Khalid Bichara is the chief executive officer of Egypt’s Orascom Telecom Holding, which has operations in Africa, Europe, Canada and Asia, as well as managing the Lebanese telecom provider Alfa. Bichara sat down with Executive at the Alfa headquarters in Beirut to discuss privatization, market share and why Lebanon still doesn’t have 3G.
E Samer Salemeh, after just a short stint as Alfa’s CEO, recently resigned. He had reportedly complained of political interference. Is this true?
As the CEO of the holding, I don’t work day in day out in the business here and I am not really in the right place to comment on that. What I will say is that the business in Lebanon is one in which we are aware of the human capital, and we have a lot of Lebanese employees that have long been involved in the sector — Lebanon in 1994 was the leading mobile player in the region.
The other thing is that the short-term view of renewing management contracts is negatively affecting the market because it is a long-term market and known for long-term investment, that is why licenses are for 15 or 25 years. Whenever you manage a market for six month or one year chunks it definitely does not deliver the best results, not for the operator, nor the government and not for the Lebanese consumer.
E Salemeh also said that HSPA plus (mobile broadband technology) was tested and ready to be deployed. This hasn’t happened yet. Why?
I don’t think we need to test it here, as it’s been tested everywhere else. Again, the [question] is: what is your time frame and how can you do it. Things take time. We are not here to re-define whether the private sector is faster than the government; this question has been answered before.
E The revenue sharing agreement that is due for renewal in the coming months is a lot more stringent than before, and on top of that there has been no movement to privatize the sector. This doesn’t exactly inspire confidence.
There has never been a change here — the government has always honored agreements [with us] perfectly well. They have never given an agreement and changed it. What we said is the term was never long enough for us to have long-term development of the sector. So far we cannot complain of our experience here; what you see is what you get.
E What about full privatization?
We are a company that plays in a very regulated market worldwide, so we have learned that it is sometimes easy and sometimes hard, and you have to follow local rules.
When we came in, nobody lied to us and said the sector would be privatized tomorrow, so we knew we would invest in a management contract — whether a long-term management contract, a BOT [build-operate-transfer], or privatization — to be ready and in the right position.
We knew that from day zero and that is why we came in. Every market has its own peculiarities.
Today we met the minister, and we reiterated the same message: we are happy, we are delivering results, and we have doubled our customer base in a year, and have increased salaries twice. But it is all building up for the future.
We cannot claim we have been negatively surprised, as we in the private sector always want more and if you give us more, we want even more. And we want more visibility and a more long-term relationship for the sector to take shape in the way it once had. For Lebanon to have been the first country to have an advanced network in the region and to have no 3G, it is a waste.
E Alfa has been losing market share to MTC, which has a 57 percent share according to recent figures. Why is this happening and what are you doing to claw back market share?
We had a business meeting today and we’ve gained 3 percent market share. We are not only about gaining market share but value share. If you want to distribute one million SIM cards it is not a big deal, but to sell to people that use it and we can make money from, is the harder trick. It is really incremental. If you move fast it will destroy you, you need a network that is up to scale.
E Are we ever likely to see calling rates go down in Lebanon?
As a management company we don’t fully control pricing. The simple focus on price per minute is not the right focus. When we go to talk to regulators, their main role is to foster competition, but they sometimes forget that. If you don’t have competition, then you won’t find companies like us investing $3 billion in Italy.
I think prices [dropped], last year, and people were happy. The right thing to do is lower the price incrementally, because if you just drop the price it will create weaker players, worse service, and little money to invest in the future. You have to create the right balance and manage carefully.
E So it’s important to take baby steps?
Fast baby steps. Because at the end of the day, while I am talking about patience, patience, patience, in 10 years we’ve gone from 200,000 to 120 million customers, so we are not slow. But there is a difference between being slow and being careless.
We have learned in some markets the hard way, you expand and the market changes. The team has successfully delivered here, quality has improved and the customer base has doubled. That is an achievement. Things go on.
E What is the outlook for Lebanon if political interference in the telecoms sector continues?
We think that from the current view and current discussions we are having, we are getting there. The view from operators and from the government is that we need more long-term investment and commitment, whether long-term management contracts, or BOT, or privatization; these are different means to the same goal.
Once that happens you will see much faster development in the market; as for when that will happen, I don’t think I am the right person to answer.
E Looking to the future of telecoms in the Middle East, the Arab world already has around 265 million cellular lines and penetration rates are soaring. How do you see the market in five or even 10 years time?
I always joke that my boss gave me the hard job — since he started the company as Orascom Telecom we have generated $15 billion in revenues and have gained 120 million customers in the span of 10 years, from 1999 to 2009. So when he passed the baton to me, looking at the next 10 years, can I add 120 million customers? Can we add and grow at the same rate doing what we have been doing? The answer is clearly no.
We are looking at adjacent services and value added services, online content, Internet and mobile advertising, mobile banking, data centers, submarine cables, and all the business adjacent to our business; we are not going to open burger shops but expand around this core business. And we will always say our customer base is our biggest asset.
Our idea is to sell more services and go vertical with our customer segments, to people that like music, who are in the trade business or into the IT business. What services can I give them and how can my business be more relevant to them? It is really changing from a volume game to a quality game; we have the volume so [now we] can build quality on top of that.