Embracing innovation and digitalization is critical to etisalat by e&’s success. In an exclusive interview with Telecom Review, CEO Masood M. Sharif Mahmood sheds light on the telecom arm’s transformation in line with the major rebranding, factors that impacted its latest performance, steps taken to maintain its strong position in the market and the role of telcos in addressing modern digital needs within the Middle East.
What are the key drivers that led e& to begin its transformation journey from a Telco to a TechCo?
We recognized the need for change due to several realities. The world is driven by technology, as demonstrated by the rapid success of ChatGPT, which reached one million users in record time.
The traditional Telco model has struggled for years, with a decline in the core Telco business resulting in low returns on invested capital and challenges in monetization. This has been driven by the need for Telcos to continuously invest in the latest telecoms infrastructure to meet the exponentially growing demand for high-speed data. Regulatory demands and a lack of innovation in the industry have further compounded these issues. Of note, etisalat by e&’s Capex investment per capita is second highest compared to its global peers. Such investments have delivered world-class infrastructure, which in turn has led to a sustained competitive advantage and a positive return on invested capital.
As a result, Telcos have underperformed, experiencing a -10% TSR growth over the past eight years. In contrast, technology companies have thrived, with investors rewarding them for their strong financial performance and growth potential.
Due to such strategic factors and the evolving business landscape, we therefore set a clear objective to transform into a global technology group. This transformation serves as a testament to our innovative approach and unwavering commitment to enhancing our customers' lives, which have always been integral parts of our DNA.
As part of our transformation, we have implemented a strategic approach by establishing five distinct business verticals: etisalat by e&, e& International, e& enterprise, e& life and e& capital. This approach allows us to effectively manage each vertical, enhance agility and maximize value creation. It also enables us to attract strategic partners and investors who align with the specific objectives of each vertical, resulting in a more significant impact.
We have adopted a growth mindset and developed a future-ready business model to fulfill our promises, add value for shareholders, seize opportunities and accelerate our growth. Our transformation into e& as a global technology group represents our ambition, innovation and commitment to growth.
The Group is embarking on an exciting phase, and I am eagerly anticipating the opportunity to tackle the challenges presented by our technology-driven world.
This is the second year of your leadership role at the Telecoms division under Etisalat, and during this time a major rebranding has taken place. How has the Telecom division’s operation transformed and evolved?
My experience at etisalat by e& has been incredibly dynamic and filled with unique challenges, opportunities and invaluable lessons. When I joined the company, the world was grappling with the aftermath of COVID-induced disruptions. The significance of telecom connectivity for consumers, businesses and government entities had reached new heights. At the same time, the Group was undergoing a strategic transformation that significantly impacted etisalat. Our primary focus was to ensure seamless business continuity while deploying the latest and most efficient technologies, such as 5G.
I am fortunate to lead etisalat, as we possess all the necessary elements to meet all stakeholders' demands despite these challenging circumstances. Our strategy and operations align with e&'s overall strategy, centered around achieving growth by diversifying revenue streams, rapid scaling through a deeper understanding of customer needs and ideating new technologies. I play a role in providing essential guidance, but it is truly the remarkable team I have the privilege to work with that achieves astounding results.
We intend to drive growth and create value with the vision to be the “customer champion” in a hyper-connected digital world by leveraging our clearly defined strategy consisting of four objectives.
First, we will grow our share of customers' Wallet in Core & Beyond services and simplify and innovate our product portfolio. This includes blending digital solutions for both B2C and SMB customers, migrating to new core services in the B2B sector and delivering premium digital experiences to maximize engagement in the B2C segment. Customers in the UAE enjoy the best mobile and fixed networks, as the UAE provides one of the highest network speeds in the world. In fact, the UAE is constantly maintaining Global mobile broadband speed leadership, and recently, its Fixed broadband speed ranking has also improved significantly. In April 2023, the UAE was ranked the 2nd fastest mobile network and the 3rd fastest fixed broadband network in the world. etisalat by e& is the main driver for improving UAE’s speed rankings, as over the last three years, etisalat by e&’s mobile download speed has increased by 2.7x and fixed broadband speed has increased by 4.5x. We also plan to leverage our network and technology leadership to ensure we create additional value for our business.
Secondly, we will establish a digital and related services incubator in the UAE and abroad, focusing on scaling and monetizing new growth engines. We aim to build a diverse and long-lasting portfolio of digital services that provide value to our customers while driving growth and profitability. Through organic growth and strategic acquisitions, we plan to experiment, nurture and monetize digital engines.
The company also places a strong emphasis on excelling in world-class customer experience delivery. We aim to transform every aspect of the customer experience, including touchpoints, customer journeys, insight generation, governance, reporting, processes and culture. By adopting a customer-centric approach, we strive to excel in CX delivery.
