The transformation of e& (formerly known as Etisalat Group) from a giant telco to a trusted global technology and investment conglomerate has been a journey of breaking boundaries, envisioning futuristic ideas that will change the world and deploying next-generation technologies that will impact every industry. In an exclusive with Hatem Dowidar, Group CEO, e&, he shares the steps that e& has taken to make the change and discusses the limitless possibilities that lie ahead for the Group, in line with its ambitious strategy to drive a brighter, digital future.
Particularly for this edition of GITEX Global, he highlights how e& reinvented itself, building on its solid foundations as a giant telco, and is moving ahead in its ambitions to be a global technology player, considering M&As, enhancing geographic footprint, pursuing strategic partnerships and exploring multiple investment opportunities.
This has been a momentous year for e&. It was undoubtedly a result of the consistently strong performance over the 46 years of your journey, despite the rapidly evolving business landscape. What prompted the change, and what do you hope to achieve as a result of the transformation?
Since the beginning, we’ve always held true to our vision of empowering societies, first as a giant telecommunications company previously known for its superior voice connectivity services, and now as a global technology and investment conglomerate. Given the new reality of the disrupted business landscape where technology and the needs of our customer segments are constantly evolving, it was critical to refine our business model and ultimately diversify our revenue streams and add more value. The decision to make the change, however, has been gradual, and we knew we were headed in the right direction. We’d already been expanding our offerings and serving new customer segments over the years, and despite the COVID-19 pandemic, we realized that we could accomplish even more for the benefit of society if we moved forward as a global technology and investment conglomerate.
2021 was also a milestone year for e& in terms of financial performance, despite the repercussions of the pandemic. It was the year that sealed our decision to create a more progressive business model to sustain our hyperscaling ambitions, promote new ventures and partnerships, and maximize value across our operations. While being instrumental in supporting the UAE’s global digitalization leadership through pioneering advanced technologies, advancing ICT infrastructures, and fuelling geographic expansions, we were ready for what’s next, and the progress we’ve made in the first half of 2022 demonstrates our resilience.
For the first half of 2022, e&’s consolidated revenues reached AED 26.3 billion, while consolidated net profit was AED 4.9 billion, a year-over-year increase of 2.5%. At constant exchange rates, revenue increased by 3.8%. The aggregate group subscribers reached 160 million, a 2.5% increase over the same period last year. Moreover, the value of the Group's capital expenditure amounted to 3.5 billion dirhams in the first half of 2022. The cumulative results demonstrate our readiness to transform from a telco giant to a global technology and investment conglomerate, in line with our vision to “Make Possible.”
To aid in the transformation, what steps did you need to take to ensure that the growth ambitions and aspirations of e& were met?
There were several elements to ensure the success of the transformation. We adopted a growth mindset, created a future-ready business model, pursued strategic partnerships and M&As more actively and set our sights on new opportunities that the digitalization of sectors brought. Our strong performance has progressed our growth ambitions to build multiple revenue streams through specialist business pillars: Etisalat UAE, branded as etisalat by e&, e& international, e& life, e& enterprise and e& capital.
- The telecoms business currently continues to be led by etisalat by e& in e&’s home market, upholding e&’s rich telecoms heritage, bolstering the strong telecoms network and maximizing value for the Group’s various customer segments.
- In our international markets (the Group operates in 16 countries), the telecoms business is led by e& international, with a focus on growing an extensive network of world-class modern digital telcos by empowering our customers with the best connectivity, most inclusive financial services, richest entertainment and seamless business transformation while embracing expansion opportunities.
- Ramping up the digital services for individual customers to elevate their digital-first lifestyle, e& life brings next-generation technologies through smart platforms in entertainment, retail and financial technology. e& life houses evision (the largest and most trusted content aggregator in the MENAP region) and e& money (the new fintech company and the financial super app marketplace that advances digital financial solutions for all customer segments).
- To enable the digital transformation of governments, large-scale enterprises and corporates, e& enterprise (previously known as Enterprise Digital) focuses on maximizing value through its end-to-end solutions in cybersecurity, cloud, Internet of Things (IoT) and Artificial Intelligence (AI), as well as deploying mega projects.
- e& capital allows the Group to focus its efforts on driving new investments while maximizing shareholder value and strengthening its global presence.
Collaboration between telcos and internet tech companies is key to unlocking growth and maximizing value in this day and age. Why, in your opinion, will such strategic partnerships and collaborations be important to meet the demands of all customer segments? Tell us about some of the key strategic partnerships that e& has entered into this year, and how do you envision that will impact the services that you deliver?
So much has changed in the past decade in the roles of telecom operators and internet tech companies. Where telcos focused their attention on building the best network infrastructure and acquiring spectrum based on geographical demarcations and a highly regulated environment, internet tech companies used any form of network (cable or wireless) to develop applications and provide these services to their customers.
