Telecoms chiefs make different calls

The two most prominent Middle East telecommunications executives presented completely different views over what telecoms operators have to do to survive.

From left, Mohammed Omran, the Etisalat chairman, Gareth Jenkins, a UBS analyst, and Naguib Sawiris, the Orascom chairman.

Barcelona // The two most prominent Middle East telecommunications executives presented completely different views of how the industry will survive in the region as they faced off onstage at the Mobile World Congress. Mohammed Omran, the chairman of Etisalat, and Naguib Sawiris, the chairman of Orascom Telecom, sparred in a debate that became the main event for Middle East representatives at this year's congress over what telecoms operators have to do to survive.

Mr Sawiris opened the discussion by questioning whether children should be given a mobile phone subscription at birth and admitting the industry made money "too easily". "The sector has to understand today that telecoms licences and spectrum are a finite resource and will lead to an increasingly growing challenge to maintain growth rates," he said. "It's not like in the real estate business where you can build another building. Licences are given and we're coming to the end."

Mr Sawiris said profits were shrinking because mobile applications had made operators look "stupid" in giving media and content companies free access on their networks. "We have become a pipeline for the Googles and Apples of the world to use us, consume us and make money," he said. "We come to these conferences to listen to them and they say, 'we're not going to pay you millions of dollars for your infrastructure'. They're practically telling us we're suckers."

Mr Sawiris said operators needed to talk to each other and think of entering new sectors such as finance and health care to offset other companies "invading" their customers. If that did not happen, he said, the most likely scenario for the sector was further consolidation, where only a dozen operators worldwide will survive. "Consolidation has to happen, whether we like it or not. My advice to anyone my size: look for a new wife," Mr Sawiris said to a laugh from the audience. "Learn that life has to go on if you want to stay in this business. I don't see any other way for our group to grow."

But Mr Omran maintained there was still a healthy subscriber market for operators to pursue before engaging in acquisitions. "I understand that we have 6 billion people in the world and 5 billion [connected] lines, but I say this is the beginning because we have more than 50 billion machines out there," he said. "If we can connect them together, we can have many more subscribers." Mr Omran did not discount acquiring other operators in the Middle East and Africa to stimulate Etisalat's growth this year. He said the company was investigating opportunities in Syria, Iraq, Oman, Lebanon, Libya and Morocco, and forecast a 5 per cent increase in revenue this year.

"I still believe that there are a lot of possibilities in Africa if we are able to offer a good model to serve customers and add value to them," Mr Omran said. He agreed with Mr Sawiris's assertion that a level of consolidation in certain markets was inevitable, pointing to India as an example of what was about to take place. "I cannot see more than six operators in India [from 12 today] in three years to come," Mr Omran said. "We aim to become one of the active players in India and become one of the consolidators in India. We have all the tools to do that and all the relations with other operators to do so."

Telecoms is one of the few sectors that managed to thrive in last year's economic downturn, with operators still churning out healthy profits as mobile phone and broadband use continued to grow. Orascom and Etisalat were examples of the sector's success, emerging as two of the fastest-rising operators in the world after acquiring several companies in Asia and Africa over the past few years. But it appears there was no love lost between Mr Sawiris and Mr Omran. At the end of Wednesday's session, the men did not turn to shake each other's hand.

Instead, Mr Sawiris thanked the moderator and made a beeline for the exit, along with Khaled Bichara,Orascom's newly appointed chief executive, to catch a plane back to Cairo. [e-mail]