Finally, we aspire to transform into an AI and data-driven organization. This involves simplifying and automating our business processes using AI, ensuring that our talent and skills align with future market needs, developing advanced analytics capabilities and promoting sustainability across our organization. These priorities position us for long-term growth and success in a rapidly evolving digital landscape. etisalat by e& has already started its transformation journey by developing key capabilities and companywide AI use-case implementation. For example, we are capturing many thousands of data attributes, have deployed well in excess of 100 Machine Learning models, applied facial recognition, voice biometrics, OCR and chatbots, delivered a significant share of consumer revenue from CVM, and a wide range of AI models has been implemented across multiple areas such as customer segmentation, fraud detection and Autonomous Networking.
Embracing innovation and digitalization is critical to our success, with a focus on cutting-edge technologies. In support of our growth, we also aim to embrace new mindsets and explore untapped potential. For example, to enhance customer experience, we have introduced a Chief Customer Experience Officer. We have streamlined our organization by merging technology and IT functions to enhance agility, productivity and efficiency. Our capital allocation strategy will also support growth through investments and strategic partnerships.
Overall, our new brand identity has helped us reinforce our position as a leader and create market opportunities. These initiatives will drive our organization towards greater success.
Can you share a summary of etisalat by e&’s financial and operational performance for 2022? Which core factors impacted these results, and how will this positive outcome continue from Q1 2023 onwards?
We are proud to share our performance highlights for 2022, demonstrating our growth and success in the telecommunications industry. Our revenue increased by 3% compared to the previous year, driven by improved economic conditions in the UAE and our commitment to offering competitive and high-value products and services to consumers and businesses. We also experienced growth in our subscriber base for both mobile and fixed services, further solidifying our market position.
We focused on expanding our digital initiatives throughout the year, resulting in an expanded service portfolio and platform offerings. This strategic approach contributed to our higher year-on-year EBITDA, fueled by solid service revenue growth and ongoing cost efficiencies. As a result, we achieved an impressive EBITDA margin of 52%. Additionally, we maintained a strong net profit margin while actively investing in expanding our superior network and maintaining stable CAPEX/revenue ratios.
Looking forward to 2023, we remain confident in our positive trajectory. We are well-positioned to capitalize on the positive macroeconomic environment and the continued demand for digital services. Our Q1 results have already shown continued revenue growth compared to the previous year, even when considering the favorable impact of Expo Dubai on last year's performance.
In line with our growth strategy, we recently acquired “Service Market,” a prominent player in the online marketplace industry. This strategic move aligns with our goal to scale our operations and leverage our strong financial position. It also empowers us to invest in new growth opportunities and expand our reach in the market.
Notably, we maintain a low net debt-to-EBITDA ratio of around 0.6 at the group level, which is well below the industry average of 1.9x. This financial stability further reinforces our ability to navigate the industry landscape and pursue our growth objectives.
How do you see the future of connectivity evolving in the UAE and the Middle East?
The future of connectivity in the UAE and the Middle East holds tremendous potential for advancement. Several key developments are expected to shape the landscape. First, we anticipate the widespread adoption of 5G technology, which will enable faster and more reliable connections. This will pave the way for the growth of smart cities and the proliferation of IoT applications, revolutionizing various industries. Additionally, internet penetration will continue to increase, connecting more individuals and businesses to the digital world.
Furthermore, the expansion of cloud services and data centers will provide enhanced storage and processing capabilities, driving innovation and efficiency across sectors. Simultaneously, there will be a strong focus on cybersecurity measures to protect the growing digital infrastructure.
Telecom operators are diversifying their offerings to meet evolving consumer demands beyond traditional services. This shift will contribute to economic growth, social development and improved quality of life throughout the region.
The UAE, in particular, is poised to experience significant digital adoption. The Digital Economy in the UAE is projected to grow nearly fourfold, reaching US$140 billion by 2031. Social media usage, especially among youth and millennials, is surging. Moreover, businesses and government sectors across the Middle East are undergoing robust digital transformation, with spending expected to more than double by 2026.
These drivers of connectivity signify a fundamental shift, with traditional connectivity being replaced by next-generation solutions powered by advanced technology. The future entails flexible and scalable connectivity for businesses, akin to purchasing cloud services, with on-demand connectivity customized through simple clicks. Contextually aware networks will deliver intelligent connectivity, while end-to-end automation will enhance the customer experience through zero-touch processes.
On the consumer side, the convergence of 5G and AI presents exciting possibilities, particularly in augmented reality solutions that can enhance everyday lives. Telcos in the Middle East have a remarkable opportunity to shape a new future for connectivity by leveraging and enriching the available data to gain unparalleled insights into consumers.
