DELTA PARTNERS RESEARCH HIGHLIGHTS THE SIZEABLE OPPORTUNITY FOR OPERATORS TO GROW NEW REVENUES FROM ICT SERVICES

 

Dubai, UAE

 

November 16, 2009

 

UAE and Kingdom of Saudi Arabia Continue to Top Countries that will Drive ICT Managed Services Growth

 

Delta Partners, a leading specialized telecoms advisory and investment firm released its latest White Paper entitled "The Rise of the Enterprise: Right time for telecom operators to focus on ICT in the Middle East?" The paper aims to clarify the opportunity and relevance to telecom operators who are looking to benefit from the regional ICT boom, in addition to highlighting the likely challenges and potential strategic options.

 

As the Enterprise ICT market reaches a tipping point across the Middle East, catalyzed by ambitious government ICT infrastructure projects and the connectivity requirements of the burgeoning real estate market, Delta Partners believes operators are well placed to grow new revenues to offset the inevitable maturing of traditional telecommunications growth.

 

"The Middle East markets, in particular UAE and Saudi Arabia, are expected to see significant growth rates in ICT managed services spend in the coming years. Markets will continue to grow with businesses, local and international, realizing the importance of managed services in lowering their costs and providing key skills and services. Equally important, managed services will allow companies to focus on their core business," said Andrew Snead, Associate Partner, Delta Partners.

 

The multiple infrastructure development programmes such as the creation of economic cities, the e-enablement of schools, hospitals and ministries combined with the influx of international companies seeking more sophisticated services is creating a new level of demand. "This is a very exciting time and a real opportunity for operators" commented Snead.

 

Delta Partners is however also keen to stress that ICT managed services warrant new capabilities and a different business culture to that which is typically found within the traditional telecoms industry and whilst incremental revenue growth can be achieved, operating margins can suffer. "Venturing into the ICT services sector requires a significant shift in focus from the traditional telecoms business, particularly as operators move towards the pure IT-end of the value chain. Operators should therefore consider their approach carefully. This is not a one-size-fits-all market, as demonstrated in Europe, where only some operators have created positive shareholder value," added Snead.

 

"Some telecommunications operators have begun to realize this potential and have embarked on developing partnerships and strategic alliances to further enhance their range solutions offerings. Partnering is definitely a positive move, but not a panacea for all requirements; therefore we believe that operators need to have a clear view on when to partner, when to buy and when to build internally. Most will require a blend of all three" added Snead.

 

The situation for the incumbent operators is, as always, different to that of the challenger. For some incumbents, the relative lack of competition at the access layer affords an opportunity to expand down the value chain towards IT services without the immediate threat of traditional connectivity disintermediation. Alternative access technologies are less effective for Enterprise services, while digging new ducts for independent fiber access takes time. The implication is that some local incumbents can benefit from the opportunity of the ICT revolution without necessarily experiencing an immediate threat, especially when compared to their western counterparts. This will however, inevitably change in time. For those incumbents facing intensifying competition, they need to respond quickly to avoid heavy losses of traditional revenues.

 

Other key findings the White Paper highlighted:

 

Strategic positioning: Whilst operators have been able to expand their service offerings into new domains such as infrastructure-type services, the core motivation has been one of strategic positioning with two principal reasons in mind - protect core revenues and resist competitor threats arriving from the opposite end of the value chain, as well as preparing for future growth of net-centric IP applications and services.

 

Delta Partner’s recommended strategic options for telecommunications operators to consider includes:

1. A pro-active and aggressive strategy that focuses on building a compelling ICT offering in advance of the competitive threat - to get in early and drive the market with an emphasis on creating internal and sustainable capability.
2. A more reactive and defensive strategy that focuses on protecting traditional revenues with a greater emphasis on partnering with IT players for capability, allowing the operator to compete for ICT deals while limiting their potential risk.

 

"The ICT market represents a significant opportunity for operators and one they should embrace very positively. Many operators are well positioned to take advantage, particularly given their strong brand and institutional relationships. However execution is vital. Irrespective of the adopted strategy, it is critical for operators to ensure they approach the market with a clear understanding of how they can create value and avoid some of the pitfalls encountered by their European counterparts," concluded Snead.

 

 

About Delta Partners

 

Delta Partners is the leading TMT advisory and investment firm in emerging markets. With more than 160 professionals the firm operates across 50 markets in the Middle East, Africa, Eastern Europe and Emerging Asia. Delta Partners provides three synergistic services: management advisory, corporate finance and investments from its offices in the UAE, Bahrain, South Africa, Spain and Singapore. Delta Partners delivers tangible results to its clients and investors through its exclusive sector focus on telecom, media and technology, and a unique approach to services, combining strategic advice and a hands-on pragmatic approach.

 

For further information please contact:

 

Mia Mutic
Delta Partners
+971 (4) 369-2999
mmu@deltapartnersgroup.com