Ahmad has experience in the region, most recently as Gulf Carrier Sales Manager for Nortel

Ciena Corporation was established in 1992, with its corporate headquarters situated in Maryland, counting more than 2,000 employees. The company’s main area of expertise is in the automation of complex networks with
programmable optical and Ethernet platforms, intelligent software and strategic services; helping customers adapt and scale. In 2009 the company opened its first office in the Middle East, choosing Abu Dhabi as the location from which to service the UAE and Gulf region with its specialist solutions.

“We have been in the region for a few months now,” says Mashood Ahmad, regional managing director, Middle East and Pakistan for Ciena. “We have been conducting the groundwork since the middle of last year and our target audience are tier 1 and tier 2 operators, together with some of the larger government sectors,” he adds.

Ciena’s key offerings include Optical Service Delivery incorporating advanced platform integrating OTN , optical Ethernet, and programmable ports. Ciena’s Carrier Ethernet Service Delivery deals with intelligent devices backhaul and aggregation networks; while the company’s Unified Network and Service Management offers a software solution for comprehensive service life-cycle control and proactive monitoring. Ciena Specialist Services is a practice that applies the company’s expertise across a wide range of technologies and service types.

Ahmad is in a strong position to help Ciena navigate through this new geographic territory given his experience of more than a decade in the telecom sector, most recently as Gulf Carrier Sales Manager for Nortel.

“We are in the business of transitioning optical and Ethernet infrastructure and are looking to alternative providers to help grow Next Generation Networks in which optical and Ethernet are converged into a single network,” Ahmad says. “There is huge demand for bandwidth and we are in fact working with a large incumbent in the Middle East on the deployment of the largest 40 Gig network in the region.”

Ahmad sees similar data traffic demand in the Middle East region as is found in other parts of the world, where demand for broadband access is growing exponentially.

With respect to entering the market at this stage in its development, Ahmad believes traditional vendors have had to consolidate to large degree over the past few years, with last year’s economic downturn compounding matters for the more fragile amongst them. This, Ahmad believes, has opened up opportunities for specialists such as Ciena to offer focussed, dedicated services in specific areas that consolidated vendors may not be able to reach as effectively.

“We offer practical network transition from complicated to automated,” Ahmad says, revealing the company has plans underfoot to open a secondary office in Saudi Arabia soon.

Target sectors outside of telecom that Ciena is looking to establish a strong presence include utilities, research and education, enterprises, as well as government sectors.

“We have seen the Middle East rising to become a technology innovation market, and it is exciting to now be a part of that,” Ahmad comments. “There is a move away from ring architecture to a mesh architecture that requires automation, and our solutions exceed Optical Transport Network (OTN ) standards.”

Ahmad says that while the company has only recently established a permanent presence in the region it is known by customers, and his ambition in the immediate term is to build a wider presence. He would like to see Ciena, ‘scaling with intimacy’, without aiming to take on larger vendors directly, but rather develop a relevant relationship with customers that will see Ciena becoming the provider of choice in the services and products it delivers.

Ciena takes over Nortel’s Ethernet business

Ciena agreed to pay US$530 million in cash and issue US$239 million in aggregate principal amount of 6 per cent Senior Convertible notes due 2017 for a total consideration of US $769 million for the assets. A motion to approve Ciena as the acquirer was heard by bankruptcy courts in the US and Canada on December 2.

“These optical and carrier Ethernet assets bring exceptional technologies, talent and scale that will accelerate Ciena’s current strategy to deliver innovative network solutions to customers worldwide,” said Gary Smith, Ciena’s CEO and president. “With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse with the scale to challenge the industry status quo and offer customers a practical path for transitioning to automated, optical Ethernet-based networking. We will be intently focused on integration as we work together to deliver the benefits of this transaction to customers, employees and shareholders.”

The assets to be acquired generated approximately US$1.36 billion in revenue for Nortel in 2008 and US$556 million (unaudited) in the first six months of 2009. Ciena is expected to make employment offers to at least 2,000 Nortel employees to become part of Ciena’s global team of network specialists. The transaction is expected to close in the first calendar quarter of 2010.

This article was contributed by Zoran Vasiljev, partner at Value Partners

Recent economic conditions have fragmented the industry, and we have seen the emergence of two tiers of operators: the large players on the one side – strongly performing operators that have managed the downturn fairly well, and the smaller players on the other – less robust performers that are struggling somewhat.

Looking back at 2009, and considering a few observations moving forward into 2010

• The Middle East telecom sector continued to grow, and in some countries the sector became one of the main engines of the country’s economy. In some markets telecom shares have increased by 70 per cent.

