Digital empire building

Service providers in the Middle East are engaged in a bitter fight to protect and even grow their mobile digital services, though the process is taking some rethinking of old assumptions. Etisalat Group has taken a pro-active position in fashioning a digital services paradigm, and other service providers appear to be taking note

Etisalat’s Al Shamsi believes the telecom industry brings a great deal to OTT partnerships, which is something that ought to be acknowledged and rewarded in its interactions with them

Etisalat Group’s chief digital services officer, Khalifa Al Shamsi, believes the era of mobile network operators blocking the services of over the top (OTT) players is a bygone era, even in the Middle East.

Speaking at the Middle East Telco Summit in Dubai at the beginning of December, Al Shamsi said: “Network operators cannot block application providers as a sustainable strategy. Network operators themselves need to innovate and partner with OTT players and other innovators.”

His comments came on the back of estimates that application providers such as WhatsApp are eating into network operators’ service revenues at an increasing rate, having invested in none of the network infrastructure required to deliver their applications.

“At Etisalat, we are looking to work with partners in areas such as IP voice as we realise much of the innovation in our industry is coming from outside of it,” Al Shamsi said.

Earlier in December it was reported that Facebook is in talks to acquire the mobile messaging platform WhatsApp.

The report did not reveal its sources, nor the potential size or nature of the takeover discussions, yet such a deal is seen as credible as Facebook seeks to bolster its mobile credentials.

WhatsApp is available as a smartphone app in over a hundred countries and according to reports has 100 million daily active users globally. At the end of October 2011, the last time the company released any usage numbers; it said it was serving 1 billion messages per day.

WhatsApp is currently the number-two paid app in the US version of Apple’s App Store, where it sells for US$0.99. On Google Play, the app is free for the first year, and then US$0.99 per year thereafter. Data from Google Play suggests that the app has been downloaded between 100 million and 500 million times to date.

With such statistics being similarly reported by other over-the-top players, and representing a massive revenue leakage for operators, the establishment of Etisalat’s Digital Services unit earlier this year was a timely development.

The unit was launched with the aim of focussing on various industry verticals such as machine-to-machine (M2M), and cloud services in the enterprise space; and commerce, digital advertisement, advanced communications, digital entertainment, and video services in the consumer space. Ultimately, Etisalat is looking to boost its position in the digital eco-system and drive innovation and advanced services to group customers.

“What we need to appreciate as an industry is that we still bring a great deal to OTT partnerships, which is something that ought to be acknowledged and rewarded in our interactions with them,” Al Shamsi said. “Service providers bring a lot to OTT partnerships and this includes billing capabilities; ID and authentication; distribution and presence; and enterprise sales force.” Service providers also contribute the network and infrastructure; insights into particular markets and market segments; as well as knowledge of customer behaviour and interaction data.

While Etisalat Group is likely to maintain its digital services output within its group operations for the meantime, service providers such as Saudi Telecom (STC) have been more open-minded with respect to sharing the exploits of their digital efforts amongst their peers.

In 2009, STC and the Malaysian media conglomerate, All Asia Networks (ASTRO) established Intigral, a company set to offer a one-stop shop for the region’s telecom operators, providing services including content creation, repurposing, censoring and publishing for local audiences. The company also dabbles in the management of video-on-demand (VOD) services provided by telcos; and the development and management of web portals. Intigral also offers digital storefront and applications development and management expertise and has since grown to employ a workforce of 240 professionals based in Dubai and Riyadh.

In October Intigral appointed Ismaeel Makdisi as acting CEO, with the responsibility to lead the company’s continued development of mobile digital services

Late last year STC invested a further SAR90 million (US$24 million) in Intigral, boosting its stake to 71 per cent. At the time, STC said it had increased its stake in Intigral, which runs STC’s television services, by 20 per cent from 51 per cent, by acquiring the stake owned by publishing company Saudi Research & Marketing Group (SRMG).

Wider-ranging digital manoeuvres by service providers in the region are also reported to be underfoot. A number of telcos are reported to be close to forming a consortium to combat potential revenue losses caused by the influx of over-the-top (OTT) players. The group, which could include the UAE’s Du, would come together to create a global Arabic social networking platform.

While the concept would likely prove popular – there are over 350 million Arabic speakers worldwide, and many international operators have ties to Middle East providers – it would be ineffective as a project spearheaded by just one operator. Du CEO Osman Sultan believes a cooperative approach would stand the greatest chances of success, and has been championing the proposition of an operator alliance.

The proposed consortium would allow the platform to reach far more users, providing the scale that would allow it to compete effectively. The majority of OTT services and social networks generate network traffic but not so much operator revenue, with Sultan noting: "Network traffic doubles every eight to nine months, but revenue is heading to a plateau, so we need to claim part of the new revenues alongside OTT players."

Sultan has gone on record in the past stating that he does not believe it is practical for individual operators in a given market to build their own app stores, despite the allure of generating incremental revenue through the sale of such applications. Sultan said the industry was still looking to figure out the most effective way for new applications to be purchased and used over mobile channels, with network operators gaining a reasonable share of the revenues.

“Vodafone live!, Orange World and Vodafone 360 are examples of operators trying to develop their own app stores, and I don’t think they have been so successful,” Sultan said. “Social networking is what made data communications successful, and I believe aggregation is what is needed in the Arab world where a partnership between OTT players and mobile operators is established,” he added.

Du’s Osman Sultan has gone on record in the past stating that he does not believe it is practical for individual operators in a given market to build their own app stores

The idea of an alliance has also been advocated by the CEO of Batelco Group, Sheikh Mohamed Al Khalifa, who is quoted as saying: “There are gains to be made by collaborating within our industry in the Middle East.”

Outside of the region, operators in Spain have taken the bold move of collaboration in order to better supply their subscribers with services that they want in a manner that generates income for the network provider. At the end of November, Spain became the first country in the world to offer a fully interoperable Rich Communication Services (RCS) solution, according to the GSMA.

The country’s three largest mobile operators – Telefonica’s Movistar and the local arms of Orange and Vodafone –launched RCS nationwide using the consumer-facing ‘Joyn’ brand.

RCS is a major play by the operator community to compete more effectively with the OTT players. It enables services such as enhanced messaging and voice, video calling and content sharing directly from the phone’s contact book, regardless of the network or device used.

The Spanish operators are initially offering Joyn services via an Android app, with an iPhone app to follow shortly. The first devices with native support for Joyn are expected at the beginning of 2013.

Additional Joyn services such as VoIP and IP-video calling are also in the pipeline.