Monday, Oct 23, 2017
Telecoms & ICT | Middle East | Jordan

Innovation, the core of Umniah’s identity


3 years ago

Mr. Ihab Hinnawi, Chief Executive Officer Umniah
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Mr. Ihab Hinnawi

Chief Executive Officer Umniah

Since its official launch on June 26th 2005, Umniah has succeeded in quickly making a strong impression on one of the region’s most highly competitive markets.

The Jordanian economy is recovering well since the crisis of 2008 with an estimated average growth of 4% in the coming years. The ICT sector is a major contributor to the national economy with a 14% to the GDP. Please give us an overview of the current situation the sector is going through and which areas are to be looked at in the coming years in order to increase the competitiveness of the sector?

In order to fully understand our current situation, we need to direct our attention to the early years of our establishment when the real changes occurred in the ICT sector. Jordan’s strategic regional position helped industrial leaders and decision-makers realize its potential as a regional hub in the ICT sector. However, certain questions needed to be answered before actions could be taken. Firstly, how do we enhance the IT sector? And secondly, how do we push the telecommunications sector forward?

Local operators were established when the government decided to privatize the telecommunications sector. At that time, Jordan Telecom was the only operator serving the country. Believing that having a strong infrastructure in the telecommunications companies would encourage the growth of other sectors like the health, banking and education sector, Jordan allowed the ICT industry’s privatization and invited international players to enter the market. 

In the year 2000, France Telecom began its operations in Jordan, and was the first step taken after the privatization of the local ICT sector. Not too long afterwards, a third player came into the market and the penetration rate was just below 25 percent. It should be mentioned that every ten percent increase in the penetration rate translates to a 1 percent increase in the national GDP. Telecommunications companies soon began to realize that appropriate measures needed to be taken to ensure a healthy yet competitive atmosphere and a strong infrastructure. Today, if you look at the penetration rate of the mobile market, it has reached somewhere in between 150 to 160 percent.

As for the IT sector, we had many Jordanians specializing 15 years ago, and now they have been fully integrated into the ICT sector’s departments offering software development, system integration and system aggregation. There have been many success stories in this area, but we still aspire to reach the next level despite many problems such as access to the market and additional investments. This caused us to implement our central strategy back in 2000, which focused on ways to support Jordan-based companies as well as help them expand into African and European markets. Our notable efforts have helped stimulate additional exports in Jordan’s IT sector which are valued at more than USD 350 million.

More than 60 percent of Jordan’s population is around 25 years old and the great majority of them are computer literate. When Jordan’s three main operators introduced 3G services between 2010 and 2012, the youth were connected, and were able to share ideas and knowledge. The internet’s penetration rate in 2010, witnessed a significant growth of more than 60 percent. This surge is a major shift that helped many Jordanians connect with their peers on a regional and global level.

Jordan has the highest Facebook number of accounts per capita, hence, translating to more than 3 and a half million accounts out of a population of over 6 million, this indicates the favourable figures in Jordan’s literacy rate as well as showing how well people are connected. This offers a great opportunity as we have a considerably high literacy and, hence, with proper direction these youth will serve tomorrow’s public and private sectors. Jordan has many capable youth that have added a lot of value over the years to the IT industry and caused a notable surge in exports. Today, we are seeing the fruits of a strategy devised nearly 15 years ago, which seeks to make Jordan a regional hub for telecommunications services and IT products.

ICT sector’s contribution to the social development of the country is considerable, being the second largest employer in the country with an estimated 84,000 employed across the country. H.M. King Abdullah II has stated that the main driving factor to a successful development of Jordan’s ICT sector is education. To what extend is His Majesty’s vision in regards to the ICT sector influencing the steps taken by the major operators?

To be honest, we are following our King’s footsteps, not just because he is head of government, but we are so confident in his leadership. Jordanians have great talent in regards to IT development, and for this, they are in high demand in neighbouring countries, notably GCC countries. However, we are currently seeking ways to keep them locally employed as they are able to serve the country to the fullest.

It is worth noting that roughly 75 percent of all Arabic content circulating throughout the region is published and distributed locally. However, one of our main concerns is that pioneering companies specializing in the ICT sector will relocate due to scarce opportunities and lack of resources; for even with strong support from His Majesty, we are still looking for ways to keep these entrepreneurs operating locally due to several challenges we are facing such as the high taxation that is leading to decreasing the amount of investments in the country.

In regards to ensuring proper education is provided, I believe the government’s vision and objectives are similar to that of the ICT sector’s, and I am guardedly confident that Jordan has some of the most highly educated youth in the region; however, there is always room to improve our educational sector as well as launch projects to strengthen teachers’ skills. With fierce industrial competition being seen, necessary action is needed to ensure opportunities remain available.  Technology needs to have a major role within the education system requiring the IT and the ICT sector to work with universities to ensure technology is introduced in classrooms.

This appears to be on the current agenda of the Minister of Education and the National Broad Band, and we are therefore optimistic that meaningful action will be taken to ensure its integration.

The Regulatory framework established by the Jordanian Government in regards to ICT has been over questioned in the past months, especially when addressing the extra tax imposed on mobile calls and services. You have recently stated that revenues have dropped by 9% while profits declined by 30-40%. What are the reasons behind such decision and how are you planning on coping with such a major challenge in the medium-long term? How will this affect the services offered by the sector in general?

Firstly, a strong telecommunications infrastructure is needed in order to guarantee the smooth flow of transactions between all the industries, it is not feasible or realistic to isolate the ICT sector or limit its presence among other economical sectors. The stronger the infrastructure, the more successful IT and ICT-based companies can positively contribute to the economy. For this reason, countries such as Qatar and Australia are pouring considerable investments into strengthening their broadband networks.

