This is the latest installment of Winning Through Turns, a new McKinsey series of interviews with technology, media, and telecommunications leaders. The previous installments can be found here and here.
Over the last decade, telecommunications operators have spurred massive economic and social impacts. By covering nearly the entire world with data connectivity, they have enabled people everywhere to work, play, learn, socialize, and stay connected during the pandemic. Through it all, the industry has played a critical role in the rise of many of the digital powers that consume our daily lives, helping to fuel the success of the likes of Uber, YouTube, Facebook, and TikTok.
Despite that prominence, the industry has still been challenged by the accelerating digital disruption, unable to reap the financial rewards to match its economic and technological influence. e& (previously Etisalat Group) is an innovative, forward-thinking operator that is reorienting itself to alter this disparity. Headquartered in the UAE, with 162 million customers across 16 markets in the Middle East and Africa, e& recently embarked on an ambitious journey to transform from a telco into a techco, creating several new, key growth verticals. e& Group CEO, Hatem Dowidar, spoke about the transformation, as well as the future of the industry, the growing importance of ESG, and new ways to attract top talent, with McKinsey senior partner Wajih Abou-Zahr and partner Eefke Post. Their edited conversation appears below.
The future of the industry
McKinsey: How do you view the future of the telecom operator industry?
Hatem Dowidar: I look at the future of telecommunications with much optimism. As the pandemic showed, we have become so essential to people’s lives, practically a utility like electricity and water [became] a century ago. It is something people need and will continue to need in the coming years. At the same time, some of the services that were once core to our business, such as messaging and voice, have already been disrupted by instant messaging or voice over IP (VoIP). That means there’s only an upside with the additional services we can offer.
We are very excited about our evolution from a telco to a techco. To grow, we need to move from connectivity to selling comprehensive solutions. We believe there is much room to extend our remit in several directions.
Lessons for creating value
McKinsey: What lessons can the industry learn from the last decade to create more success and value in the coming years?
Hatem Dowidar: We learned a lot from the recent disruptions our industry has experienced. When VoiP arrived or instant messaging became mainstream, we risked losing too much of our value and significance to recover.
How did we end up in such a vulnerable position? As organizations, we had grown and built our business model, confident that revenue would continue to come from the same places. When we realized that some of these revenues had disappeared, it took us a while to reorient the organization and generate new services.
In all businesses, I think it is crucial to be more paranoid about the potential loss of business and be prepared and agile enough to change the business model.
So now, as we become a technology company, we can identify future opportunities much faster. We are working on many things that will not necessarily provide revenue in the short term. But three to five years from now, these projects will bear fruit and compensate for some of this disruption.
Delayering and the shift from telco to techco
McKinsey: You’re in the middle of a bold strategy to delayer the traditional business and turn your telco into a techco. What inspired this transformation?
Hatem Dowidar: Our delayering and changes to the business model were driven by the fact that we haven’t moved fast enough to deal with the near-constant disruption of recent years.
We don’t have infinite resources. To execute the shift from a telco to a techco, we need to free up many resources, and what enables this is the evolution of technology. On the customer-facing side, advances in Artificial Intelligence (AI) and robotics mean there is less need for customers to connect regularly with call centers and service agents. They can now resolve many issues or get answers to questions by themselves. On the back end, virtual networks and cloud-based services help free up specific technical resources to work on more cutting-edge, innovative projects to create future revenue streams.
So, in the end, delayering and reorganizing the departments was essential.
McKinsey: As part of this journey, Etisalat has rebranded into e& and restructured into separate business pillars. Can you explain that restructuring and the value you expect to capture?
Hatem Dowidar: We have gone through a restructuring over the past year to deliver on this transformation agenda from a telco to a techco.
We have moved from a more typical telco structure, with one consumer division and one enterprise division sitting underneath top leadership, to a model comprised of distinct business lines.
The first is very simple, our UAE telco, called etisalat by e&. The UAE is our home market and most significant business unit, and the CEO of this business pillar reports directly to me.
Then, we have a separate business pillar (and CEO) for our 15 international telco markets outside the UAE. e& international focuses on two things. One is proper governance, while the other is ensuring that we carry the best practices across the different markets in areas such as commercial, technology, and regulatory frameworks.
We then have e& enterprise, the business pillar focusing on enterprise solutions such as cloud business, cybersecurity, Internet of Things (IoT), and AI.
