend takes time.”

The group published its financial results with $50 million profit in 2014 from losses of $17 million the previous year and $46 million in 2012, and the firm expects 5%-10% profit growth this year. “The growth will continue, during the first three months of 2015 we reported around $10 million net profit. The strongest driver of the revenue is still voice. Voice contributed to 78% of the total revenue, but definitely Sudatel is going to complete a transformation. Strategically, by 2020 our income from broadband will be over 50%.”

International operations, which include operations in Mauritania, Senegal, Ghana and Guinea Conakry, currently contribute roughly 30% of Sudatel’s revenues. Sudatel is also aiming to increase its domestic and international subscriber base by 35% over the next five years from the current 12 million to over 16 million.

Elabdein said that 95% of Sudatel group’s network is 3G but the company is not planning to invest in any future network enhancement. “People are now talking about 4G and LTE. The question is: are we utilising the current infrastructure? Are we in a position to go to new technology? I believe that the new technology is led by the manufacturers, the vendors. They are offering that new technology just to earn more money, but in the position of the customer and operator, this 3G hasn’t been utilised by 50% or 60%. Now people go and build LTE and 4G just for cosmetic reasons. I think we need to change that, the economy is not in a position for luxury now,” he added.

“If I am going to build infrastructure, I need to invest carefully and I need to know how much I am going to get from that investment. I strongly believe that moving to LTE is not going to solve the problem but fibre will be the answer. We lay more in fibre optics, and we connect the customer to the internet core,” Elabdein said.

However, in Africa, connectivity has not arrived to all the territory, as rural areas are still often considered “too far away” to be connected, he said. “We cannot leave those people behind. The coming years are going to be M2M centred, the people will be connected through M2M […]Mainly we are going to focus on providing services for healthcare, education and financial services. I believe that it is going to reshape the communities and it will be a new revenue stream for Sudatel.”

To meet all the targets that the company set for the future, Elabdein relies on a positive regulatory environment. He is not worried about spectrum availability as regulators are offering fair prices for the licences. However, he believes that regulators in Africa must make more of an effort to push through [network] sharing agreements and interconnection tariffs between operators and OTT players. “If you share your infrastructure, you minimise the cost and, by doing that, we can offer a better tariff to the consumer. Also in some countries, like Sudan, they are increasing the interconnection tariff between operators, while the rest of the world is going towards a zero interconnection tariff.”

Elabdein believes in a business model for operators similar to the internet players, where the operator works as a virtual operator and the government or a private investor owns the network. “As a CEO, I don’t want to care about managing a huge network, the cost of that network, the headache of that network. I want to focus on the front line, selling the product and being more creative to offer better business and better bundles for my customers. But our job nowadays is to focus 70% on the network and the infrastructure, which is a headache. If some investors come together and take care about the network, it will be better for both players.”

Nevertheless, when asked about OTTs, he said that they need to establish a conversation with the operators as they are using their network for free and getting more revenues than the operators. “I propose that the OTT should engage in a dialogue with all operators and those services that they offer that are using my network, we have to charge them and after that I am going to charge my customers. I don’t think it is tough because OTTs are making a lot of money and they are making more than the operators.”

The investment is set in place and the company is talking with the regulatory authorities to change the environment to promote the changes that the company aims to achieve by 2020. “I am very proud of Sudatel and the future transformation that the company started with this investment. I am positive and I foresee future growth for the group.”

US sanctions

The United States government renewed in 2014 the economic sanctions imposed on Khartoum since 1997 over allegations of human rights abuses and support of terrorism. These sanctions affected the telecoms sector as operators struggled to find investors and get loans from different countries.

However, the Sudanese government reiterated its criticism of unilateral sanctions imposed and described it as the main reason for the deterioration in the human rights situation.

Khartoum has cooperated on counterterrorism issues since 2001, according to the government, but the US has maintained the sanctions due to the new conflict which erupted in Sudan’s western region of Darfur.

The country also faces some problems related to the fluctuations in the currency. Tariq Hamzah Zein Elabdein, president and CEO of Sudatel Telecom Group (STG), said that the economy has been more stable in 2015 than in the previous years and reckons that the company faced some issues related to currency.

“The government of Sudan is working with Europe and America and we see that we are starting to move in the right track. I am very optimistic and I believe that the economy of Sudan is getting stronger and stronger,” he added.

Sudatel to invest $267 million

STG is running telecom operators in five African countries: Sudan, Mauritania, Senegal, Ghana and Guinea Conakry. The operators cover the areas of mobile, fixed, internet and broadband services.

The group is planning to sell its Ghanaian business Expresso (Kasapa Telecom) and exit the market by the end of 2015. Sudatel already sold 18% of shares to an unknown buyer.

Sudatel is planning to invest $267 million over the next five years to transform Sudan’s telecoms sector and grow its subscriber base.

The company said that around 30% of the investment will come from equity and the rest from bank loans, mainly Arab and Chinese banks.

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