Venture at 10: Zain and Orange

Zain and Orange

Date of Interviews: Zain’s CEO Ahmad Hanandeh in January 2012, and Orange’s CEO Jean-Francois Thomas in February 2013

As dominant players within the important telecoms sector, the CEOs of Zain and Orange have frequently voiced their opinions in the pages of Venture. Below is a snapshot of interviews with Zain CEO Ahmad al-Hanandeh, and former Orange Jordan CEO Jean-Francois Thomas on some of the most important issues that faced the sector in recent years.

From the interviews

Fourth Operator

Orange’s Thomas: I don’t see any valid need to introduce a new player in the field. The number one negative consequence could be the reduction in the ability to invest by all the existing competitors, and a loss in profitability, which in turn would be a loss for the government in terms of taxes and to the country in terms of development of infrastructure. We are in an industry that is very capital-intensive. You need to invest a lot. My company is investing between JD40-50 million every year. All over the world, telecom companies are huge investors. The telecom industry in Jordan, just like in many other places around the world, used to be a monopoly. Then competition was introduced. Competition is good because it forces you to be more innovative, more agile, and better performing in terms of costs and value for money for your customers. I think this is the right model. But then you have to find the right balance between competition and allowing the companies that are in the industry to get enough of a return on their investments in order to keep investing. If you introduce too many players, competing head-to-head, you don’t give enough of them enough return to keep on investing. This is especially the case in a relatively small market such as Jordan.

The switch from voice to data

Zain’s Hanandeh: I see voice losing revenue to data. We see an increasing number of mobile data subscribers and an increasing demand on data services; we see more content provision and application development companies coming up in the country. This year we had a 15 percent increase in the total minutes consumed by our subscribers in voice. What they paid is almost 10 percent less in money. And this is the trend of the voice traffic. Data and value added services are compensating for this loss.

Introduction of 4G

Orange’s Thomas: The introduction of 4G services was a real milestone for us. We think this country deserves 4G and we couldn’t just leave Jordanians with one choice of provider. We bought frequencies in the 1800 MHz spectrum and selected Huawei to build the new network. Today, we are covering most of Amman. The rollout will be extremely rapid, with nationwide coverage by the end of Q3. What’s more, we’re using part of our existing 900 MHz band to boost our 3G services, which is where most customers will likely remain for the immediate future. I believe that anybody with a 4G compatible handset will try and go for 4G. The experience is totally different. It’s like if you buy a Ferrari and just drive it on little country roads. If you have a Samsung S6 or an iPhone 6, you will want to take the full advantage of its capabilities.

What happened next?

The government failed to receive serious bids for a fourth mobile operator license back in 2014. The prospects of seeing the emergence of a new player in the near future are slim, as the market remains highly saturated and existing operators are having their profit margins squeezed by the seemingly unstoppable rise of OTT services like WhatsApp. Mobile broadband continues to be by far and away the most popular way for Jordanians to access the Internet, with Orange estimating that national penetration for 3G and 4G now stand at more than 70 percent and 11 to 14 percent, respectively.