Broadband and pricing will be the key battlegrounds in Qatar,says Nick Jotischky

Posted by Nick Jotischky Wednesday, February 4th, 2009

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When Vodafone launches its network in Qatar – which despite continued delays to its IPO it still expects to do in March – Qatar Telecom’s monopoly will come to an end. It will also mean that all GCC markets will have at least two mobile operators. So, what can the incumbent and the new entrant in Qatar learn from other markets in the region?

Q-Tel might have set out its target of becoming one of the 20 largest operators in the world by 2020 before Vodafone was awarded its license, but it probably would have been necessary to do so anyway, since Q-Tel knew it needed growth from overseas markets. And in doing so, Q-Tel has become another emerging-market consolidator from the Middle East – albeit one that has been rather more innovative in its approach to M&A as it looks to new technologies as much as to new markets for growth.

Because of Q-Tel’s somewhat different strategy – in terms of its geographic focus and technology, with the operator apparently not interested in sub-Saharan Africa – it is difficult to group Q-Tel together with Zain, Etisalat and STC. And yet as with these other incumbents, it is important for Q-Tel that it remains a strong leader in its domestic market. Q-Tel needs to ensure strong revenue growth from its Qatari operation so it can maintain its international expansion strategy.

The danger for Q-Tel is that its focus on overseas markets might become its weakness. The potential exists for it to be drawn into competitive licensing rounds that cause it to overpay for acquisitions while losing its focus on fighting its new competitor at home.

As for Vodafone, how should it address its strategy as the new entrant in Qatar? Given that Vodafone also has a fixed-line license, we can expect broadband to be at the center of its strategy. This gives the operator a huge advantage over most other new entrants. And with just 10.4% of Qatar’s population able to access fixed broadband services as of September, broadband – whether fixed or mobile – has to form a central plank in Vodafone’s strategy in the country.

But with mobile penetration at more than 150% in Qatar,where there is a strong multiple-SIM trend, Vodafone must offer something markedly different from Q-Tel if it is to eat into the incumbent’s customer base. Vodafone must try to establish a unique advantage in Qatar, as Etisalat did in Egypt,when as the third entrant it was the first to launch a 3G network, and as Mobily did in Saudi Arabia, when it was the first to launch 3.5G services, double mobile broadband speeds and introduce the BlackBerry.

That is easier said than done, especially since Q-Tel knows exactly what is required to succeed as a second entrant. Its Omani subsidiary, Nawras, was the first to launch mobile broadband in that market, and it had 250,000 mobile broadband subscribers at the end of September. Alongside Mobily, Nawras had the highest proportion of data revenues (16.5%) as a percentage of total revenues in the GCC region in 3Q08. The fact that both operators are second entrants is no coincidence, with the need to differentiate all too clear.

There are many lessons that Vodafone can learn from the actions of second entrants in other countries. Innovative pricing is often at the center of new-entrant strategies, and in South Africa, a market Vodafone knows well, it will have watched the No. 2 player, MTN (albeit a longstanding second operator), launch its MTN Zone to good effect in 2008. The MTN Zone service, which offers users lower rates when the network is less busy, was used by 4.5 million subscribers in its first year, of which 400,000 were new customers.Vodafone can also be expected to promote a loyalty program in the same way that Kuwait’s third entrant, STC-backed Viva, has done with its Qitaf plan.

But as would be expected, Q-Tel has made a pre-emptive strike with the launch of its own promotion, the Shahry Value Pack plan, which allows customers to select one number to which they can make unlimited calls free and offers a range of reduced tariffs for calls and messaging. Q-Tel also introduced BlackBerry devices in Qatar last month.

Vodafone must also take care not to repeat the mistake it made in Turkey, where after launching its network and seeing initial success in terms of sign-ups, it failed to maintain the quality of its network,which soon led to congestion and a severe dent to its brand.

In the short term, the winner in Qatar will be the consumer, who can expect several promotions to choose from, greater levels of service innovation and high-quality networks in place as the incumbent defends its position and Vodafone attempts to take advantage of the upcoming implementation of mobile number portability.