CORPORATE STRATEGY : Etisalat & Huch merger - Marriage of convenience or match made in heaven?

According to a press release publishedon the Hong Kong based CK Hutchison corporate website, CK Hutchison Holdings and UAE based  Etisalat Telecommunications have reached an agreement to combine their celluar telephony operations in Sri Lanka. According to the information provided, Hutch will have a bigger stake and as such will be in control of the combined operations.

In the opinion of the writer, its about time the minnows of the Sri Lanka mobile telephony industry got their acts together and combined their forces to stand up to the Axiata's Dialog and Mobitel-SLT empires. The combined Etisalat and Hutch would have approximately 22% of the total mobile subscriber base in the country consisting of about 28 million active connections. This is a substantial number considering that no 2 in the industry Mobitel has only 24% of the cake. Therefore, it is quite understandable if Mobitel becomes worried about the proposed merger.

Details of the deal are sketchy and requires TRC approvals and clear many hurdles before it is completed. Assuming that the deal goes through, it is not clear whether the combined operation will be branded as Hutch as they have the controlling stake or would be known as Hutch Etisalat or a completely different name.

While the writer has no definitive inside scoop, the word on the street is that Etisalat is badly affected by communal tensions prevailing in the country. The fact that Etisalat is from UAE which is a cosmopolitan,  forward looking, 21 century economy and a friend of Sri Lanka employing thousands of our "Sinhalese Buddhist" people is lost on some "Sinha Ley (lion's blood)" patriots. Not long ago they "punished" Muslim Etisalat by smashing the SIM cards. 

The joke doing rounds those days was that the idiots who broke/smashed/ate their Etisalat SIM cards and posted photos online, went to the nearest phone shop and bought Dialog SIMs not realizing that it is a company owned and controlled by Malaysian Axiata. Need I say any more?

In the opinion of the writer, what really affected Hutch and Etisalat was actually their past baggage, rather than any anti-Muslim crusade by a handful of nut cases. Hutch is the modern incarnation of CallLink. Those who are old enough would remember that CallLink owned by Singapore Telecom was the second cellular operator to come to Sri Lanka after the pioneer Celltel. While, CallLink metamorphosed into Hutch, Celltel evolved into today's Etisalat. Celltel and CallLink occupied the number one and two slots in the industry those days, much like Dialog and Mobitel today. 

The poor strategic bet Celltel and CallLink made by sticking to analog technology for too long and extremely poor customer service was to be their doom and they have never recovered. A bigger problem was that their corporate parents, Millicom Cellular of CellTel and Singapore Telecom of CallLink were never really committed to the Sri Lankan market and didn't give the investments both companies needed to upgrade their technologies and coverage. Numerous re-branding efforts and frequent ownership changes (there was a time Hutch when was called Tigo) also played a part.

At that time, Mobitel was a distant third and an independent company run until 1998 by Vijendran Watson, a Sri Lankan domiciled in Australia. Vijendran quietly built Mobitel, oversaw its transition to GSM after a bad bet on a dead-end technology called D-Amps. He then moved to Lanka Bell in 1998 with a mandate to turn it around.

Dialog, today's market leader was the also-ran fourth entrant. They pioneered the GSM format and quickly caught up through innovative products and savvy marketing campaigns. Dr. Hans Wijesuriya ran Dialog at that time and marketing was headed by Nushad Perera, one of the most innovative marketers (in my humble opinion) in Sri Lanka. The duo turned the also-ran Dialog into the juggernaut we see today.  

Looking at their history and the baggage they carry today, it would be really advisable if Hutch+Etisalat combine re-branded and rejuvenated their marketing. The brand Hutch has never really connected with the consumer. It kinda feel like a Huchchoom (a sneeze) than a credible brand to me. Therefore, they really need to rethink their brand name and brand positioning. 

Further, they are not going anywhere if they try to take Dialog or Mobitel head-on. That approach is bound to fail. If anyone is in doubt, just ask Airtel...their "simple plan" of cheap calls didn't really pan-out. 

What they need to do to maintain their subscriber base and find some profitable niches undeserved by the Dialog / Mobitel-SLT empires for further growth. They need to expand their data coverage as one of the deal breakers for Hutch and Etisalat even today is their patchy data coverage. The writer had a personal no-data-coverage experience with Etisalat at an out of Colombo town called "Kataragama", where millions visit every year.

So, Good luck to the new couple, Hutch and Etisalat. May the two of you go forth together and multiply. In the meantime, try to see whether you could tick-out the following check list.

1] Make sure that you don't lose your 22% present subscriber base.

2] Ditch your parent company inspired Hutch/Etisalat and seek a trendier, memorable brand name that is acceptable to Sinhala and Tamil speaking people.

3] Work on your 3G/4G data coverage. Even tuk-tuk drivers in Weli Oya and Akkaraipattu are posting selfies on FB these days. Also, some people try to trek thorough Knuckles Forest Range using Google Maps (and get lost).  

4] Seek out under served segments OR create some segments and dominate them. Remember that not everyone on top two networks are happy customers. There is a lot of griping about call plans, data plans, download speeds and FUPs. Capitalize on those. 

5] What ever you guys do, don't ruffle the feathers of the big boys too much too soon. Learn from the mistakes of the boys up north from India.