• In 2009 a greater emphasis was placed on migrating consumers to 3G services and on developing content to stimulate higher-ARPU among consumers. Amongst other service offerings, in the past year we have witnessed the introduction of bundled services and the arrival of the iPhone. We have witnessed increased Internet usage/revenues, roaming revenues are up, and we acknowledged that the quality of our data experience has become more important than the quality of our voice experience. In order to meet the capacity requirements driven by data usage and mobile broadband, many operators in the region are bringing forward their network investments and upgrades. This expansion in data usage is as a result of new user behaviours. We spend more time using our phones for surfing, searching, emailing, downloading, and connecting to friends on social networks, than for making voice calls.

• Last year we saw the successful launch of both the first MVNOs in the region and of additional WiMAX operators. The MENA region’s telecom industry will become more complex over the next few years, as the introduction of more MVNOs and operators’ use of WiMAX complicates the dynamics of the sector in the area. The region is still in growth mode, but the greatest opportunity is not just mobile, but also broadband, local content, and telco/media collaboration.

• Due to the credit conditions that triggered the worldwide financial crisis, it was difficult for operators to access new funding. As a result, M&A activity in the region has been prudent as compared to previous years, and we have seen a mismatch in valuation expectations in the sector. Operators had to be more selective about investments, more diligent in their evaluations, and more careful about how they estimated acquisitions. I am convinced that more activity will occur in 2010 as the pricing expectation gaps shrink.

• There is no doubt that developing markets, such as North Africa and India, present considerable opportunities for service providers wanting a share of the rapid growth in communications services. We have witnessed increased activity between the Middle East telecom sector and India. Operators from this region have ventured into India, and several Indian operators are seeking investment opportunities in the Middle East as well as in Africa.  These markets also present potential difficulties as operators need to quickly master how to serve more people with lower profit margins in places like India, Egypt and Nigeria. It will be interesting to see how these experiences and models are exported to other regions of the world, and which players will start to benefit first from the new “third world” models.

• Planning for what is coming after the downturn has already begun. As the dust of the global financial crisis settles, many telecom industry executives are wondering what their next steps should be. Their fear has been replaced by caution first, but recently we have seen that caution being replaced by optimism. Eventually, optimism should translate into laser focused, forward-looking strategies that will ensure their success in a new, more competitive landscape. Looking ahead, successful operators will be those that evaluate their position in the industry and choose their own path, while continually improving their operational effectiveness, and adding growth to their agenda at the same time. Business imperatives that must be embraced in this new reality include: improving cost structures, investing in growth, driving efficiency, and strengthening relationships with customers.

• We should also expect to see more emphasis on accelerating decision making and execution, shortened time-to-market and launch timelines, strengthening of management talent, and a renewed focus on key accounts and innovation. Smart companies will move beyond the old fashion way of thinking. This time around, making progress implies the acceptance that “normal” no longer exists, and that deep industry and business insights are required to identify and make smart, well-timed decisions. With a smart decision the journey just begins. Strategy alone will not be enough; practical execution is what will separate the new winners.

Nesci joined Alcatel in 1980 and held several positions in Italy, East Africa and Belgium before becoming Alcatel vice president for the Middle East

At the age of 61, Vincenzo Nesci believes this is as good a time as any to offer younger people the opportunity to shine in the corporate limelight. Thus his departure from Alcatel-Lucent as the company’s president for the Middle East and Africa region fills him with a greater sense of pride and satisfaction than with any sense of loss for the passing of his time.

“I am proud of my contribution to the activities in the region,” Nesci comments. “I believe that El Leithy is inheriting a strong and relevant company in the region and that is deeply satisfying to me.”

For a man who first started working in the ICT sector in Africa in 1972, Nesci has a unique insight as to just how dramatically communications technology, in particular mobile communications, has helped alter the landscape of economies across the MEA .

“I remember when I first arrived in Nigeria all those years ago for the first time, there was no fixed-line phone in my office,” Nesci recalls. “Messages had to be sent physically around the office, or from one location to another, which is a world away from what modern communication networks offer.”

Nesci lived in Egypt for 21 years and remembers that at the time of his arrival there were just 500,000 fixed lines, with only half of them in working order. Today, Egypt boasts 11 million fixed-lines and 43 million mobile lines, and the impact of this technological advancement has been felt throughout people’s social and business interactions. While many companies and individuals operational in the developing world view their role as being to enlighten and educate local counterparts, Nesci says he has looked to exchange knowledge with all of his customers during his working career, imparting knowledge while at the same time receiving it.