However, if we are to magnify the impact that we can make in the lives of our customers, whether they be consumers, governments or enterprises, it is necessary to envision new ways of working. That means both telecom operators and internet tech companies must capitalize on their core capabilities to bring exceptional digital experiences jointly to the table. As a global technology and investment conglomerate, we’ve already orchestrated such collaboration for our enterprise customers through our end-to-end solutions in IoT, AI and cybersecurity, as well as cloud and 5G.
Our partnerships with world-renowned companies such as Microsoft and Meta are game changers, making it possible to compound growth while designing seamless digital experiences for customers and contributing to society in more significant ways than ever imagined. When it comes to accelerating cloud adoption in the region, our collaboration with Microsoft offers our customers the opportunity to take full advantage of the benefits of using reliable, cost-effective public cloud solutions. The partnership is a perfect example of business integration that combines one of the world's fastest 5G networks from e& with Microsoft's technology ecosystem based on cloud solutions, artificial intelligence services and data services. Not only does this partnership have the potential to meet the growing demand for next-generation technology solutions, but it can also contribute to the UAE’s vision for a fully digitalized society.
We are leveraging Meta’s technologies through the use of e&’s advanced 5G network combined with a multitude of technologies to help customers embrace a digital-first lifestyle more efficiently. We will work together on use cases that integrate with the latest Meta products and solutions, consumer channel digitalization, enhancing Augmented Reality (AR) and Virtual Reality (VR) experiences and conversational commerce throughout its digital communication plans.
Your journey of transformation is remarkable as you continue to explore limitless possibilities beyond the realms of connectivity. Let’s talk investments and how they offer a suite of opportunities for e& to enhance and develop its international portfolio.
This year alone, we’ve taken massive strides in entering strategic partnerships and made several acquisitions for future business growth, driven by our relentless commitment to providing innovative solutions for the benefit of our customers and offering long-term sustainable investment opportunities for our investors.
One of our cornerstone investments this year was in Vodafone Group, where we acquired approximately 2,766 million shares, representing 9.8% of Vodafone’s issued share capital (excluding treasury shares), making us their largest shareholder. I believe our investment in Vodafone Group has great potential to drive value for both companies as it explores collaboration opportunities in the rapidly developing global telecom market and supports the adoption of next-generation technologies.
Through our partnership with ADQ, we’ve strengthened our service offering by signing a binding agreement to acquire a majority equity stake of circa 57% in STARZPLAY, a leading subscription video on demand and streaming service provider in MENA. It is a step in the right direction to meet the ever-changing consumer requirements as the demand for high-quality content and seamless streaming continues to rise.
You’ve been in the industry for quite a while. You’ve also witnessed the disruption of the business landscape during the pandemic, which changed the face of the telco industry. What keeps you excited for what’s to come in terms of technologies and innovative solutions at GITEX and beyond?
When it comes to the reinvention of telcos, I’m definitely excited about the possibilities that telcos have in leveraging both new and emerging technologies so that they can continue to deliver on their promises of offering the best customer experiences to boost digital-throughout lifestyles. One of the shifts in the digital transformation of telcos that will continue to take place is moving to cloud-native technologies as a cloud-first approach. By 2025, 85% of organizations will embrace a cloud-first principle, and the use of cloud-native architectures will become an absolute must, without which they will not be able to fully execute their digital strategies. Industry clouds are cloud and data platforms that are customized depending on what various industries require and will require moving from generic technology operations to a more tailored platform. They will boost cloud adoption to allow industries to digitally transform at scale, positively impacting the speed and the cost of IT modernization.
We will also see the accelerated adoption of next-generation technologies. Artificial Engineering is here to stay, given that both AI and Machine Learning (ML) reduce the time and cost associated with human input, while staff can focus on improving customer experience and driving the business forward rather than getting caught up in manual tasks that are automated. AI engineering operationalizes updates to AI models, using integrated data and model and development pipelines to deliver consistent business value from AI. By 2025, 10% of enterprises that establish AI engineering best practices will generate at least three times more value from their AI efforts than the 90% of enterprises that do not.
ESG governance will also be high on the agenda, given the sudden shift towards the digitalization of customer experiences and the importance of social performance in contributing to society. Digital telcos and global tech conglomerates could further strengthen their commitments to ESG by considering low carbon operations, striving to become even more diverse, inclusive and ethical employers; securing a digital future for all; maintaining ethical and transparent business practices; and giving back to the society.
