Page 42 - SAMENA Trends - September 2021

ARTICLE SAMENA TRENDS

Operators in the region have several Another route to inorganic growth is Operators should not
natural advantages which equip them well corporate venturing. Operators can
for this transition: consider making strategic investments restrict themselves to
First, they already have a large in the growing number of technology mergers and acquisitions
customer base resulting from high start-ups in the region and throughout however. Another route to
mobile penetration. For example, the the world. In March 2020, Riyadh-based
United Arab Emirates is ranked number online grocery app Nana raised US$ 18 inorganic growth is corpo-
two globally for its proportion of mobile million in an investment round co-led by rate venturing. Operators
subscribers. Saudi Technology Ventures (STV), which
Second, they have the available cash is backed by stc, and Middle East Partner can consider making stra-
to make the necessary investments. Ventures (MEVP). tegic investments in the
Operators in the Middle East have
always been able to generate a high level Joint ventures are another option. Telecom growing number of tech-
of free cash flow by global standards, operators in the Middle East can co-invest nology start-ups in the
and the COVID-19 pandemic is unlikely in emerging technologies, or combine region and throughout the
to alter this reality significantly. forces to establish regional infrastructure
platforms. In 2019, UAE’s du and Bahrain’s world.
Third, most regional operators are Batelco entered a joint venture named Arc,
heavily supported by the state. For in order to set up a technology platform short-term gains, possibly mitigating
example, the Emirates Investment capable of providing connectivity and data against the scale of long-term investment
Authority has a 60% stake in Etisalat, center services throughout the region. required for strategic change.
and the Public Investment Fund in Saudi
Arabia owns 70% of stc. Moreover, Partnerships and alliances can be equally Such change requires continuity at the
regional regulatory authorities important in developing operators’ strategy top. The constant turnover in leadership
have implemented timely reforms and laying the platform for future success. positions witnessed at regional operators
which provide an impetus for digital One such example is the recent multi- therefore represents another obstacle
transformation. year partnership between Etisalat and which needs to be addressed. The right
Microsoft. The tech giant will help Etisalat talent must be brought in, not just by means
However, in order to reposition themselves to develop a public cloud-first strategy, of inorganic growth, but also through
as enablers of digital transformation, which will involve building a digital recruiting expertise from companies
operators will need to augment their platform equipped with automation and that specialize in emerging digital focus
existing capabilities through inorganic AI capabilities. Another recent strategic areas. Operators will certainly need to
activity. Regional operators have been partnership, this time between Conviva undergo a cultural shift and become more
active in mergers and acquisitions despite and Ooredoo Kuwait, will use machine comfortable with risk. They should have
the pandemic. For example, Etisalat learning to improve customer retention the courage to appoint specialist leaders
completed its acquisition of German and maximize individual customer value. from outside their ranks to run these new
cybersecurity firm Help AG in 2020, while As well as needing to improve capabilities, companies, and eliminate the prevailing
Ooredoo and Hong Kong conglomerate CK telecom operators in the Middle East will fear of failure within their organizations.
Hutchison Holdings are exploring a deal face other challenges as they seek to
to merge their Indonesian wireless phone become enablers of digital transformation. If telecom operators in the Middle East
businesses. Given the scale of current downturn evident confront these challenges in a robust way,
in other sectors, and the healthy history of then they are likely to look very different in
Operators should not restrict themselves returns recorded by regional operators, 2030. The major rewards promised by this
to mergers and acquisitions however. shareholders will surely push for further change lie within their grasp.

About the author:
Jad Hajj is a Partner and the leader of the firm’s Technology, Media and Telecommunications practice at Strategy& Middle East, part of
the PwC network.

This article originally appeared in Gulf News, March 2021.

42 SEPTEMBER 2021