Catering to a niche client segment…

Veer Passi has been no stranger to the boardroom.

Early on in his career, he found himself attending meetings with chief executives of top telecom companies in India.

It was those early lessons, he says, watching senior management take critical decisions, which helped him in his job as one of the youngest chief executives in the telecom sector.

At the age of 30, Mr Passi was approached by Bahrain’s Kalaam Telecom to head their operations.

For the young man from the Indian city of Chandigarh, the task seemed overwhelming at first.

“One of the challenges was the fact that most decisions were instinctive as I hadn’t had the experience of taking them in the past,” he said.

However, when it came to making a mark in Bahrain’s small and competitive playing field, the fledgling Kalaam Telecom chose to bring on board the seasoned telecom expert.

When Mr Passi began his career in finance with an Indian telecom operator, the country’s market had penetration levels of only 10 per cent.

Nearly a decade later, with changing market dynamics, they range between 70pc and 80pc.

The growth trajectory of the telecom sector was not entirely unanticipated, however its speed is phenomenal.

“It was not only about voice, but we were talking about broadband back then and we knew that the future would be mobile,” said Mr Passi.

“The matured economies such as the US and Europe had broadband, so we knew that this was a sector where growth was expected but didn’t anticipate that it would come so soon, and that Indian operators would go global.”

Mr Passi’s previous employer Indian telecom giant Bharti Airtel has since acquired a significant domestic market and moved on to acquire assets in Africa.

Overseas acquisitions, which Bahraini companies are also eyeing, appear to be the trend.

“Of the three major players in Bahrain, two are overseas investors who chose the Bahrain market,” said Mr Passi.

“As for local players, whenever captive consumption goes down, companies go abroad to improve their cash flows and tap into high growth markets.

“It’s always crucial to increase your commercial footprint and enhance the value of your customers,” he added.

When Mr Passi joined KPMG’s Dubai branch in a telecom advisory management role, the UAE’s leading operators such as Etisalat had already been searching for newer markets.

Coming from India whose telecom sector thrives on the sheer size of the population, Mr Passi had to deal with smaller scale markets.

“The dynamics are very different from what I was used to in India,” he said.

“The market base is very small.

“In India, you talk about millions of subscribers, here we’re talking about hundreds.”

With bigger markets came multiple players, however in Bahrain, only one operator was sufficient to cater to the communication needs of the population for a long time.

All that, however, was to change when the Telecom Regulatory Authority deregulated the market in 2004 and opened it up to newer players.

Kalaam, together with partner Telecom Australia, bid for a second generation mobile telephone licence, along with 10 others.

The licence eventually went to MTC Vodafone, now called Zain.

“We have all licences except GSM,” said Mr Passi.

Kalaam Telecom is an alternative operator, catering to a niche client segment of enterprises.

With a small team of 50 and a capital base of BD3 million, the operator has in the last few years managed to attract 1,500 clients, which for Bahrain is a significant number.

As Kalaam plans to expand regionally, starting with Oman, does the operator have plans to tap into the much larger retail sector in Bahrain?

“No, certainly not,” says Mr Passi emphatically.

The reason he gave is the fact that growth prospects for retail are diminishing and saturated, while the broadband segment and corporate client base hold more promise.

“We cannot compete with established GSM operators on the retail front,” he said. However, the enterprises segment remained underserved and there lay the opportunity for yet another player to contribute.

“We’re cash positive, we’re growing and we haven’t gone back to our shareholders to make an investment in the last three years,” he said.

Increased competition in the telecom sector, Mr Passi said, has served Bahrain’s economy well.

“Competition has brought more choice and innovation to the economy.

“Every entrant takes away a share of the pie.

“In terms of revenue, voice constitutes 60pc, the other 40pc belong to data, while the contribution of information communication technology remains negligible.

“Whenever anyone enters the market they target price, and hence we can see that the average revenue per user for Bahrain’s earliest telecom player has gone down dramatically.”

Bahrain needs to focus on innovation and Mr Passi noted that more operators are making significant investments in research and development.

“There was a time when one could say that technology affected social trends and now we are in a situation where technology creates social trends,” he said.

“These trends create a requirement and if telecom companies don’t catch up, they won’t be able to cater to that market and growth will remain limited.”
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