As companies take on the role of becoming ESG enablers, we will see a profound shift in the telecom sector to increase energy efficiency and make significant reductions in greenhouse gas (GHG) emissions. For example, fiber to the home (FTTH) is 85% more energy efficient than copper networks because it reduces the need for cooling systems and the number of central offices. Industry-specific ESG reporting metrics for the mobile sector have been launched by GSMA, where companies can track their ESG progress over time to gauge maximum impact on society. Social criteria such as community relations, labor standards, data privacy, employee diversity, customer satisfaction, network stability and other governance issues will become increasingly important to measure the impact of the company on a range of stakeholders – employees, customers, communities, policymakers and shareholders.
What’s your view on the evolution of AI in relation to the development of the UAE digital economy?
Advancing AI in all aspects of life will contribute to unlocking more value for all members of society, and as a global technology and investment conglomerate, we are privileged to be part of the digital economy journey of the UAE. Digitalization creates additional opportunities for economic growth and adds value for our customers and shareholders.
This year, under the UAE’s leadership, several digital strategies have been implemented as the country aims to be a world leader in AI by 2031, in alignment with the UAE Centennial 2071 to create a thriving knowledge economy. Already, the country has taken massive strides in furthering the future of technology and innovation, from declaring the world’s first AI Minister to establishing the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI), the world’s first graduate-level AI university in Abu Dhabi. Moreover, the UAE’s Digital Government Strategy was developed to ensure a world-class digital infrastructure for the UAE and is in alignment with various national strategies, including the UAE Centennial 2071, UAE Strategy for AI and Fourth Industrial Revolution (4IR) strategy.
Also this year, the UAE announced the Digital Economy Strategy, which aims to double the contribution of the digital economy to the UAE’s GDP from 11.7% to over 20% within the next ten years. UAE is among the top 25% of countries in the most important global digital indicators, where the contribution of the digital economy to the non-oil GDP is 11.7% and UAE’s GDP is 9.7%. The overall potential effect of AI on the region’s economic growth is significant, with the MENA region estimated to accrue US $320 billion by 2030 from the technology, mainly through costs saved by massive automation across industries. Globally, the AI contribution to the global economy is likely to touch US $15.7 trillion.
Moreover, following the launch of the Dubai Metaverse Strategy, Dubai set up the Higher Committee for Future Technology and Digital Economy focused on investments in the metaverse and establishing strategic partnerships.
Retaining great talent and attracting new hires with the right skills is essential for future growth. How does e& tackle this?
A holistic HR 3.0 transformation is required to attract talent and retain existing talent. Digital HR 3.0 is about maximizing the employee engagement journey, creating a work culture that supports optimal productivity and performance, which then impacts the business growth and accelerates digital transformation that benefits all. And we have already been doing this internally.
When companies get clear on three things (values, culture and purpose), they are already on their way to becoming “future-ready companies.” As a McKinsey study says: future-ready organizations structure themselves in ways that make them fitter, flatter, faster and far better at unlocking value.
Successful organizational digital transformations require an in-depth look into reinforcing new behaviors or behavioral expectations that support organizational change. It could be anything from encouraging a continuous learning or flexible working model, to developing an internal ideation program where employees can submit their ideas that they feel may have a positive impact on the business or could lead to more innovation in the digital ecosystem. This undoubtedly encourages a sense of loyalty and belonging in the company.
Innovative leadership is another factor that will drive the organization forward and towards a complete digital transformation. This particular leadership style applies a growth mindset, innovation and creativity to managing both people and projects.
Partner with thought leaders in the industry as well as executive schools and universities so that there is ongoing learning in the area of tech. This is what we’ve done through our AI Graduate Program. We welcomed the first cohort of Emirati graduates to our cutting-edge, nine-month AI Graduate Program.
Innovation requires the collective knowledge, intellect, and brainpower of various institutions. When we think about the global impact we want to make, this involves taking care of our employees, nurturing an open, innovative culture and engaging the youth who will be leaders of tomorrow. There are several long-standing examples where partnerships between industry, government agencies and academic institutions have provided immense benefits to societies, for instance, access to employees of the future who are high school students today (Gen Z).
e& operates in 16 markets. What are your plans for looking further afield and exploring novel opportunities in new geographies?
e& has defined a clear strategic vision to increase shareholder value by accelerating growth while leveraging on its diversified portfolio and economies of scale. In addition to pursuing organic growth, we will pursue inorganic growth opportunities within the Middle East, Asia, Africa and Europe where it fits our investment criteria. We will also explore new business development opportunities such as strategic partnerships and joint ventures in selected areas, achieve scale synergies and have access to diverse currencies and geographies.
When it comes to the markets where we operate, Egypt and Morocco contribute the largest revenues and profits of e& outside the UAE. In the last three years, Etisalat Egypt has achieved a growth of more than 15% per annum. The Saudi Arabia market is a promising one, and we have sufficient capabilities to invest in developing innovative services there in line with the Kingdom’s vision. While we have announced our aspirations to increase our 28% stake in Mobily by 50% plus one share, we await a response from the Saudi regulators.