OBG talks to Alan Whelan, Group CEO, Batelco; Ulaiyan Al Wetaid, CEO, VIVA Bahrain; and Mohammed Zainalabedin, General Manager, Zain Bahrain: Interview

Text size +-
Share

Interview: Alan Whelan; Ulaiyan Al Wetaid; Mohammed Zainalabedin

What are the factors impacting pricing strategies for 4G long-term evolution (LTE) services in Bahrain? What are the advantages and disadvantages of volume-based 4G LTE pricing versus unlimited, flat-rate 4G LTE pricing?

ALAN WHELAN: Pricing strategy factors are related to customer usage behaviour, the maturity of LTE devices in the region and competition between operators. In many markets, including Bahrain, operators have adopted unlimited, all-you-can-eat packaging for 3G data. Launching LTE was a good opportunity for some markets, such as the US, to start tiered pricing for data. The dilemma is that with the cannibalisation of SMS and voice revenues, it is essential that data revenues can compensate.

This is vital in order for operators to continue to fund the infrastructure investments that are required to carry increasing data traffic, and the only rational approach to this is that consumers pay for whatever they use. Therefore, tiered pricing for data is important to sustain profitable growth for operators as data volume keeps growing.

Nonetheless, moving from unlimited to tiered pricing implies providing a different user experience through higher network performance and a better customer experience at all levels, and this is the challenge for the operators.

ULAIYAN AL WETAID: In Bahrain, 4G LTE services’ pricing strategy is characterised by fierce competition in the market and high usage of underpriced data consumption. In the past, the market had converged towards flat-rate pricing; however, operators are slowly starting to move away from this strategy and considering different approaches.

There is no right or wrong when it comes to LTE pricing as there are various ways to do it, and different regions adopt different approaches based on their own unique market conditions and LTE pricing objectives. These goals can be based on data network monetisation, data usage increases, either by volume or unique customers, smartphone penetration or offloading congested 2G and 3G networks.

MOHAMMED ZAINALABEDIN: With intense competition prevalent in the Bahraini market for the past few years and the resultant unfavourable impact on profitability, operators in the kingdom are considering 4G LTE as a platform to more effectively monetise investments. The deployment of 4G networks is able to drive stakeholder value for the foreseeable future. Also, the majority of 4G LTE plans in the market are integrated within a broader mobile data tariff structure with access to the services priced at an additional fee when compared to existing data plans. Zain Bahrain launched a new network in early 2014 with an investment of more than $100m and which will allow for additional high-speed digital content capabilities for an increasingly tech-savvy customer base, including 4G LTE and high-definition (HD) voice.

In the context of Bahrain, backhauling traffic to the global internet cloud is still a relatively expensive proposition for telecoms companies, and as a result will preclude all-you-can eat, flat-rate 4G pricing, especially in terms of volume-driving price points in the near future. Whereas at face value, unlimited tariffs would seem enticing for consumers, the longer-term quality expectations from 4G LTE service would be better served by a more effective utilisation of network capacity enabled by employing volume-based pricing strategies.

However, 4G LTE has introduced a better quality of service for consumers with greater speeds and latency. The key service differentiator has allowed operators to effectively use technological innovation to employ a volume-based pricing strategy.

How could voice over LTE (VoLTE) technology shape the future supply for conventional voice services, and is this a threat to the industry?

AL WETAID: Conventional fixed voice services have been in rapid decline around the world given the increasing popularity of substituting mobile phones for fixed line over the last decade. With the introduction of VoLTE, this trend is expected to continue accelerating in the coming years.

VoLTE will offer a unique value to network operators as it will provide operators with a much more cost-effective method of managing their voice services, since VoLTE is based on an IP multimedia subsystem (IMS), which is a network architecture that is recognised by all standards organisations and provides operators with the ability to integrate multiple existing fixed and mobile networks.

Furthermore, LTE is a much more efficient technology in terms of spectrum usage than 2G and 3G are. Therefore, the convergence of IP-based services and the more efficient use of spectrum will enable VoLTE to greatly simplify network architecture, reduce operating costs and integrate IMS-based services with LTE. All of which will indirectly translate into benefits to consumers in terms of new services.

ZAINALABEDIN: This revolutionary concept is attracting the attention of mobile operators from around the globe and is expected to become the standard for the industry in near future.

However, for us here in the Kingdom of Bahrain, we believe the possibility of commercialising VoLTE is an economically viable option. Zain Bahrain is always interested in new benchmarks and technological breakthroughs and VoLTE is an area that is being explored, as it is believed by many in that there is still room to drive value by innovating on the voice side of the business. Our strategy is evident in the recent introduction of HD voice services.

