Etisalat, Indonesia, Unilever and the Future of Retail

Etisalat says this month (October 2012) it has invested $4.08 billion installing fibre optic connections in the UAE to facilitate high speed broad band and television services.  The Chief Executive of Etisalat in the UAE says they have yet to make a return on investment.


Back in 2008, The National reported on both telecom networks gearing up for FTTH.

In fact, the journalist writes: “Interest in FTTH networks has spiked in recent years as the popularity of bandwidth-hungry services such as streaming online television and peer-to-peer file sharing put enormous strain on traditional networks and boosted demand for faster connections


Given that our neighbour, Saudi Arabia is now the number one country to stream Youtube videos on their mobile (per capita) why haven’t we seen the media and advertising industry plan for this moment since 2008? The opportunities to grow both the content and advertising pie would have been huge.   Also, Etisalat (and other telco’s) currently host data on behalf of companies including Google and Yahoo on its servers so users can surf the web faster and avoid network problems.  There should be plenty of data that would be instrumental in transforming the advertising industry here.


Middle East usage may be small compared to the rest of the world as far as digital consumption patterns go, but the growth rates are double and sometimes triple that seen in other markets.  With so much growth, infrastructure must keep up, which opens an avenue for media and advertising to make use of this new channel.


Interesting patterns would emerge from this new audience segment.  The UAE has one of the highest rates of fibre-optic penetration in the world with 30.8 per cent of the country’s households and businesses connected, according to the Fibre to the Home Council Europe.  Those that have the money to pay (quite highly) for faster network access are potentially also those people that are very active on social media and might be early adopters of brands products and services.  They might be likely to have tight knit networks around vertical interests. 


These two observations would be highly useful to brands and their communication agencies. Perhaps they differ in terms of race, colour, ethnicity and age, but they have different things in common which means a whole new creative story and tone needs to be found. 



Du’s 100mbps connection is charged monthly starting at Dh999 (US$272) – more than double the cost of a 24 mbps connection.  Kuruvilla of the Arthur D Little Consultancy says: “I don’t think there are a lot of customers that will need this type of bandwidth. It will be suitable for niche customers looking to watch movies online and playing games.“  Newsflash  – that’s pretty much most of what we do here.  Movies and gaming are growing hugely.


Perhaps because that’s what consumers do here most, the price tag is so high.

So far our consumer profile is as follows:


  • High disposable income
  • Consumes a lot of content online
  • Highly networked
  • Niche interests (film, gaming, hobbies, etc)
  • Early adopter
  • Likes to be an opinion influencer


More information would be needed to find out whether this person is an introvert / extrovert (someone that lives a large portion of their life online, socializing, entertaining, shopping or one that ties in the outside activities with online life)


This would be useful to know for brands looking to properly segment their advertising budgets.  Should they focus more on communication at POS in store, or can they communicate and lead to checkout all online?


As Triska Hamid points out, “Telecoms operators in the region have so far struggled to monetise the growth in data usage on the mobile platform, reflecting a global trend”  furthermore, “Mobile operators charge customers for access to their networks, missing out on revenue from apps and downloads generated by platforms like Facebook, Google, Zynga etc”  


Du hopes to solve this with its Anayou offering and wants to attract all regional telcos, so far nothing has happened.


Surely it would have been better for Etisalat (and Du) to sit down with some of the big local firms, global brands and agency and media executives and talk about the profile of the new consumer? Telco could offer the brands faster and better ways to reach the target consumer, subject to a fee. 


From a consumer point of view, this would mean greatly reducing the $272 monthly price tag for 100mbps speeds in exchange for targeted advertising. The cost of the connection would be in effect sponsored by the brands.


This is analogous to the TV model, advertising sponsors the cost of the content production.


Why would this work? Whilst consumers may place some premium on higher speeds, the jump in price is too large to equate to value for money. A large percentage of the consumers may compare with costs in Europe of America for similar speeds and decide that its far cheaper abroad.  What people are short of in the region is content, and the only way to support the discovery of more content and also its production is to sponsor it, indirectly through connectivity.



As Etisalat is 60% owned by the government, the financial outlay may have been easier and quicker to achieve.  The emirates have sustainable development goals and a level of network readiness it wants to achieve.  As the government has so large a stake, will there be the same urgency to deliver a significant return on investment and if so how?


Etisalat managed to raise $509 million by selling its shares in the Indonesian mobile operator XL Axiata. They had bought the stake for $440 million back in 2007. The report also outlines: “Etisalat’s foreign operations account for 28 per cent of its top line, according to the firm’s second-quarter results. The company has embarked on an ambitious global expansion drive over recent years but many of its foreign ventures have been underwhelming” which is why it’s surprising that Etisalat have chosen to exit the Indonesian market now, when it is on the brink of a mobile explosion.


