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Transforming a traditional voice-driven telecom market

Article - October 15, 2013
The latest entrant and third largest telecommunications operator in Saudi Arabia, Zain KSA has taken the market by storm with its innovation-driven strategy, which has proven to be successful with the predominantly young Saudi population
ZAIN KSA, SAUDI ARABIA
Zain KSA is part of Zain Group, the leading telecommunications provider across the Middle East and North Africa, which provides mobile voice and data services to over 44.4 million active customers, as reported on 30 June 2013. The group’s commercial presence spans eight countries, and it sustains leadership in five of those: Kuwait, Jordan, Iraq, Sudan and South Sudan. The Zain brand was recently voted the most famous Arab brand worldwide, according to an online poll conducted by the Arab Society for Intellectual Property, amongst 200 major Arab brands across 54 countries.
 
Zain KSA is one of the latest additions to the group and is the third largest telecommunications operator in Saudi Arabia. It launched its commercial operations in the kingdom in August 2008, and as of December 2012, had achieved a market share of approximately 15 per cent, consisting of over 7.5 million customers.    
 
A strong commitment to Saudi Arabia

Demonstrating one of the largest commercial commitments in the kingdom’s history, Zain KSA acquired the country’s third mobile license in the competitive bidding process in 2007.  
 
Investing over $6 billion in the 25-year license and competing against two already established operators in a country almost 10 times the size of the UK has required a capital-intensive, pragmatic and innovative approach from Zain KSA. Following the initial successful network rollout and market entry, Zain KSA is now focusing on advanced sustainable business models to ensure its long-term success.
 
Zain KSA’s CEO, Fraser Curley, sums up the necessity to constantly pursue innovation. 
 
“Zain KSA operates in one of the most dynamic industries in the world, and certainly the most competitive telecommunications market in the region, which forces us to constantly challenge our own view of the market and the position we have in that market. After 30 years in this industry, I consider change as something normal in telecommunications, but the enormity and pace of the change we face today is a major challenge to operators, regulators and governments alike. 
 
“The investments made by the mainstream operators in Saudi Arabia run into the tens of billions of dollars, and the returns investors quite rightfully expect are threatened by a whole new world of Over The Top (OTT) players that the industry has seen evolve over the last five to seven years. It is easy to forget that, when Zain KSA acquired this license back in 2007, such giants as the iPhone, Twitter and WhatsApp were either not even invented, or just being launched. Our challenge now is to monetise the investments we have made as an industry, and innovate to not just stay ahead of the field, but to stay in the game.”
 
Innovation and transformation to overcome challenges

Realising the need to change and adapt to the increasingly competitive environment during its formative years, Zain KSA has experienced the usual challenges of a late entrant: financial market expectations combined with a traditional voice services market approaching saturation.
 
According to Mr Curley, “2012 was a pivotal year for the company, as we started a major transformation programme in order to become the kingdom’s most trusted telecoms provider by 2016. We undertook the region’s largest capital restructuring and forged a landmark strategic partnership with Vodafone Group.

This provided the required financial stability and has given us a distinct competitive advantage in the key areas of innovation, global roaming and access to multi-national enterprise clients. We consistently ensure everything we do throughout the company is aligned with our focus on the four key pillars of success: operational excellence; differentiation through customer experience; smart network investments reducing the cost-to-carry and long-term operational costs; and supporting global enterprises with regional solutions. 
 
“The results so far in 2013 demonstrate that Zain KSA is now entering a period of profitable sustainable growth.”
 
The company’s financial results for the first quarter of 2013 (Q1/2013) reinforce Mr Curley’s statement, as between January and March Zain KSA registered a 17 per cent year-on-year growth in revenue and over 40 per cent in EBITDA. 
 
Saudi Arabia, the world’s largest YouTube market

Understanding that the almost 70 per cent of the Saudi population under the age of 30 will generate an ever increasing demand for data traffic and online entertainment, Zain KSA was an early adopter of the latest data technology based upon the 4G Long Term Evolution (LTE) standard at 1,800 MHz. As a result, in September 2011, Zain KSA became the first operator in Saudi Arabia and in the Middle East to commercially launch 4G on the 1,800 MHz spectrum, the spectrum that now supports most LTE smartphones in both Europe and the Middle East. 
 
Following the success of the initial launch, Zain KSA has consistently released a series of 4G firsts, including the first 100Mb/s 4G router in Saudi Arabia in May 2012.  
 
