Telcos go from empire-builders to gardeners

Zain, the Kuwaiti telco group that has built a sprawling African empire, said yesterday that it will begin a new focus on cost-cutting and consolidation, with the outsourcing of about 2000 jobs the first step in the process.

Empire-building was the name of the game for Middle Eastern telcos in the last few years. "I think there was a lot of guys just standing in front of a map, enjoying pushing the pieces around," one consultant recently said to me. It certainly looked that way.
Riding on massive demand for one of the great technologies of history, flush with cash, surrounded by high-growth emerging markets, they gorged themselved on expansion, domestic and international.

It was a good idea, and it worked. But in any boom time, things get a little excessive, a little inefficient. Lots of people get hired, to implement lots of fancy new systems and ideas recommended by lots of highly-priced consultants. In that mad scramble to be everywhere, all the time, you inevitably take your eyes off the individual trees as you gaze across the ever-expanding forest.

But that was then, this is now. Expect to see lots of tree-trimming this year, plenty of micro-level garden maintenance. Outsourcing non-core parts of the company, signing network-sharing deals, cutting down on new hires, consolidating back-offices, data centres and IT - all of this stuff will be as big a part of the life of a Middle Eastern telco this year as winning multi-billion dollar new licenses was in recent years.

Osman Sultan, the CEO of du, one of the Middle East's smallest telcos, recently told me that this is the stuff he is thinking about every single day. Saad al Barrak, CEO of Zain, one of the Middle East's biggest, is also diving in.

This might sound like bad/grim news, but I disagree. Now is a very good time to be a smart company in the region that can offer to outsource some of their work, sell them software that automates it, of offer a product than can somehow cut out one of the many thousands of middlemen entirely. Carpe diem.