“It has been one of my greatest sources of satisfaction to learn from Etisalat,” Nesci states categorically. “This was a true partnership where Alcatel-Lucent and Etisalat worked at solving problems together,” he adds.

The development of local talent is another area in which Nesci has the fondest memories, having been active in the development of local capabilities in-country in many of the markets he oversaw as a senior executive with Alcatel-Lucent. He also enjoyed the opportunity to work in culturally sensitive countries in the region, which may not have the most positive international reputation, but in which inhabitants remained hungry for information and communication just as in any other part of the world.

The fact that Amr El Leithy, Alcatel-Lucent’s incoming MEA president has experience of the Internet/IT market fills Nesci with confidence that he will do well for the company

“I feel a deep sense of satisfaction to have brought communications to these countries and help democratise places, not in a political sense but in a social one,” Nesci says.

For the main part, Nesci applauds the roles that governments have played across the MEA in helping to foster and expand the telecom sector in their respective markets, believing that those countries that were early in  establishing independent regulatory authorities are the ones to have benefited the most.

An area that has hampered progress to some degree is the operation of bloated state-owned telecom incumbents, which Nesci describes as having been more like employment agencies rather than commercially run operators. As privatisation and liberalisation of the telecom sector has occurred in much of the MEA region in the past decade, this is proving to be less of an inhibitor as all operators are forced to adapt or struggle. Alcatel-Lucent has itself
gone through some turbulent times, not least in the period leading up to the merger between Alcatel and Lucent in 2006. Both companies were finding the going tough as independent companies, though very real concerns were raised with regards to whether the disparate corporate cultures of the two organisations could in fact be bridged in order to create a viable single entity.

“I do admit that at the beginning of the Alcatel/Lucent merger, each party came to the table with baggage,” Nesci says frankly. “However, over a relatively short period of time it became clear that we needed to be more focussed on external fights than on any internal rivalries, and at this point our integration of corporate culture is complete.”

Following a string of poor quarterly results in the latter part of 2008 and early part of 2009, market speculation mounted that Alcatel-Lucent would be the next telecom vendor to succumb to the tightened global economy; a situation that Nesci describes as the ‘Nortel syndrome’, which competitors exploited as much as possible. The company still faces its challenges in a highly competitive environment, but under the leadership of well-regarded telecom executive Ben Verwaayen, who was appointed Alcatel-Lucent CEO in September 2008, the vendor is on arguably the most solid footing since its creation in 2006.

With respect to his personal situation, Nesci says he is looking forward to the next 10 years, in which his focus is likely to shift in the direction of playing more golf while as raising his involvement in humanitarian activities. Corporate social responsibility has been a large part of Nesci’s agenda as a senior manager at Alcatel-Lucent, and he feels obliged to continue such efforts on a personal level.

“I want to give back. This region has offered me so much, I feel I have to. But I also intend to continue to be productive, and shall be involving myself with activities in region,” Nesci concludes.

Telecom World Summit 2009 had operators assessing whether the worse effects of the economic slowdown are now behind us

Oman has five licensed resellers cramped into a market with an addressable potential of around three million users. It shall be interesting to witness just how many of these resellers survive beyond their first couple of years of operation. Three of the five – Friendi Mobile, Renna, and Mazoon – are operational, with the remaining two set to launch in H110.

As the first country in the Gulf to introduce reseller services of this nature, Oman has been held up as an example of what the impact of such a competitive regime may have on the market; with participants in places such as Jordan, Bahrain and Saudi Arabia all checking the progress in respect to what may occur when and if such services are offered in their own markets.

Jordan’s network operators have been vociferous in their objection to having to answer to all reseller/MVNO applications should they sign an agreement with one, and the Omani example does little to allay fears that network operators will end up being landed with more resellers than are commercially viable. Oman’s Nawras has agreements in place with three resellers while Oman Mobile has deals with two of them, and it remains to be seen how these niche players will differentiate their services and achieve critical mass.

Given the presence of three existing resellers in Oman, as well as a further subbrand launched by Friendi in collaboration with a local Omani radio station, the prospects for further development of this market niche appear limited.

“The point is we will need to differentiate,” commented Mohamed Al Hashili, CEO of Mazoon Mobile talking at Telco World Summit. “There is already a lot of activity in the market and we need build to a relationship with customers that they do not already have with any of our competitors,” he added without offering any specific examples.

Another issue likely to affect Oman’s resellers is the fact that projected ARPU levels are understood to be lower than initially anticipated, resulting in the requirement for more subscribers to need to be added to their services in order for the operations to break even.

