Face to face: Mansour al Babtain
Innovation has led the way for 60 years - but how does the company maintain its edge?
Al Babtain Power and Telecommunication is a story of a forward thinking company whose initiatives literally brighten cities and smart ideas communicate deep understanding of the Saudi market needs. A series of sound strategies elevated it to being one of the leading companies in its field in the Saudi market.
Strategy No. 1: Why import when you can manufacture?
When the mother company was established in 1955, its main function then was the contracting business particularly electrical substations. Seeing that they depended on the European/US markets for products like power poles, in the early 80s they decided to expand from pure contracting to manufacturing of power poles and towers.
Strategy No. 2: Avoid conflict of interest and gain customer trust.
Al-Babtain split their activities into two independent operations. Al-Babtain for Contracting, would seek projects that did not include the erection of substations and left that job to Al-Babtain for Industry and Trade, the manufacturing arm of the company. “If we were at the same time the contractor and the manufacturer, we would naturally prioritise the manufacturing for our projects but not for projects that other contractors have acquired. It would be a conflict of interest and they would stop buying from us,” said Mansour Al-Babtain, Al-Babtain’s KSA Country Manager. Following the same reasoning, another split followed, where Al-Babtain trading became independent from the industrial and contracting activities.
Strategy No. 3: Shorten the learning curve.
Being on the steel poles and towers manufacturing side and seeing that the telecom industry was starting to flourish in the 90s with people beginning to know about mobiles, the company realised that a huge amount of infrastructure work in telecom was needed. “In 1993, we sought an agreement with Canadian LeBLANC, a company specialized in telecom, design, and contracting. So we established the JV Al-Babtain - LeBLANC Telecommunication Systems, 51% owned by Al-Babtain and 49% LeBLANC and it was geared for the Saudi market as well as the Gulf region,” said Mansour Al-Babtain. Armed with this immediate know-how, the JV established offices in Egypt, Saudi Arabia and the UAE and served the MENA. In 2012, Al-Babtain bought the shares of LeBLANC in these countries and it became the telecom arm for Al-Babtain Power and Telecommunication Group. “It is still called Al-Babtain LeBLANC but it is under the umbrella of Al-Babtain Power and Telecom. It is a known brand. When we acquired the company, we as well acquired its activities and employees in the MENA. The acquisition was in the SR 80 million range,” explained Mansour Al-Babtain.
The decision in 2006 to turn the company from a limited liability company into a Joint Stock Company, ranked the company at the time among the top 100 Gulf companies with an annual turnover of SR700 million. The move as well split the activities of power from telecom.
Strategy No.4: Keep growing. In 2000, Al-Babtain established a factory in Egypt which like its Saudi counterpart manufactures poles and towers for the power and telecom sectors. In the telecom sector, the company aims to enter into joint venture agreements in the area of In Building Solutions (IBS). The company has entered into discussions with companies specialized in design, hoping to launch projects in 2015. Telecom operators provide IBS to overcome coverage and quality issues, and to increase capacity. “The market is just beginning to offer complete solutions from infrastructure, to power poles and telecom technology in Saudi. There are plenty of projects in maintenance and/or replacement to keep us busy but we can either follow the newest trends or accept a lower turnover for our company. The latter is not an option,” said Mansour Al-Babtain.
This ability to look ahead has laid the foundations for future success. Though Telecom is not the biggest portion of the company’s turnover, it is growing. In Saudi Arabia, Babtain was commissioned to supply the Universal Service Fund (USF) project with the Saudi Communications and Information Technology Commission (CITC) (Hay3at al Itisalat). Under the initiative, small Saudi towns with low populations are to be provided with telecom infrastructure and towers to allow them to communicate via telephone and internet. Operators like Saudi Telecommunication Company (STC), Zain and Mobily know that they make their profits in big cities and it’s not worth it for them to be installing huge infrastructure in a town with 500 people living in it. The CITC essentially forced the operators to build the infrastructure on the basis that the profits these companies made should be put to good use in meaningful projects. “Now they are in phase 11 of 15 and we have manufactured and delivered more than 4000 tower structures from 2011 until now. The cost is about SR250 million per phase of which towers are 20% which is SR50 million,” said Mansour Al-Babtain.
With additional offices in the United Arab Emirates, Oman, Bahrain and Qatar, Al-Babtain supplied and performed certain installations for telecom projects in these countries. “Being one of the first companies that were established in that field in 1993, we have very good relations with telecom operators in the Kingdom and elsewhere. From Etisalat to Zain, Mobily, Ooredoo, Vodafone, VIVA and others around the region, we have developed trust around our designs, manufacturing and delivery, something which brings jobs our way though we are not the cheapest,” said Al-Babtain.