As Mr Curley reiterates, “Our LTE network is widely recognised as providing the leading 4G data experience in the kingdom and has recently won the Telsa 2013 award for the Best 4G Network in Saudi Arabia. Similarly, excellent customer care is a key differentiator for us, and we are consistently rated by independent bodies as having the best customer care in the telecommunications sector in Saudi Arabia. For instance, we were recently awarded ‘The Best Customer Service Centre’ in the Middle East by the Institute for International Research (IIR).”

“Our LTE network is widely recognised as providing the leading 4G data experience in the kingdom”

Fraser Curley, CEO of Zain KSA
Like many operators in saturated Western European markets, Zain KSA is now exploring new alliances to address the challenges it is facing in a market with over 180 per cent mobile penetration.

This encompasses network vendors, sales and distribution partners, international partners (Vodafone) and local network infrastructure providers. 
 
According to Mr Curley, “On the one hand, we compete vigorously with one another, and on the other hand, the operators cooperate with each other in order to leverage the infrastructure and cost efficiencies that are necessary in a country of this size.”
 
Adopting sophisticated business intelligence tools to allow in-depth analysis of demographics, economic expenditure and subscriber demand has seen the operator evolve into one of the region’s most cost-effective players.
 
Social responsibility and sustainability 

Zain KSA’s Corporate Social Responsibility programme has served as a critical channel for community engagement. By following global benchmarks and implementing international best practices in the design of its CSR initiatives, the company has established itself as a responsible corporate citizen using a two-pronged approach focusing on the community and the environment.
 
Since its inception, Zain KSA has formed a dynamic relationship with the community by partnering with local universities and offering support to non-profit organisations. The Shabab Temouh – meaning ambitious youth – development programme, providing Saudi students with the tools and experience to build skill sets in a number of divisions, including sales, marketing and CSR, has proven to be a particularly successful venture.  
 
In addition, Zain KSA has undertaken a number of changes in its network sites to limit the negative impact on the environment by using eco-friendly technology and equipment. The company has increased energy efficiency by performing preventative maintenance on generators to reduce carbon dioxide emissions and introducing hybrid power solutions to lessen power consumption by 70 per cent.  
 
“As the first telecommunications company in Saudi Arabia to publish a Sustain-ability Report, in 2010, we have been awarded a number of accolades in recognition of our initiatives to raise awareness around environmental sustainability and benefit the community at large. Zain KSA has been awarded the King Khalid Competitiveness Award for Best Philanthropy and has received a special mention in the CSR Strategy & Sustainability category by CSR Arabia Dubai – a testament that our holistic approach to doing business is on par with our global peers,” Mr Curley says.
 
Zain KSA remains committed to using the most internationally recognised and comprehensive sustainability reporting guidelines – the Global Reporting Initiative (GRI). 
 
Business sustainability and strategic partnerships, key to ensuring future growth

Mr Curley believes the foundation of Zain KSA’s long-term success has been set through its focus on business sustainability and strategic partnerships. 
 
“Business sustainability is first and foremost about getting full alignment behind our long-term strategy amongst our highly talented workforce. We constantly seek to hire, train and maintain the best skilled resources available. These are transforming the company through both operational as well as organisational excellence to enable us to extract the maximum from our strategic partners and respond rapidly to the daily market challenges we face,” he says. 
 
Regarding the synergetic benefits of strategic partnerships for Zain KSA, Mr Curley cites examples such as access to Vodafone’s Global Enterprise (VGE) footprint of 1,500 corporations worldwide, the ability to leverage its best-in-class product portfolio, and industry-leading staff training and exchange programmes. 
 
Key areas of engagement with Vodafone include access to consumer products and terminals portfolio, brand support, technology exchange and supply chain. In May 2013, Zain KSA launched the Vodafone Passport, the company’s first offering as a result of this partnership, which gives users access to fixed-price data and voice services in over 27 countries whilst travelling. 
 
“This tremendous roaming solution is another significant benefit that Zain’s partnership with Vodafone has brought to the company. With the large number of Saudi citizens and expatriates travelling during the summer, the benefits of this service will be realised immediately,” adds Mr Curley. 
 
Building upon the successes to date, Zain KSA’s focus upon profitable growth and business sustainability will undoubtedly see it gain further market share in what is the region’s toughest telecommunications market.

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