“While we have been surprised and delighted by the number of subscribers we have been able to add since launch, I will say that we are slightly behind or just on par on ARPU levels,” Niklas Nielsen, board advisor at Majan Telecom, the parent company of Renna, said. “Despite this, we shall become cash flow positive in 2010.”

Independent consultants have estimated that it will now take the addition of 170,000-200,000 subscribers in order for a reseller in Oman to become profitable, when that figure had originally been estimated at around 100,000. It is highly unlikely that all five resellers will be able to reach such numbers, suggesting two or more of them are likely to go out of business within the life-span of their five-year licences.

As important as the issue of service differentiation, if not more so, is the matter of customer retention efforts in the Middle East, as subscriber growth flattens or falls. MTN Yemen CEO , Raed Ahmad estimates the average cost of churn in his market at as much as US$8.50 per line, including the cost of the SIM and packaging, distribution commissions, and lost opportunity amongst other things.

Mehdi Otoofi, MCI Iran’s chief marketing officer confirmed that Iran operates the largest post-paid market in the region 

“Operators must have tools in place that continuously monitor usage patterns,” Ahmad said, highlighting one of the factors that allowed MTN Yemen to lower its churn rate from six per cent in August 2008, down to 3.4 per cent.

Thus the operator has witnessed a reduction in churn of 45 per cent in just two years. Five operators are present in Yemen, a country with a population of 23.4 million and a mobile penetration rate forecast to reach 30.7 per cent in 2010. This penetration level is set to rise further to 51.9 per cent by 2014. MTN Yemen’s active response to and arrest of its high churn has helped the operator garner a 39.4 per cent market share, counting 2.3 million subscribers at the end of September 2009, and representing a 23.1 per cent year-on-year increase.

“Operators really need to start valuing prepaid customers as much as they do post-paid users,” Ahmad advised. “MTN Yemen launched service in 2001, and one of the strategies of our loyalty programme was to look after old soldiers first, and reward them with bonuses.”

What has become abundantly clear is that it costs less to keep subscribers on the network through loyalty offers than it does to go out and purchase new customers that might have churned.

“In this time of growing competition, operators need to place additional concentration on market intelligence, and on products and services,” Ahmad concluded.

The move by telecom operators into areas that are not their traditional areas of activity such as the Internet and financial services is a trend that is building greater momentum as the need to generate incremental cash increases. Robert Waaler, product management, business unit Device Management at SmartTrust revealed that we now exist in a time when there are more connections to the Internet made via mobile than via fixed PC. He identified six building blocks for mobile applications, which are:

• Ease of use
• Personalised
• Clear billing
• Open
• Evolving
• Quick return on investment

Given that an estimated 85 per cent of the world remains unbanked, while more than half of the world’s population owns or has access to a mobile device, the incentive for mobile operators to consider ways in which to offer banking and financial services becomes more apparent. Mobile financial services can be divided into three main categories:

• Mobile banking
• Mobile payment (which targets the unbanked)
• Mobile money transfer

The key elements for the successful implementation of mobile financial services include easy registration; simple and easy interface; the ability for interactivity; and the enablement of portability.

“The architecture of mobile financial networks needs to be compliant with regulations; highly secure, and offer a flexible system that is future-proof,” Waaler commented.

On the part of operators, the crucial roles they can play in establishing mobile financial services as a successful part of their offering includes implementing a strong marketing campaign; building awareness; educating users about the service, and creating trust for the service.

“Security and regulation ought to be at the forefront of developments from the beginning,” Waaler cautioned.

Najeeb Al Awadi says Viva is looking to garner a market share of 30-33 per cent as soon as possible, and sees no reason why it shouldn’t target the top spot

Unlike other Gulf countries that have an independent telecom regulator in place and a mobile penetration rate exceeding 100 per cent, when Viva splashed onto Kuwait’s telecom landscape in December 2008 it was faced with a relatively less daunting task of participating in a market that was 75 per cent penetrated. Given the pedigree of the incumbents, Viva was always going to have to work extremely hard to attract customers to its nascent network and even more so, to make existing mobile users churn from the established operators and give Viva a try. The new entrant opted to offer early subscribers free local calls for their first three months. Following the free call period, post-paid subscribers were allowed to take advantage of local calls at no cost if their call duration exceeded five minutes, while receiving international and landline calls at no additional charge.

“Free incoming calls were introduced by Viva,” comments Viva CEO Najeeb Al Awadi. “Since launching we have added 500,000 subscribers, which equates to 10-12 per cent market share,” he adds.

