Middle East Telcos Mull Alliance In Facebook Fight

VERY DIFFICULT

The proposed Arab online platform would feature social media and online shopping for goods and services, including digital content such as music, video and applications, Sultan said.

He declined to give details, saying parts of the talks were confidential, and most other Arab telecommunications operators contacted by Reuters declined to comment or did not respond to requests for comment.

But Sheikh Mohamed Al Khalifa, chief executive of Bahrain Telecommunications Co, welcomed the idea.

“Telcos are beginning to look to the deployment of OTT services such as streamed TV and video-on-demand,” he said. “Such diversification (into) adjacent industries has become necessary. There are gains to be made by collaborating within our industry in the Middle East.”

Sceptics point to the fact that efforts by telecommunications firms elsewhere in the world to set up online ventures have often failed when faced with the technical savvy and marketing muscle of the established Internet giants.

“Fundamentally, it’s very difficult to complete against OTT players – operators lack the agility and the core competencies as well as the brand appeal,” said Guillermo Escofet, a senior analyst at Informa Telecom and Media in London.

“They’re used to running networks, not being media companies. Also, operators instinctively try to differentiate themselves from each other – it’s against their DNA to work together.”

London-listed Vodafone is one of a number of operators that have had difficulty creating Internet services. The Vodafone 360 service, based on customers’ phone address books, was launched in Europe in 2009, letting customers import contacts from social networks and use an online application store. In 2011, Vodafone said it was winding down the service.

“Operators have failed miserably every time they have tried to move up the value chain, except for in certain business-to-business services,” said Pedro Oliveira, a partner at global management consultants Oliver Wyman. “Some have tried to move into content and applications, but the war is lost already.”

The big Western Internet firms are already popular around the Middle East. Facebook, which offers an Arabic interface, had 45.2 million users in the Arab world as of June 30, up more than 50 percent from a year earlier, according to the Arab Social Media Report, produced by the Dubai School of Government.

Despite pockets of innovation in the region, such as video game industries in Saudi Arabia and Jordan, and ventures developing applications for smart phones in Egypt, the Middle East has so far not come close to developing online products to rival the top Western Internet companies.