“The year of 2010 might be remembered as one in which the future of Zain seemed very uncertain and in some instances there were even fears that the former "gold standard" for Middle East operators might cease to exist completely. This is however, not the case and the operator has shown a healthy return to profit in the latest results released by the Group. True, this is mainly due to the once off sale of most of its African operations to Bharti-Airtel, but there are other signs that point towards a healthyprospect for growth in the coming year.

At present, there is still continued speculation about the sale of the operator's Saudi assets as a necessary condition for a deal with Etisalat to take place and indeed the news that all pending offers were rejected is certainly a cause for concern. Speculation has focused on issues such as family alliances and other vague angles that make it very difficult to gain complete clarity.

If one is to focus only on the financial facts, there is hope for the future of the operator. In recent reports, the Group has stated that it hopes to focus its energy on building its subscriber base in the GCC. Frost & Sullivan believes its current financial situation is a health foundation for this targeted growth, providing that there are two very important factors in place. The first of these is consolidation. The Group is a perfect illustration of the negative side to exponential growth where a lack of focus can be detrimental to sustained growth; it is therefore recommended that the Group focus on each of its operating companies with a view to securing existing revenue streams and changing
emphasis from subscriber acquisition to subscriber retention. The second of these is revenue creation - the advance of mobile applications and the introduction of several applications stores to the MENA region in the past 12 months is testimony to the growing opportunity represented by the trend. In order to take advantage of this, operators need to have a clear content provision strategy in place with offerings that are differentiated and unique. The encouragement of developer participation is one way
in which to provide new applications and ingratiate an operator with its subscriber base.
Frost & Sullivan believes that 2011 could be a very promising year for Zain provided that these two conditions are met in addition to the operator providing subscribers and investors with a clear path forward. It is time for the operator to present a focused approach to ensure its future success."

Perspective by:
Lindsey McDonald, Consultant, Information & Communication Technologies Practice, MENA, Frost & Sullivan

The global aviation sector was expected to make good profits in 2011; however it looks quite unlikely considering the current political situation in the Middle East region. Frost & Sullivan forecasts this Middle Eastern crisis to hit the aviation sector soon. The Aviation Turbine Fuel (ATF) prices account for a major portion of the operational expenses. The crisis in the countries in Middle Eastern states has raised the oil prices per barrel. Assuming the situation continues, the oil prices are expected to touch US $ 115- US $ 120 per barrel within the next two weeks which would result the global airlines in losses for the current year. The Middle Eastern crisis has also restrained the inflow of tourists into the region, especially in countries like Egypt and Tunisia. The economies of Egypt and Tunisia are strongly supported by Tourism and these economies are in grave danger if the tourist inflow does not get back to normal. Another key threat is the rise of political unrest in the region which would impact the aerospace sector at all levels. The key area which would feel its impact is the offset sector where the foreign investors would be reluctant to procure from this region. The continuation of political turmoil would also lead to a dip in the defence budgets in the region. There is also a risk of civil war in the region which would lead to the unstable airport infrastructure, airline operators and MRO market apart from destabilizing the entire economy of the region. On advent of a civil war, it is expected that the radical Islamic groups would venture into the countries in this region; this is a key risk to the Western countries. The oil economy of this region would financially support the radical groups to procure advanced weaponry system in large scale. Libya produces about 1.6 Million barrel of oil, majority of which is exported to Europe. Saudi Arabia would need to increase its production to cater to the European needs, failing which the economies in Western countries would be in a risk because the oil prices would increase. This would risk the stability of the economy as the oil prices form a part of the inflation. Iran has also been restless due to the political turmoil and it has sent two warships across the Suez Canal (Khark and Alvand) and is expected to move towards Syria which has created a platform for international intervene from Israel. The US defence budgets are expected to decrease over the next few years and it would be interesting to witness if the US would intervene, its interest in oil reserves would force the US intervention. However, if the oil prices continue to rise it will be bad news for Aircraft Manufacturers, Airline Leasers, Component Manufacturers, Airports and the MRO houses. All the associated trade with each of these sectors would also be affected. It is strategically important for Aerospace and Defence companies to have a huge cash capital to acquire financially hit companies which would add value in the long term. The political turmoil in Middle East is a good platform for the entry of radical groups which need to be addressed with utmost caution, failing which the entire Middle East would turn out to be another disturbed region and would affect the entire global economy. Perspective By: John Siddharth C.P, Industry Analyst, Aerospace & Defence Practice, South Asia & Middle East, Frost & Sullivan