Next is e& life, a business pillar focusing on OTT (over-the-top) services to sell directly to customers. The current push is on fintech and content, though we may pursue other areas, such as health and education, in the future.
In our region with so many unbanked people, we want to create a fintech ecosystem that starts with a digital wallet but can also offer a much more comprehensive suite of services.
On content, we believe we have a natural advantage by being in the region and knowing our customers well. This will help us offer the best local and global programming selection, from linear to VOD (video-on-demand) to streaming. With a base of 162 million aggregate Group subscribers, we have a distinct advantage over most OTTs because we have much easier customer acquisition.
Our investment arm is e& capital, which focuses on investing in businesses we don’t intend to control and offers two distinct kinds of investments. We have a venture capital (VC) arm, which is looking into opportunities to invest in early-stage companies, and a growth arm, where we are more focused on taking bigger, but still minority, stakes in more established companies.
A critical role for ESG
McKinsey: The operator industry is now thinking about impact in a much more holistic way. How do you see the role of operators in ESG?
Hatem Dowidar: I think ESG has become core to what we do. It has become especially relevant in emerging markets, where our social impact as telecoms in the past and as technology providers going forward is significant.
But ESG is no longer just about a philanthropic desire to do good and be a good corporate citizen. It heavily influences the way that investors, customers, and potential hires look at us as well. Many people will only invest now in companies making a genuine effort in ESG, and more and more people and organizations are only buying services from companies they believe are committed to it. Our staff highly value what we do in this area, and many job candidates will only consider working for companies that are serious about ESG.
We are building an ESG structure within the company where people at the most senior levels are engaged in ESG, taking part in active discussion and communication around the issues. I believe we are off to a good start. Our last ESG rating was an A, one of the highest in the region. We aspire to maintain and grow that rating further by putting more effort into ESG.
Attracting talent to telcos
McKinsey: Telecom operators were historically a magnet for talent. Over the last several years, the sector has ceded much of this appeal to OTTs and other industries. What is your plan for attracting and retaining the best talent?
Hatem Dowidar: Talent has always moved from one industry to another. A few decades ago, telcos became very attractive because they seemed new and exciting. And then, as we became more disrupted by technology players, the telco sector appeared less appealing. People wanted to work with companies driving innovation and changing the world, and telcos no longer seemed to fall into that category.
However, as new technologies like 5G have arrived and many telcos (such as ours) are transforming themselves into true techcos, we’re starting to become more attractive to top talent. We are now able to tell prospective candidates, “Join us, because we are going to lead on AI. We are going to lead on cybersecurity or the metaverse as they will change the world.”
As part of this new approach to talent, we have launched initiatives like our graduate trainee program. Most recently, this was about artificial intelligence and how it can be incorporated into many jobs. So, even if you’re working in finance, how can you do those jobs better with AI? If you’re working on networks, how can you incorporate AI? Even if you are working on procurement, how can you procure better with AI?
This way, the best talent sees us as a company that is not accepting the status quo. And then they will hopefully want to join us on our journey.
Cultural pursuits and alternative careers
McKinsey: When you’re away from work, in your spare time, what kind of content do you gravitate to?
Hatem Dowidar: I have very eclectic tastes in music. I like jazz and hard rock, depending on the time of day or my mood. On my way to the office in the morning, I usually listen to hard rock and driving back home in the evening, I generally listen to jazz.
Even when I watch TV, I’m interested in two different genres. On the one hand, I am fascinated by history and historical fiction, so I watch TV series like Vikings or Peaky Blinders. On the other hand, I love things that are pure fantasy, like Lord of the Rings, The Hobbit, or a Marvel movie. That kind of entertainment allows me to enjoy a classic battle of good versus evil, where most of the time, good wins.
McKinsey: If you hadn’t embarked on a career in telecom, what industry could you see yourself working in today?
Hatem Dowidar: Another industry that I have always been fascinated by is space. During my childhood, one of the few ways to get into that industry was if you were in government or the military. But the industry has developed of late, whether with telecommunications satellite services or companies offering private orbiting opportunities. I believe there will be actual space travel, with people going to other planets, perhaps not in my lifetime, but certainly in the future. By that point, the industry may be as exciting and ubiquitous as aviation was 40 or 50 years ago or where our industry is today.