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Regional consolidation derailed by pride

AT&T-DirecTV merger closer to reality with DirecTV shareholder approval

The prospect of consolidation among operators in the Middle East and African region has provided much fuel for the industry rumour mill in 2009. But the collapse of talks involving the disposal of Zain Africa to Indian carriers BSNL and MTNL, as well as those between Bharti and MTN has brought to light a disruptive and persistent level of pride within the operator community.

During a panel discussion on international expansion and geographical footprints at the recent GMS>3G Middle East Telco World Summit, Informa Telecoms & Media’s chief research officer, Mark Newman, asked whether operators are too proud to merge with a rival carrier unless it is a merger of equals.

In response, Jamal Jarwan, group chief investment officer for Etisalat, said: “Regional consolidation very tough because of friction between the two companies, and it is also very difficult to establish governance even in the negotiation process.” Jarwan indicated that in some markets, many companies have a strategy set on expansion, which is detrimental to the merger process.

Just minutes before, Dr Nasser Marafih, CEO of Qtel, had told the auditorium how the Qatar-based carrier had moved to acquire new opportunities as quickly as possible – starting to expand its operations before a second player had even launched in its domestic market, meaning the company was building market share in Qatar while looking for MENA expansion opportunities.

Among the panelists it seems that being number one or number two in a market is a clear requirement for entering that arena. “It’s important to be number one or two, or maybe three, but less than that and it’s too difficult to get market share,” said Marafih.

This stance was supported by Vodafone, which has an innovative strategy for entering new markets with its partner market model. “Vodafone invests in markets as a number one or two player. We may think about being third, but Vodafone has its partner market model, allowing partners to share the brand and introduce new products,” said Denise d’Elia, international service director for Vodafone Egypt.

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