Al Awadi says his company is looking to increase its market participation to 30-33 per cent as soon as it can, and that Viva’s ultimate target is to become the leading provider in Kuwait; which Al Awadi believes is a realistic target to aim for.

The nature of competition in Kuwait limits the possibility of an out-and-out price war breaking out, though each operator works hard to be able to offer subscribers deals and value that they may not easily receive from a competitor. Viva’s parent company, STC has been a strong proponent of utilising technology leadership in order to gain a competitive advantage, and this viewpoint has trickled down to its Kuwaiti operation, where Viva has been pushing the limits of its HSDPA network.

At the beginning of this year the Kuwait operator announced it had become the first retailer in the country to offer the smallest, most lightweight portable Internet router. The new device is compact and portable, offering speeds of up to 7.2Mbps over Viva’s HSDPA network.

Viva’s router allows up to five PCs or laptops to connect at once, acting like a Wi-Fi hotspot on the go. Unlike pre-existing routers, which are larger and rely on electrical sockets to function, Viva’s operates using rechargeable batteries that offer up to four hours of use.

“Our price on data is on par with the competitors, which is around US$90 a month” says Al Awadi. “We offer subsidised modems, and believe this is necessary to help drive adoption.”

Viva has also been quick off the mark with the offer of other value added services. In February 2009 the operator announced it would launch a mobile commerce solution using a platform provided by Irish firm Macalla Software.

In September 2009 Roamware announced the completion of the acquisition of Macalla, and according to Juniper Research, the service provider market revenues for mobile financial services are set to exceed US$5 billion globally by 2013. These revenues are based on the commissions and charges acquired from the gross value of money transactions derived from mobile money transfer services and remittances, making this a potentially viable income stream for operators such as Viva, if implemented correctly.

Viva said it was looking to provide payment services in Arabic and English directly to Viva subscribers and also via its dealer and agent network. Rollout would be undertaken on a phased basis, and service channels were to include mobile, kiosks and online, with supporting payments done by mobile wallet, cash, debit or credit card.

Mobile penetration in Kuwait stood at around 75 per cent when Viva launched in December 2008

At the end of 2009 Viva counted around 370 employees, of whom around 60 per cent were Kuwaiti nationals. STC owns 26 per cent of the Kuwait operator, though the strategic emphasis appears to be to position the operator as a Kuwaiti player that is helping to champion the communications needs of the Kuwaiti people. Indeed, the Kuwait government holds a 24 per cent stake in the operator, with the remaining 50 per cent held by Kuwaiti nationals following an initial public offering. Viva’s paid-in capital stands at KWD50 million (US$182 million).

“In terms of our performance over the first year of operation, I would give ourselves a B-grade,” says a Viva executive who preferred not to be named. “I think we need to improve our ARPU levels, and this is something we are already addressing.”

The introduction of mobile number portability (MNP) has been on the agenda in Kuwait for some time now, though it remains unavailable at this point in time. Al Awadi believes its introduction is likely to have a positive impact on Viva’s growth prospects as it is typically later entrants with smaller subscriber bases that benefit to a larger degree with its introduction.

“Kuwait’s Ministry of Communications is seriously discussing mobile number portability,” Al Awadi says. “A request for proposals is set to come out this month and hopefully by 2010 we may see the implementation of MNP in Kuwait.”

STC, which recently appointed Ghassan Hasbani to head its international operations, has been active in its expansion of operations across the Arabian peninsular, having also acquired a licence to operate Bahrain’s third operator. STC paid significant premiums in order to gain access to the telecom markets of its two Gulf neighbours, and part of that strategy must have been motivated by a desire to be able to offer a competitive pan-regional rate, similar to Zain’s One Network and Qtel’s SmartRoamer.

At the time of launch Viva offered calls made to STC numbers in Saudi Arabia at local rates, and the Kuwaiti operator further expanded upon this offer during the Hajj. At the beginning of November Viva announced the offer of the Viva Hajj package, which featured the ability to have subscribers know and share STC local numbers before heading to Saudi Arabia. In addition, customers using the STC line were able to have their devices remain  connected even when no credit has been added to the SIM , received incoming calls to still be permitted.

Viva Hajj package customers were able to use the same prepaid line when they returned to Kuwait, top up locally in both countries, and are even able to use the line should they travel to Saudi Arabia in the future. Upon  purchasing a Hajj “2 in 1” package, customers receive a prepaid Viva line including KD 9 (US$ 31.46) credit along with a prepaid STC local number with SR 5 (US$1.33) credit.