The potential for innovation is limitless.
What are the steps etisalat by e& is taking to maintain its strong market position in the UAE?
etisalat by e& is committed to revolutionizing connectivity and becoming a customer champion in a hyper-connected digital world. By focusing on growth and leveraging the power of AI, the company aims to drive efficiency and agility in its operations. Investing in talent and utilizing data and insights, etisalat by e& aims to enhance customer experiences and unlock shareholder value.
To maintain its strong market position, etisalat by e& aligns with the UAE government's digitalization ambitions. This empowers the company to provide best-in-class innovative solutions, harness advanced technologies and maintain cutting-edge telecom infrastructure offerings. Acting as a trusted partner and advisor to businesses, etisalat by e& enables enterprise connectivity and supports the digital economy by facilitating future-forward spaces such as private networks, autonomous vehicles and AI.
Leveraging its 47 years of telecoms experience, etisalat by e& focuses on technology adoption in areas like 5G, Edge and Private Networks, which offer clear growth opportunities. This positions the company as the telecom orchestrator of choice.
An example of etisalat by e& bringing customers closer to a digital-first lifestyle is its acquisition of El Grocer, a grocery delivery platform, through its highly popular Smiles platform. This move enhances customers' experiences by providing seamless digital-first services. Similarly, the acquisition of ServiceMarket, a leading online marketplace for household services, aligns with the vision of empowering consumers and diversifying the Smiles marketplace's online presence.
To stay ahead of the competition, etisalat by e& regularly reviews its strategy and takes essential steps to leverage its strong market position. Continuous investment in infrastructure, including the expansion and improvement of Fiber and 5G networks, enables the delivery of the fastest bandwidth and best user experience to more customers.
In addition, the company invests in new technologies and solutions, such as AI, to improve service quality, enable faster time to market and enhance the overall digital experience.
Recognizing the importance of adjacent digital services, etisalat by e& has made significant investments in digital transformation and strategic acquisitions. These efforts have positioned the company as a leading digital player in the UAE and the broader region. The expansion of the SMB marketplace for business customers offers software solutions in a SaaS model, empowering small and medium-sized businesses in the digital landscape.
Launching digital services like the GoChat SuperApp and acquiring leading platforms such as elGrocer and ServiceMarket showcase the commitment to providing an extensive portfolio of telecom and digital services.
These initiatives are part of a comprehensive strategy to become a leading digital player in the region. etisalat by e& is dedicated to delivering exceptional telecom and digital services, ensuring all customers have the best experience and access to innovative solutions.
What roles can telcos play in serving the needs of the modern digital consumer in the Middle East, and why?
Telecom companies in the Middle East play critical roles in serving the needs of the modern digital consumer. These consumers are at the forefront of embracing emerging technologies and exhibit high levels of digital engagement across various industries, including banking, entertainment, telecom and travel.
Given their unique position in the digital ecosystem, telecom companies are pivotal in driving the adoption of digital channels and meeting the needs of consumers. They possess distinctive capabilities, including mobile and fixed connectivity infrastructure, strong billing relationships, access to customer data, extensive distribution and sales networks and partnerships with global tech giants.
One of the key roles of telecom companies is to provide fast and reliable connectivity, which is essential for consumers to access the services and platforms they rely on.
Telecom companies can also expand their offerings to provide a blend of core and digital services. They can enhance consumers' digital lifestyles by becoming preferred service providers for multiple digital services such as gaming, entertainment, smart homes, devices, e-health and insurance.
In addition, telecom companies enable digitization by providing the necessary infrastructure and expertise to help industries introduce digital business models such as e-health, e-finance, e-education, e-commerce, critical IoT, cybersecurity and analytics solutions to enhance their offerings and customer experience. Telcos can also support industries in digitizing their internal operations, leading to improved efficiency, productivity and agility.
Furthermore, telecom companies can establish partnerships with governments to strengthen the provision of secure connectivity to e-government services. This collaboration can involve developing e-government applications and driving the adoption of such services through mobile and other devices.
To enhance the overall customer experience, telecom companies can leverage data analytics and AI, to deliver personalized customer service and support tailored to individual needs and preferences.
Overall, Telecom companies in the Middle East play a crucial role in meeting the needs of the modern digital consumer. They serve as infrastructure providers, ISPs, MNOs and digital content and service providers. By investing in robust networks, offering reliable connectivity, driving the adoption of emerging technologies, facilitating IoT connectivity, collaborating with governments and leveraging data analytics and AI, they contribute to the growth of the digital economy and support the digital transformation of industries in the region.