And Al-Babtain’s ability to adjust to changing market conditions plays another factor in winning tenders and orders. “In the past, we used to erect a telecom tower in one month taking into consideration, design, manufacturing, delivery and installation. Now it takes one day. But it’s a different kind of tower,” says Mansour Al-Babtain. Whereas in the past standard tower foundations were installed underground, today the trend is above ground. Rapid Deployment Towers cost higher but are faster to deploy. “In the past, we would dig for the foundation, prepare the site, then manufacture, built and construct, taking us a month to a month and a half. Now, we manufacture stocks in advance in anticipation of demand for towers and we can install in one day. Based on projects’ locations and forecast we might take the risk of manufacturing so that when the need arises and the operator asks for towers, we would have them ready.”
Employing some 350, Al-Babtain’s telecom operation contributes about SR 320 million from the company’s 2014 turnover of SR 1.6 billion. Al-Babtain is also a manufacturer of exterior lighting fixtures. The power side of the business employs some 1500 in staff.
The telecom operation at Al-Babtain is catching up to the growth the company made in the Power sector, which size is substantial and growing. The Saudi Electricity Company (SEC) is the main client in Saudi Arabia and it works with various contractors who in turn request bids from manufacturers and suppliers like Babtain. “In power transmission for example, SEC announces tenders for full turn-key projects about specific lines, with conditions and specs for contractors to follow, and these contracting companies ask us for bids,” said Mansour Al-Babtain. National Contracting Company Limited (NCC) is one of the leading contracting companies in the electrical and mechanical works in the Kingdom assigning work for Al-Babtain which in 2015 has already secured SR multi-million contracts in power transmission from NCC.
In 2006-2007, the company manufactured and delivered power transmission poles for the inter-GCC power transmission (Al Rabt al Khaliji) grid. Al-Babtain is as well bidding for two projects linking two lines of grids between Egypt and Saudi Arabia. “We have a factory in Egypt which will benefit if we win the bids that will be announced the months ahead. In Saudi Arabia, the project is in the design phase and by end 2015 we expect the bidding process to start, which around 5 main competitors will bid,” said Mansour Al-Babtain.
The power sector generates the most income but also the biggest challenges. Production Capacity and delivery are the challenges that companies like Al- Babtain face in power projects. Between design, testing, manufacturing and installation, a project could take two years in total, knowing that every project nowadays involves 20,000 – 30,000 tons of steel. And often, delays arise with cases where roads cross through towns where owners refuse to sell to the SEC. “This might delay the entire project, and what happens is that the road might be diverted as well as the design might change, and you would need additional types of towers.”
However there is a growth area that Al-Babtain is taking advantage of which is the trend of going to LED lights –more efficient, last longer and require less maintenance from municipalities. “We have a joint venture with a European company this side of business which will add to the existing external lighting operation, one that will take time before it is replaced by LED,” added Mansour Al- Babtain.
And yet another weapon in the arsenal of Al-Babtain is the fact that they own 4 Saudi galvanisation plants with two in Industrial City 2 being the biggest in the ME (15.5m long x2.3m wide x2.8m deep). It owns a galvanizing plant in Egypt as well. “All our products are galvanised. We are talking 250,000 tons of steel products that we manufacture a year and at the cost of galvanising the products at SAR1500 per ton, that’s a pretty sizable number to be doing elsewhere.”
A record breaking project
In 2014, Al Babtain completed the design, procurement, supply and installation work on a Flag Pole 171 meters in height breaking the Guinness World Record as a standalone pole. The previous record was for a 165 high pole built in Tajakistan. Al-Babtain’s current pole carries a Saudi Flag 30x60 metres. The owner is the Jeddah municipality but it was one of Abdel Latif Jamil’s community initiatives which was behind the project, as a gesture and gift to the former and late King Abdallah. Abdel Latif Jamil initiated the project in 2011 with a tender for the pole. Al Babtain won the bid in 2012. According to Al Babtain, the project presented a set of difficult challenges thanks to its very complex nature.
“We had a big debate going on whether we could do this project. This was new. But we couldn’t pass up the opportunity to build it knowing the branding that will come out of it. We took it and it was a challenge, from design, to manufacturing and installation. We had more than one consultant in Europe and the United States. After we won the Guinness Book record, we got an appreciation from the Kingdom. This you cannot measure with money,” said Mansour Al-Babtain, Al-Babtain’s KSA Country Manager.