Secondly, Jordan’s three operators have shareholders, and these shareholders need to see reasonable returns in order to ensure their future investments.

Thirdly, it is important to understand the many economical challenges the local ICT industry is facing, when there is any economical or political turmoil, we are directly affected. A major concern of ours is applying short-term solutions to fix long-term problems as it will never succeed. We understand that the country’s economy is going through difficult times and the government’s responsibility of finding employment solutions and the need of reducing its expenses. The regulatory committee has shown resilience in carrying out its responsibilities of equalizing service quality and prices; however, the committee needs to also keep a harmonious balance between market competition, return on investments and government profits. If the committee exceeds or falls short of its responsibilities, the desired outcome cannot be achieved.  The regulatory committee needs to assist us in ensuring consumers, shareholders and the government are all benefitting mutually.

Due to the periodic tax increases, revenue has dropped more than USD 100 million yearly, which is about 6 percent between 2012 and 2013. Additionally, profits have plunged by 20 or 30 percent. This, in turn, is negatively affecting the balance between the shareholders’ returns and the investment they are making. If you look at the global telecom sector, we have reached maturity and have slowed in our advancements. In recent years, the industry’s revenues from traditional services (voice and the SMS) have plunged; hence, global operators now need to double their investments to maintain revenues. Global telecommunications revenue continues to drop by about 3 percent each year, while the capital expenditure worldwide was at around 10 percent. Today, in order to stabilize revenues, operators need to invest at least 17 to 18 percent of their profits in new technologies like 3G, 4G and 5G services. As a result, shareholders have fewer returns because their funds are being directed towards capital expenditure.

Moreover, total profits of IT companies are also on the decline. We need to shift our investments towards technology to curb the decline, and this can be quite challenging. We need the government to understand that if shareholders’ returns continue to dwindle, they will direct their finances elsewhere.

Since you took over the company in 2009, what are the main changes you have seen so far, the main challenges and opportunities you see in the near future to expand the company to a whole new level of competitiveness?

I was greatly involved in Umniah’s establishment in 2005 and was responsible for all its commercial activities. Upon the commencement of the telecoms company’s operations, our penetration rate was at 38 percent; we had the understanding that just like electricity and water, telecommunications services should reach everyone.

Hence, we started the company based on three basic understandings: very attractive prices (the lowest in the country), transparency in all our business transactions, and that youth have the priority when introducing packages. In a country where60 percent of the population have very low purchasing power, we were planning to have around 90,000 subscribers in 6 months; however, we achieved that figure in the first week. We officially opened our doors in June 2005, and by the fourth quarter of the same year, we had nearly 350,000 satisfied customers.

We believe that Umniah is greatly responsible for the penetration of mobile services in Jordan.

When I became CEO in 2009, I was determined to achieve greater success in a market that currently has three key players. An operator needs five years to establish a strong reputation and if you grip anywhere around a 20 percent market share, you are considered a successful third player; we had a 51 percent share. Now in 2014, we are the second largest operator and still aim to become number one.

We have devised corporate strategies that focus on introducing services marked with creativity as it runs parallel to His Majesty’s vision of making Jordan a regional ICT hub; however, to achieve this, we require strong infrastructure and substantial investments. Instead of ensuring the great success of one company, we would rather see the moderate progress of many as it helps the entire economy advance.

As a result of this understanding, we partnered with Plug and Play to give young entrepreneurs the chance to travel to Silicon Valley, California to participate in a three-month training program. The workshop’s objective is to help these young entrepreneurs obtain valuable industrial expertise, bridging the two countries and meet with leading investors.

The future direction of our country lies in the hands of our youth, therefore, we have to invest extensively in the comprehensives development in order to ensure that they are up to task.

Corporate social Responsibility has always been at the forefront of your company, what are the main steps to be followed by your company in the coming years in terms of CSR and giving back to the community? Is Plug and Play also a way of ‘giving back’ and developing the youth?

The answer is definitely a ‘yes,’ our CSR programs usually revolve around promoting innovation, education, art and culture, sports and adventurism. We always take different approaches when implementing our programs as we believe in giving back to the community.

The difference between those areas will depend on the intensity of the program. Therefore, we tend to designate five percent of our CSR budget on arts and culture and 10 percent on education, as they hold greater importance. Other funds are directed at promoting innovation among youth as well as sports and adventurism. By helping start-ups become better established in the Jordanian market, we ultimately help curb unemployment levels by generating future job opportunities.

We are proud to drive the innovation wave in Jordan with our partnership with Plug and Play. This partnership is only the beginning and it is marked with phases; the first one was to bridge the gap between Jordan and Silicon Valley and the second is to create an innovation center in Jordan and the third step includes facilitating Plug and Play’s involvement in local universities to locate creative students. We are also eager to give these students special attention by hosting them and helping them further develop their ideas as we don’t take anything in return. Our one and only goal is to better influence these youth and bridge them with one of the leading tech companies for better knowledge and possible future investments.

In a few sentences, what is your final message to USA Today readers, when they read about Jordan, about the ICT sector and, most importantly, when they read about Umniah’s contribution to the social and economic development of your country?

I would say to everyone in the US to invest in Jordan. There are many great business opportunities in Jordan that individuals in the US can benefit from, and should capitalize on and invest in.

I aim to see Umniah perceive a global reputation that it is a company that strives and focuses on helping youth since they ensure the future success of any country, both economically and socially.



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