ONE ON ONE: Alcatel-Lucent tailoring services to regional market

Kate Dannies
8 Min Read

CAIRO: With a turnover of over ?16 billion in 2008, Alcatel-Lucent is clearly getting back on its feet.

After a turbulent merger between Lucent and Alcatel in 2006 that prompted many changes in the structure of the company and less than ideal profits, the new giant Alcatel-Lucent is making its mark on the global market.

After divesting of a mobile phone subsidiary, the company’s business is now centered on communications infrastructure. The company and its main competitors, Ericsson, Nokia-Siemens and Huawei, cover almost 100 percent of the global market in this sector.

Alcatel-Lucent provides operator services, value added servers, submarine internet cables, optical fibers and connectivity infrastructure for international and local clients around the world.

Adolfo Hernandez, the company’s president for Europe, Africa and the Middle East, has made it his business to see that these areas of Alcatel-Lucent’s operations are moving forward at a healthy clip.

“North to south, I cover from Norway to Cape Town, and east to west from Ireland to Vladivostok. It’s a really mixed territory in terms of market maturity, he explained.

“The different regions require different solutions, but I strive to apply our global vision across the board, and translate that vision to fit local needs. It’s the same strategy with a different approach, he continued.

Alcatel-Lucent has a direct presence in the 66 Middle Eastern and African countries it covers and works with international and local companies to provide IT solutions. The region accounted for over ?1 billion of business last year.

“We have an international dimension and a local dimension including global accounts like Vodafone and Orange, as well as semi-local and local players like Etisalat and Orascom that work across multiple countries, said Hernandez.

“We couldn’t do well regionally without Orascom, or internationally without Vodafone. We have to be doing well in all countries to offer the best service in each, he explained.

Regionally, Alcatel-Lucent has also gained a foothold in the verticals business, which supports communications infrastructure for petroleum companies, airports and other large operations.

The company recently collaborated on communications system for the soon to open Dubai metro.

Despite these exciting gains, the company has been impacted by the 8-12 percent estimated global shrinkage of the telecommunications market this year. For Alcatel-Lucent, this loss of business could mean a drop in revenue from ?150 billion in 2008 to just ?105 million for 2009.

Regional operations

Though Hernandez acknowledges the global slowdown, he emphasizes that Middle Eastern and African markets have continued to see growth throughout the crisis.

“The region is doing really well; there is growth here which isn’t something that can be said about everywhere in the current context. The region has been successful at finding new areas to compensate for the crisis, he said.

“We are seeing mind-blowing developments in the area. It is fascinating how Africa and the Middle East are linking up to big data pipes and becoming big players in the system. Our next challenge is to enhance intra-continental connectivity, he continued.

Hernandez says the key to covering a diverse geographic region is to identify key priorities and elements to drive and then figure out how to map those into covered areas with consideration for localized requirements.

But developing new solutions isn’t as simple as taking the latest developments from Europe and applying them in the Middle East and Africa. According to Hernandez, the process goes both ways.

“We’ve had to develop eco-friendly alternatives in areas with unreliable electricity supplies. In turn, we’ve realized that these products have a market in Europe and North America these is an increasing emphasis on green technology, he explained.

“On the other hand, as subscriber growth plateaus in the Middle East and Africa we’ve had to identify new sources of revenue, and have looked to things like mobile advertising, which was pioneered in Europe, to enhance these other market, he continued.

Driving new technology will require the increased participation of local investors and utilization of the increasingly popular public private partnership (PPP) model regionally.

This, Hernandez maintains, will prove vital as operators make the move towards more dynamic networks, newer technologies and more comprehensive coverage.

“We’re still waiting to see a move to full IP networks in the region. New networks will ensure that we can offer more dynamic and flexible services and this will be positive, said Hernandez.

Another trend that might not be seen in such a positive light in some areas is outsourcing. Hernandez maintains that outsourcing is necessary for progress.

“I think the other trend we’ve seen is outsourcing network operations. Outsourcing allows companies to cut costs and achieve higher quality so they can focus on providing more services, he explained.

However, Hernandez conceded that an outsourcing move is wrought with political considerations as local governments strive to conserve jobs within their borders.

“Governments are concerned with guaranteeing employment and they get heavily involved with these types of decisions, he said.

Outsourcing or no outsourcing, Hernandez emphasizes that the future of the telecom industry locally will be increasingly service-based, a move that will require the enhancement of local networks.

“We’re going to see a richer set of services as perceived by the user, everything from watching multimedia in real time to videoconferencing. These new patterns of usage will require operators to transform their networks into more flexible high leverage networks that can field new demands, he stated.

This relationship, he says, will fuel a cycle of demand as consumers demand more services and operators require more fiber, optics, software and convergence and delivery services between new IT and old telecom platforms.

Hernandez says he expects Egypt to continue to play a major role in the expansion of Alcatel-Lucent’s operations regionally, providing that the country remains business friendly.

As the business expands, identifying and nurturing local talent will be key.

“We need to make sure to grow local talent because large-scale leveraging from abroad isn’t workable. We need to develop the expertise here, he concluded.

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