Qatar Telecom QSA

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Qatar Telecom QSA

CREATING QTEL IN 1987

PRIVATIZATION IN 1998

INTERNATIONAL EXPANSION FOR THE NEW CENTURY

CREATING QTEL IN 1987

Telecommunications came rather late to the tiny country of Qatar, when the first private telephone exchange, with a capacity of 50 lines, was installed in Doha in 1949. At the time, Qatar remained an impoverished backwater under British protection; the emirate’s primary industry, pearling, had been devastated in the 1930s by the twin blows of the global recession, and especially by the introduction of cultured pearls, introduced by Japan during that decade. Yet the discovery of oil represented new hope for Qatar. The new source of income brought further investments in the telecommunications sector, and led to the creation of a public telephone network in 1953. Initial capacity of the network was just 150 telephone lines. Qatar’s oil deposits later allowed it to emerge as one of the world’s richest countries per capita.

Independence in 1971 and the economic boom following the Arab oil embargo in the early 1970s created new momentum for the country. In the early 1970s, the decision was made to develop a modern telecommunications infrastructure. The Qatari government turned to the United Kingdom’s Cable & Wireless Ltd., forming Qatar National Telephone Service (QNTS), which was set up to provide domestic telephone services. Cable & Wireless was granted the concession for international telephone services. Work on installation of the network was carried out under the auspices of the newly created Telecommunications Department, established in 1973 under the Ministry of Communications and Transport. The full rollout of the new telephone network was completed by 1975. The following year, the company commissioned the Doha Earth Station, positioning the country as a major hub in the region’s international satellite-based telecommunications grid. A second earth station was added in 1985. By then, QNTS had become one of the first in the region to add mobile telephone services, using the analogue-based Mobile Automated Telephone Service (MATS) standard. The country later acted as a founding partner behind the launch of the Arabsat satellite in 1986, establishing a third earth station that year. Also that year, the company inaugurated its first fiber-optic link, between Doha and Khalifa City.

Despite these achievements, telephone penetration in Qatar remained low, with poor service levels. The Qatari government took full control of QNTS in 1987, which was merged with two other existing telecommunications operations to form Qatar Public Telecommunications Corporation (QPTC). Under terms of its founding agreement, QPTC was granted the monopoly over the country’s telecommunications sector through to the year 2013.

QPTC then began to institute a new program of modernizing the country’s telecommunications sector. In 1991, the company introduced the first public payphone. In that year, also, QPTC launched its own paging service, boasting national coverage. One year later, QPTC fully digitized the country’s telephone network, making it one of the region’s most advanced. QPTC was also given control of the country’s cable television monopoly, launching Qatar Cablevision in 1993. Like the vast majority of its telecommunications operations, the company’s cable television operations were transmitted via satellite through its existing earth station network. By then, QPTC’s expansion of its operations allowed it to top 110,000 telephone lines, enabling it to claim penetration rates of more than one-fifth of the total population.

QPTC was also the first in the region to launch new generation mobile telephone services. This came with the 1994 launch of Qatarnet, which introduced cellular telephone services based on the GSM standard. The company was somewhat slow to complete its base station grid, however, and continued to receive complaints about the lack of coverage, even in certain parts of the capital city, Doha, into the 2000s.

Nonetheless, QPTC remained committed to developing its range of services through the end of the decade. The company rolled out its new high-speed paging service, called Flex, in 1996. In that year, also, the company brought the Internet to Qatar, launching its first Internet access packages. Like other telecommunications offerings, however, Internet access remained tightly controlled by the Qatari government.

PRIVATIZATION IN 1998

The introduction of new services allowed QPTC to grow strongly through the decade, and by the late 1990s the company was already one of the largest and most profitable in the country. The company’s growth had received a major boost from the government’s massive investment in developing its liquefied natural gas industry, which not only stimulated the economy, but also brought in a surge in demand for the company’s telecommunications services. The country’s rising population, as Qatar became a magnet for a growing number of foreign nationals, helped push the company’s total subscriber base past 150,000. QPTC’s own investments, which boosted its total capacity to 350,000 lines, positioned the company for future growth.

COMPANY PERSPECTIVES

Our Vision: To be among the top 20 Telecommunications Companies in the world by 2020.

The Qatar government had begun moving toward a policy of privatization of its state-controlled assets, as part of a larger effort by the ruling Al-Thani family to transition toward a democratically elected government in the 2000s. As one of the country’s largest and most profitable companies, QPTC became a flagship of sorts for the government’s privatization policies. In 1998, the company listed its stock on the Doha Securities Market, and changed its name to Qatar Telecom (Qtel) Q.S.C. The following year, Qtel added its listing to the London Stock Exchange as well, followed by a listing on the Bahrain Stock Exchange in 2001, and on the Abu Dhabi Securities Market in 2002. Nonetheless, the Qatari government retained 55 percent of the company.