WHELAN: VoLTE offers operators a greater number of opportunities, from network efficiency to a much improved experience for customers, with shorter call setup and HD qualities. Operators can also leverage on VoLTE to provide more differentiated offerings, versus over-the-top players such as Rogers One Number, and better voice and data bundles.

As we move towards a more interconnected world, almost everything has a connectivity element. What are the opportunities for machine-to-machine (M2M) growth both at the consumer and enterprise levels in Bahrain?

ZAINALABEDIN: Experts have stressed that in 2014 the concept to watch out for is “connected world, connected things”. Everything has a connectivity element and there is an opportunity at both the consumer and enterprise levels. M2M is an area of strategic focus for many telcos in Bahrain, as they work on developing an ecosystem and capabilities that will enable them to operate both in the most obvious cases for M2M use, such as smart cars and smart metering, as well as emerging trends like smart homes and the broader paradigm of connected living. At the enterprise level companies are also looking to develop services and applications that can help companies run more efficiently.

WHELAN: As we work on realising the Networked Society initiative, three main enablers are crucial: mobility, cloud computing and broadband. Connectivity and infrastructure in Bahrain are in good shape and already in place. New devices are already coming with connectivity capabilities and are tied to some sort of a cloud system. Enterprises continue to look for ways to improve business efficiency through automation and M2M communication, including smart metering and vending machine supplies, among other things. Consumers have a desire to connect to home appliances and other devices in order for more convenient and better remote control over services such as home surveillance. These new technologies will all drive the future demand for market growth and M2M connectivity.

AL WETAID: The market for M2M technology is very nascent in Bahrain, yet promising in the long term. In particular and at the initial stages of sector development, it seems there will be a growing demand for two types of services. First of which is telemetry services, such as the recording and monitoring of energy consumption or medical devices. Secondly, services in fleet management monitoring that manage and locate vehicles remotely.

On the back of strong international growth in smartphone and tablet usage, the mobile advertising market is expected to expand further in coming years. Could it become a key component in capturing new growth opportunities?

WHELAN: Mobile advertising is already happening, but is mainly monetised by application developers. Network operators own the media of communication and have a lot of valuable information in terms of user data and context. Therefore, they can provide a better proposition to advertisers, and hence monetise the assets they have.

AL WETAID: The mobile advertising hype has been around for many years now. So far it has not delivered on the expectations operators had a few years ago. Issues with consumer protection and privacy have been at the forefront of discussions. Nonetheless, it may flourish in the future if operators manage to provide customers with very personalised and customised advertising that is not intrusive.

ZAINALABEDIN: Experts have predicted that mobile advertising will grow worldwide, with spending forecast to reach $18bn in 2014. We see the trend growing in the Middle East, especially in Bahrain, and as advertising budgets come under pressure, companies are increasingly moving towards more cost-effective mobile advertising instead of the traditional advertising solutions.

However, we believe the enhanced geographic and demographic targeting solutions provided by digital media houses and application developers have given them a prime position in the mobile advertising value chain. We are of the view that the incremental value a telco could add to the mobile advertisement ecosystem service is marginal.

In which areas and segments could major telecom operators build new revenue streams outside of their core business?

AL WETAID: We believe that there are broadly two growth avenues for telecom operators that are seeking to capture new revenue streams outside of their core business. Firstly, looking at ICT services, there is a very big potential to address enterprise customers’ needs for ICT services based on two types: vertical industry solutions, such as e-learning, e-health and e-commerce, and horizontal services, such as managed services, systems integration, cloud computing, M2M and the “internet of things”. Secondly, growth outside of the core business could also benefit from a convergence of traditional and advanced services for consumers using LTE through the adoption of VoLTE, shared data services and multi-screen ubiquitous access.

ZAINALABEDIN: M2M and m-commerce have emerged as the most economically and commercially viable adjacencies for the telecoms industry. We have been at the forefront of tapping into these adjacent revenue streams, launching its mobile wallet solution in 2007. We will continue to leverage the Zain Group’s relationship in order to further develop ecosystems that will enable us to effectively tap into adjacent value chains.

WHELAN: As mentioned above, network operators have a lot of data on all subscribers, in addition to secure billing capabilities. This information could be better leveraged by operators if they sold such capabilities to adjacent industries – such as verticals – as a service, in addition to opening up networks to developers who can then create a continuous flow of new and innovative services for subscribers.

Whilst the enterprise business is already important, it is projected to grow more quickly than consumer numbers. Customers are already asking us to provide ICT services as a complement to network services, and we expect this demand to grow.

Share

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Bahrain 2015

Telecoms & IT chapter from The Report: Bahrain 2015

Cover of The Report: Bahrain 2015

The Report

This article is from the Telecoms & IT chapter of The Report: Bahrain 2015. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart