Middle East telcos are crossing other regions in search of the 'next billion' consumers, reports Ryan Harrison.

How does a company successfully expand into new markets? Marketers in the telcos industry have been grappling with this question for a few years now.

Telco and handset bosses decided, even before the financial crisis, to diversify as the Middle East market tightened.

After enormous growth in the early-tomid 2000s, which saw mobile penetration levels rise rapidly, the region quickly became oversaturated.

With profits margins squeezed at home, the big players looked elsewhere.

There has still been inter-GCC expansion. Last summer, for instance, Qtel grabbed the headlines with the $2.2bn purchase of the remaining 48 per cent of Kuwait-based Wataniya Telecom that it did not own.

In moves like this companies are generally looking to benefit from greater control in existing subsidiaries' activities rather than break new ground.

Wataniya Telecom recently launched the Nokia Lumia at an exclusive event in Kuwait for its members.

Others such as Etisalat are expanding their brand through technology deals.

The UAE firm boosted capacity in Africa with a new satellite last year called Intelsat 22. The move expanded its reach of internet, voice, data and video services.

An Etisalat spokesperson highlighted this wasn't to the detriment of services at home, though, adding: "The company has invested more than $5bn over four years in its fibre optics network, considered as a long-term investment for the development of essential sectors such as education, healthcare, business, banking, hospitality and others.

"The project, which is one of the most advanced in the region, has seen the laying of more than 2.8m km of cabling all over the UAE and has enabled the completion of the recent breakthrough 300Mbps speed test."

Etisalat's sheer size and reach are core selling points here, especially in new ventures in Africa.

It hasn't always worked out that way.

India, for example, was a PR disaster for Etisalat. The firm was forced to write off investments worth $827m following a court's decision cancelling 122 mobile licences. (Bahrain telco Batelco had earlier existed India.)

Etisalat's rival du is less ambitious, but is still mulling plans to enter the Saudi Arabian market as a mobile virtual network operator (MVNO). MVNO operators do not have their own telecommunications infrastructure and typically rely on other carriers' networks to serve customers.

Farid Faraidooni, COO at du, said: "At this stage we are only exploring the opportunity of expanding internationally through MVNO ventures and the potential for generating incremental value for the shareholders."

Handset makers that have previously recorded strong growth in the Middle East are also looking further afield. There were a number of high-profile launches to connect with African and Asian consumers in the past 12 months, including Nokia's unveiling of the Asha Touch series of mobile devices in South Africa. The two new brands, Nokia Asha 306 and Nokia Asha 311, expand Nokia's Asha range of phones that debuted in Q4 2011.

In addition to offering an enhanced social experience, the two have been created with entertainment in mind. Included free with the new Asha Touch products is an exclusive gift of 40 EA games to download for free, including Tetris, Bejeweled, Need for Speed: The Run and Fifa 2012. Ten Asha devices, targeted at young, social consumers, have hit the market.

There is great excitement in the industry about the nearly one billion mobile phone subscriptions in Africa, as well as the potential of mass markets such as India.

As India's economy continues to grow, shopping habits are evolving, particularly among Low-Income Value Explorers (LIVE), a group once referred to as the 'deprived' class. The LIVE demographic is mobilising to become, what is termed by Nielsen, First-Time Modern Trade Shoppers.

By 2015, Nielsen estimates that these two segments alone will drive an additional $3bn FMCG sales in India.

Tapping into this increasingly mobilised population growth could be the key to future profitability for telco firms as western markets struggle to rebound and population levels remain flat.

The Middle East posted a strong track record of profitability for many in the past, but the playing field is maturing. Marketers will, increasingly, be called to discard the playbook from the last decade and formulate a new strategy for international expansion to guarantee long-term success.

© Gulf Marketing Review 2013