The first decade of the 2000s saw a boom in the company’s mobile telephone services, especially following the launch of its prepaid service, Hala. By the middle of the decade, the company’s mobile telephone operations were its largest, bypassing its fixed line operations, which grew only slowly to achieve a market penetration of 26 percent at mid-decade, to achieve a market penetration of 102 percent. At the same time, Qtel continued to roll out new services, such as high-speed ADSL based Internet access in 2002, called BarQ Platinum. The company also opened its first retail store, featuring a one-stop shopping concept, at the City Center Mall in Doha.

Qtel’s enhanced service offering came in part due to the unusual restructuring exercise launched by the company in 2002. Dubbed “Q-Turn” and devised by the McKinsey consulting firm, the restructuring exercise was unusual in that it involved transforming an already highly profitable company. As part of its restructuring, the company reorganized its operation, boosted its customer services division, while also stepping up the pace of its new services and product offerings.

The Q-Turn program, which took two years to complete, was designed to prepare the company for the next phase in its expansion. At home, the company’s monopoly was slated to come to an early end, amid the government moves to institute new democratic reforms. At the same time, Qtel’s domestic growth prospects had increasingly reached their limit, while former bestsellers, such as its paging service, had gone into decline. The company’s improved customer service offering was designed to help maintain customer loyalty in a postmonopoly marketplace, while also developing new markets for products and services.

INTERNATIONAL EXPANSION FOR THE NEW CENTURY

Nonetheless, Qtel recognized that its true survival as a public telecommunications company depended on its ability to expand beyond Qatar’s borders. Despite its relative lack of experience, Qtel became determined to break into new markets. This effort was quickly rewarded, when the company won its bid to acquire the second GSM license in Oman in 2004. For this, the company formed the joint venture Nawras with minority partner TDC International. By 2005, Nawras was operational, and quickly gained a 20 percent share of the Omani market.

Partnerships remained an important component in the company’s international ambitions. The company teamed up with Singapore Technologies Telemedia and investment bank Naeema Holding to bid for one of the GSM licenses on offer in Egypt in 2005, placing the company in head to head competition with Vodafone. By June 2006, the company had passed the first round of the selection process.

KEY DATES

1949:: First private telephone exchange is installed in Qatar.
1953:: First public telephone exchange is commissioned.
1972:: Qatari government forms Qatar National Telephone Service in partnership with Cable & Wireless Ltd.
1987:: Qatar Public Telecommunications Corporation (QPTC) absorbs existing telecom companies in Qatar and becomes state-owned monopoly.
1994:: QPTC launches GSM-based Qatarnet mobile telephone service.
1998:: Privatization of QPTC creates Qatar Telecom (Qtel), which lists on Doha Securities Market, then later adds stock to London and Bahrain stock exchanges.
2002:: “Q-Turn” restructuring program is launched.
2004:: Qtel wins bid for second GSM license in Oman, and forms Nawras, which begins service in 2005.
2006:: Qtel loses monopoly in Qatar.
2007:: Company pays $3.7 billion for Kuwait-based Wataniya, with mobile telephone operations in seven countries in Middle East and North Africa.

In the meantime, Qtel sought new international prospects and in November 2006 the company raised $2 billion in loans in order to fund its war chest. That fund-raising effort coincided with the Qatari government’s announcement in November 2006 that it was ending Qtel’s monopoly, opening the domestic market to competition. The first rival to Qtel’s home base was expected to appear as early as the end of 2007.

Qtel braced itself for the competition, in part by rolling out new services, including 3G mobile telecommunications services, which included an innovative mobile television service. The company also launched its own “triple play” package of Internet access, telephone, and television.

Yet the company’s future hopes were pinned on the international market and the ambitious goal of breaking into the global top 20 by 2020. In November 2006, the company bought 38.2 percent of Navlink, a data services company majority owned by AT&T and focused on the Middle East market. In January 2007, Qtel teamed up with Singapore Technologies Telemedia again, this time paying $635 million to buy a 25 percent share of Asia Mobile Holdings. That purchase gave Qtel a share of Telemedia’s Starhub, in Singapore, and PT Indosat, in Indonesia. The latter was already the second largest mobile provider in its market, with more than 14 million subscribers.

Elsewhere in the region, Qtel, in partnership with Atco Clearwire Telecom, became one of ten bidders for a fixed-line license in Saudi Arabia. The decision for that bid was expected to come late in 2007. In the meantime, Qtel made a leap into the regional big leagues at the beginning of March 2007, when it agreed to pay $3.7 billion for 51 percent of Wataniya, a Kuwait-based group focused on mobile telephone operations in the Middle East and North Africa. The Wataniya purchase expanded Qtel’s presence to Kuwait, Tunisia, Algeria, Iraq, Saudi Arabia, the Maldives, and, by the end of 2007, Palestine. With plans for more acquisitions, Qtel appeared determined to become a telecommunications major in the years to come.

M. L. Cohen