Developing Telecoms reported last month that Zain was on its way to creating a roaming-free market in Africa, with a dozen countries all enjoying one single telecoms market. Since then, Zain has announced a single roaming-free market for its Middle East customers...
Developing Telecoms reported last month that Zain was on its way to creating a roaming-free market in Africa, with a dozen countries all enjoying one single telecoms market. Since then, Zain has announced a single roaming-free market for its Middle East customers. Having also taken over Iraqna for US$1.2 billion and signed an agreement with NSN for the latter to operate a greenfield mobile contract in Saudi Arabia Zain is clearly a strident and ambitious telecoms player. Michael Schwartz updates.
Last month Developing Telecoms published a story entitled “Africa abolishes roaming claims Zain with new One Network.” Zain’s ambition is to bring 12 countries together into one market, thereby ending excessive roaming fees. In other words, nearly half Africa’s population can now make calls at local rates across 12 countries.
The Zain Group has witnessed exponential growth over the last four years, growing from a single operator in Kuwait in 2003 to being a 15,000-employee, US$26.5 billion capitalised company offering a range of advanced mobile voice and data services to over 42.5 million customers. The Group’s economic and social contributions to the 22 countries in which it operates are in its opinion “both extensive and significant.”
And the roaming-free creation of One Network in Africa is set for repeat in the Middle East. It is expected that the One Network service will be extended to Iraq and neighbouring Jordan, Saudi Arabia and Bahrain in the first half of 2008. This will give Zain customers contiguous local network coverage stretching from Iraq in the east to the Atlantic Ocean in the west, a distance of some 4,000 kilometres.
Zain can be counted one of the most ambitious and acquisitive enterprises anywhere in the world once one adds two recent Middle East developments – purchasing Iraqi player Iraqna for approximately US$1.2 billion and commissioning Nokia Siemens Networks to run a 2G/3G Saudi Arabian mobile operation. Both these specialised developments are discussed later in this article. On a more general corporate level, it is important to see Zain’s business philosophy. Zain’s decisions will also be of interest to those who have to consider the implications and challenges of rebranding.
Zain’s own website is revealing. The company’s “strategy focuses on combining value creation and internal growth from existing operations with aggressive expansion into new geographies.” Quite clearly the newer markets – exactly those we feature in Developing Telecoms – are being lined up for what Zain itself describes as “aggressive” expansion.
To attain these ambitions Zain has embarked on a four-level strategy. First it will look at the mass market in any given country, whether the simple total of subscribers or the segment value of the market. Here there is a split between the less penetrated segments and the established clientele within the market. The former will be the target for an aggressive approach which yields subscriber growth. In turn, the existing customer base will yield the value growth. This split is maintained in terms of market share: 50% market share in markets where Zain is a “leader” and at least 30% market share where Zain is a “challenger.” Zain’s views on competitive and differentiation strategy are also highly individual. Differentiation means not only implementing a standard pricing strategy but also combining differentiated elements from Zain’s value proposition. Competitiveness, by contrast, derives from a fully-segmented market approach where customers are grouped into value segments. No one segment is neglected – all are addressed whether high-end or low-end.
There is even one further consideration when it comes to competitiveness. Zain will on occasion selectively expand into new businesses in the wireless value chain, probing for those areas that will generate value for it.
The third pillar of Zain’s strategy lies in technology. Upcoming technologies are never neglected by Zain; testing these very technologies is part of Zain’s strategy. Sensible investment in commercially viable wireless technologies that will both provide the widest range of services while adding value both to Zain and its customers is positively welcomed.
Fourthly, company management strategy is intended to strive for excellence through personnel co-operation and collaboration at whatever level. Zain sets out to provide merit-based working conditions which reward and empower employees in line with performance. “Risk-taking is allowed so long as upsides are clearly measurable.”
The Iraqna acquisition – and rebranding implications
Iraq mobile operators MTC Atheer and Iraqna have now been united under the Zain brand. In consequence, 7,000,000 Iraqis have joined Zain’s existing 42.5 million mobile community worldwide. This major rebrand follows MTC Atheer’s attainment of a 15-year Iraqi licence in August 2007 for US$1.25 billion and Zain’s acquisition of Iraqna on December 1, 2007, for an amount of US$1.2 billion. Rebranding is now well advanced within Zain, as the company’s Iraqi restructure is the fifth of this nature in the group (in the Middle East context Kuwait, Jordan, Bahrain and Sudan were also renamed Zain on September 8, 2007).
Dr Saad Al Barrak, Zain Group Managing Director and Deputy Chairman acknowledges the broader role that MTC Atheer and Iraqna have played: “In recent years through the provision of essential telecommunication services and extensive community support, both MTC Atheer and Iraqna have played critical roles in the reconstruction of Iraq. Together as Zain, and as one larger operation utilising the Group’s worldwide resources, we will be even better positioned to serve the people of Iraq. Zain’s unrelenting commitment to the future prosperity of Iraq goes hand-in-hand with our aspirations of being a top-ten global operator.” The implementation of the new brand is expected to have no impact on the functionality of MTC Atheer’s or Iraqna’s current pre- and post-paid products and services, and customers are not required to re-set their mobile devices or change SIM cards. The complete integration of MTC Atheer’s and Iraqna’s network to Zain in all branding, technical and logistic areas such as shops, distribution outlets, SIM cards and recharge cards will be rolled out over the coming months.
Zain Saudi Arabia and NSN sign 2G/3G network contract Under the terms of a new greenfield contract including multi-year managed services, network operations and maintenance services, Zain and Nokia Siemens Networks will soon roll out a state-of-the-art greenfield mobile network in Saudi Arabia. NSN will supply a full turnkey 2G and 3G mobile network, including core and radio networks, operations and business support systems, applications and a full suite of services. The latest 2G and 3G mobile network technologies, including HSDPA and HSUPA, will be in place for subscribers, based on the latest base station design and distributed architecture for both radio access and core networks according to the 3GPP release 4 standard. For example, the Flexi base station design helps customers save significantly on capital and operational expenditure. With the distributed architecture of its mobile softswitch and multimedia gateway, NSN can bring new advanced services for subscribers via a cost-optimised core network solution with fast rollout. Time for full implementation is five years.
Zain is confident (to put it mildly) that "this huge project will radically change the face of mobile communications in the Kingdom of Saudi Arabia and sets the benchmark for future mobile communications in the region." It is very clear that what we have been reporting in this analysis constitutes some of the most far-reaching changes in the telecoms sector.
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