Picking a dream team

Hits Telecom chairman Sultan Bahabri tells Comm. how he is going about selecting the best corporate assets in order to create a leading global mobile operation by 2015

Sultan Bahabri describes Hits Telecom as a global telecoms 3.0 style company that can benefit from its lack of legacy infrastructure

On July 28, Hits Telecom is set to commercially launch its GSM network in the Brazilian city of Sao Paulo. It is arguably one of the furthest markets that a Gulf-based operator has dared to enter, and what makes the development of even greater interest is the fact that Hits Telecom is a relative novice to the telecoms operator space.

The Hits Telecom family already has a foothold in a number of African countries including Tanzania, Liberia, Equatorial Guinea and the Democratic Republic of Congo, though the company’s wider aspirations reach far beyond the Middle East and Africa.

Hits America, Hits Telecom’s operational company in that region of the world, is already looking for an additional three mobile licences in Brazil, with distribution being one of the key pillars to the operator’s further development.

Given the high levels of liquidity in the wider economies of the Gulf and specifically in the telecoms sector, it would be fair to question what kind of chance Hits Telecom has in acquiring prime telecoms real estate in the face of more experienced operators with deeper pockets competing for similar opportunities.

“The numbers we have forecast are achievable,” Sultan Bahabri, Hits Telecom’s chairman told Comm. “It is an ambitious task, though it is not hard to add 50 million subscribers at the premiums that are being paid at the moment.

The challenge is to add those 50 million subscribers at a fraction of the cost that is paid today.” Bahabri describes Hits Telecom as a ‘global 3.0’ type of company, representing a new breed of telecoms provider that is trying to achieve a global presence without legacy and is developing strategies in seven global markets currently.

Spain and China are also areas of interest for the company and Bahabri explains that discussions are at an advanced stage in both markets that could result in Hits Telecom entering both of them.

“We are looking to sign a deal in China that is involved in the laying of fibre across the country,” Bahabri reveals. “There is also an investment in Spain that is set to be announced.”

In terms of his company’s appetite to succeed in the face of strong international competitors, Bahabri believes that in some cases success can be a hindrance to further success and as such he sees an opportunity for nimble companies such as his, with little to lose reputation-wise and much to gain, as being well primed for future success.

Hits Telecom constructed a market review of global opportunities in cooperation with McKinsey & Company, a global management consulting firm, developing a go-to-market model, which its says leverages as many synergies in individual markets as possible. The companies analysed 35 operators in 38 countries and projected the opportunities they identified would enjoy double digit growth in the coming five years, at least.

Hits Africa’s Lahham says the assessment of a country’s economic strength and stability, as well as its telecoms penetration rate is of paramount importance prior to investment

In Tanzania, for example, Hits Africa possesses licences to offer services utilising both GSM as well as WiMAX technology. “We intend to launch first with a GSM network in the initial stages and at a later time we will rollout a WiMAX network for data services,” stated Talaat El Lahham, CEO of Hits Africa. “We are looking to launch the GSM network before the end of this year. We have already selected the vendor for the network deployment – Huawei – and we have completed all the network planning,” Lahham added.

The fact that mobile market penetration is 20 per cent or less in a number of the African markets in which Hits Africa already has operations or is set to enter leaves Bahabri confident that the impact of being the first entrant or a fourth entrant is limited. In the fourth quarter of 2008, for example, Hits Africa acquired a 65 per cent stake in a company licensed in the DRC, Congo Kinshasa. Mobile penetration is estimated at under 10 per cent and Hits Africa forecasts the market has an addressable penetration in the high 30s in terms of percentages.

There are currently four operators in DRC, but given its population of around 65 million inhabitants, Hits Africa believes the potential for a positive return on investment remains high. “We have undertaken deep market analysis and we were confronted with an interesting answer we were not expecting. Some operators offer what the market does not demand or require and in the DRC, the handset is a barrier to use,” asserts Bahabri.

“We are tapping into the lower third of the economic pyramid and have devised our own handset strategy.” Thus while Hits Africa is looking to combine offering subscribers what they want at compelling price points, Bahabri emphasises that it is not the company’s intention to become a price leader and undercut competitors as a core strategy. “We are not going to be engaged in a price war.

Simplicity of the offering and affordability in terms of the offer of better plans will be our focus,” Bahabri explains.

Bahabri claims Hits Telecom’s management has checked ego and emotion when it comes to selecting and making investments and that going forward many of the perceived wisdoms of this period will not necessarily apply at that time. In terms of its presence in Africa, Hits is looking to develop a converged network strategy, combining elements from both mobile as well as fixed-line access.

“There will be a lot of disintegration and distressed telecoms operators in the future,” Bahabri contends. “We are looking at this business with fresh eyes, and the quality of human capital is a key element here. Our core DNA is based on our human capital, group knowledge, a lean operating model, partnerships, as well as investment in futureready technology.”

Hits Telecom’s Mission

Hits Telecom is listed on the Kuwait Stock Exchange. Its major shareholders are Al Madina for Finance and Investment of Kuwait and Ebram Investments of Saudi Arabia. Hits Telecom’s capitalisation exceeds US$1 billion, with the company currently raising US$600 million for business development initiatives.

• Accessibility
• Affordability
• Simplicity
• Quality
• Innovation
• Human Capital
• Knowledge
• Future Ready
• Lean Operations
• Partnership
• Agility

Goal
15 million+ in Asia
12.5 million+ in Africa
12.5 million+ in Latin America
10 million+ in Europe
Total 50 million+ subscribers

Selected success factors

Affordable

• Pricing that is perceived a good value for money
• Community service telephony initiatives that provide communication services to those who cannot afford a traditional service

Simple

• Simple service that simplify lives
• Straightforward bundles and prices that are easy to understand
• Straightforward communication to inform consumers about the available services

Accessible

• Opening up access to communities that couldn’t otherwise have access to the service
• Ensuring SIM and recharge products are readily and easily available in the market

Innovation

• Innovation focused on simplification of services
• Seamless integration of available technologies
• Choice of technology driven by evolving customer needs and markets

Source: Hits Telecom