Why exit the Indonesian Market now when growth suggests shares will double / triple in value:

Firstly, I find the divestment of shares in the Indonesian market interesting.  Indonesia has a very high level of mobile centricity as demonstrated by the Mobile Monday report using Inmobi figures   There is no doubt that the shares would have increased in value as usage of mobile data increases.  Indonesians are heavy users of social media (being the largest “Facebook nation”) and they respond to global brands well.  There is also a lot of knowledge and expertise that could have been transferred from the Indonesian market to here.  Hanging on to those shares and trying to replicate some of their success would have given Etisalat a huge competitive edge in not just its domestic but other foreign markets as well.





Indonesia’s population is about 240 million with approximately 220 million mobile subscribers (92% penetration).  20% of mobile subs are smartphones (compared to feature phones)


The number of internet users is 55 million (23% penetration) and the percentage of mobile internet users is 29%. (16 million)


However, Gerard Tan of Gfk Asia claims Indonesia has a smartphone penetration of 62%


Whilst Singapore, Malaysia and the Philippines ranked as the most mobile payment ready countries in the world (Mastercard Mobile Payment Readiness Index, ) – Indonesia scored much lower, as the population are not familiar with mobile payments and score low on willingness and frequency of use.  However, their willingness to use m-payments scores higher than familiarity suggesting that “with enough marketing and consumer dedication, Indonesians could be adopting the technology in large numbers”


In contrast, the UAE and Saudi rank 7th and 8th respectively on the mobile payment readiness index, which means that coupled with our large retail industry growth (the fashion industry in the Middle East is said to be worth $10 billion ) – we should really start moving towards being a 21st century retail hub.


There are 9 operators in Indonesia, hence lots of competition.   With a massive market size, cheap mobile data rate and cheap devices to support data, Indonesia has very attractive market dynamics.  There are some downsides, such as quality of connection, no payment mode yet and no ecosystem support but these could be fixed by industry incentives, market education and media campaigns and relaxation of regulations.


In the UAE, the market looks very different of course with only 2 telecom operators, expensive mobile data rates and a focus on higher end devices.  However our connection quality is better. 


Blackberry’s largest market outside Canada is Indonesia.  Out of 77 million users worldwide, Indonesia counts for 12 million of them There are clusters of mobile developers in Indonesia and many have committed to Blackberry 10, which suggests that users all around the world will benefit from an improved content experience on the device.


The Chairman of Etisalat also says: “the UAE could become a digital hub where online services would be provided not only domestically but around the world to other operators


Indonesians are heavy users of Facebook and Twitter on mobiles  In 2010, Indonesia became the largest “Facebook nation”


Even with the majority of phones being feature phones, the “Call me”mobile marketing campaign by Axe (Unilever) back in 2008 delivered 270k SMS, 760M calls from 32M unique numbers and a 300% increase in sales.  Shinta Babu spoke about this at an MMA briefing in 2009.  Do also connect with Tommy Prastowo (now GM at Wunderman Indonesia) who was instrumental in that Axe campaign





In the Middle East, we have still to see real brand uptake of the mobile channel.


Indonesia even has an official association for e-commerce sites in the country called idEA.  With 55 million users, and 57% of users shopping online, Daniel Tumiwa says the potential of Indonesian ecommerce is massive.



As explained in the following section, whilst ecommerce in the Middle East is still new, there is potential to grow hugely with a shift in responsibilities between operator, advertiser and consumer.





How can operators start making return on its infrastructure investment?


Global and local brands are making heavy use of social networks to reach their consumer base.  E-commerce however is extremely low with high barriers to entry (cost of set up, requirement to access multiple countries in region to make it cost effective, lack of consistent trade costs between countries etc). Consumers are putting more strain on networks with their demand for rich media and content.


Operators can increase revenue by asking advertisers to pay to deliver their message over the faster network.  In addition they can charge for in-depth data on the target consumers.


The consumers in return get a much lower cost of connection, with the right communications, both consumer and advertiser will benefit.


Many people are using social networks.  Brands continue to invest in 3rd party platforms in order to reach their customer base. To facilitate commerce, telco’s could start creating online shops, accessible through the smart tv, (landline connection) or the mobile, or both, and charge the brand a per transaction fee to facilitate that.  This would recoup some of the investment they are losing by providing access to Facebook without billing the consumer for amount of time spent on there.


By matching the wealth of data the telco’s have from media watching (tv), content consumption (internet and mobile), and other geo-demographic factors with; the opportunity to buy (present the right product to the right person at the right time) – the Middle East could be the true retail center of the world.   

Source: New feed
Etisalat, Indonesia, Unilever and the Future of Retail

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