Osman Sultan on Mena’s move from ‘telco’ to ‘techco’

du

• Telecom veteran Sultan says it’s vital to invest in new fields
• ‘Over-the-top’ services are offered directly to a network’s customers
• Sultan says there is more to be done for Gulf entrepreneurs

Osman Sultan proclaimed in 1997 he would put “a mobile in the hand of everyone” in Egypt.

At the time, even some shareholders at Egyptian Company for Mobile Services (MobiNil), where he was CEO, were unsettled by his audacious statement. 

Egypt’s telecoms regulator granted him a licence to become the country’s first mobile operator, but the scepticism was plausible. While it had a population of 80 million people, the North African country had only around 35,000 active mobile phone users, one of the lowest penetration rates in the world at the time.

More than two decades later, the naysayers have been proven wrong. The number of mobile subscriptions in Egypt has risen from 1.36 million in 2000 to 103.45 million in 2021 for a population of 109.3 million, according to Statista.

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The global telecom services market was valued at $1.8 trillion in 2022, according to India-based Grand View Research and, for many telecom operators, mobile internet connectivity is their bread and butter.

However, Sultan believes that operators who rely solely on customer penetration growth and internet connectivity have “limited potential”.

Sultan is most famous in the Gulf region as the founding CEO of the UAE’s Emirates Integrated Telecommunications Company (known as du) from 2005 to 2019.

He is presently chairman of two startups and a limited partner in venture capital firms including Beco Capital and Middle East Venture Partners

The Gulf sector, where smartphone connectivity is one of the highest in the world at 97 percent, has seen operators transition from “telco to techco” by investing in innovative new revenue streams, he observed.

One area many are actively investing in is in over-the-top (OTT) services, in which a telecom provider directly offers services to users via its network.

Local operators such as du, Saudi Telecom Company, Etisalat (e&), Qtel, Batelco have all begun to diversify into the OTT segment over the past few years.

To stimulate this next phase of rapid growth, operators are working closely with startups. Sultan pointed to the success of Dubai-headquartered ride-hailing startup Careem, which has transitioned to become a super app, offering a range of additional services from food delivery to money transfers.

Careem has been hailed as the Middle East’s second ”unicorn’, and its investors included Saudi Telecom Company. It was reported last month that Careem was in talks with UAE-based e& to finance its expansion into even more service areas.

“Telecoms have all systematically, and rightly so, started to look at the startup space in the form of corporate venture capital,” Sultan said.

But he believes they need to partner with these platforms more strongly.

“What’s interesting for an entrepreneur is not just to have a telco bring money, but to use the telco as a way to accelerate the reach of their product and proposition. That could be a win-win.” 

Reuters

Sultan added that founders need better support systems in the region.

Data from investment fund Wamda found that startups in the Middle East and North Africa region raised $247 million across 67 deals in March 2023, a decline of 67 per cent month-on-month and down 17 percent year-on-year.

As a result, Sultan believes “there is still more to be done” to support entrepreneurs in the region and is concerned by the scarcity of funding for early-stage startups in the region.

“Venture capitalists now position themselves in later stages of the funding cycles,” he said. “This also poses the risk that too many good ideas that don’t take off, which could lead to a weakening of the entire startup ecosystem.”

Sultan is still involved in the local sector in advisory roles, and he dismisses criticism of Dubai’s unenviable top spot as the most expensive city when it comes to mobile data.

“The UAE is a very rich market in terms of services and capabilities,” Sultan said.

“It offers one of the best – if not the best – overall infrastructures in the world and particularly telecom infrastructures in terms of speed of data and coverage. It’s part of the choice of being here.”

Sultan also disagreed with analyst views that increasing competition in the UAE’s telecom duopoly – the two major network operators are du and e& – would help to bring down the costs.

“People need to understand the legitimate concern of those in charge of the sector. Telecom is a very capex intensive business. Telecom operators have invested billions and at the end of the day the economic equation must be viable.”