Telecommunication is one of the fastest growing sectors worldwide. Globally, there are currently 3.3 billion mobile subscribers, 77.9% of them in the Global System for Mobile communications (GSM) standard. With an increase of 1.5 billion mobile subscribers anticipated over the next four years, a 75% overall penetration rate is expected by 2011, according to TAIB Research. Worldwide annual subscription growth is expected to slow down this year to 12.7%, compared to 18.6% in 2007. Growth in revenues of the mobile segment is also estimated to decline somewhat from 50% in 2007 to 44% in 2008.
In the MENA region, the subscriber base for mobile users is expected to double over the next ten years, reaching 400 million by 2017. Consolidation in the telecom sector over the past three years has seen over $55 billion been spent on mergers and acquisitions, with the sector achieving an annual growth rate of 20%. According to TAIB Research, the telecom and broadband internet sector in the region is expected to generate annual revenues of $70 billion by 2015.
The mobile segment, which has seen very high growth over the years in the region from 41% in 2003 to 76% in 2006, may see growth upwards of 85% in the next three years as demand for GSM continues to rise.
Among the GCC countries, the highest mobile penetration rates were recorded in Bahrain, the UAE, Saudi Arabia, and Qatar, where levels have already exceeded 100%. With the incorporation of new technologies the Gulf countries are expected to spend up to $275 billion on telecoms and related infrastructure over the next decade.
Expansion into new markets
As one of the telecoms with largest geographic reach, Kuwait-based Zain covers 22 countries and is poised to enter into the Saudi market. “As of the end of March 2008, our active customer base was over 45 million of which around 15.6 million operate under the Zain brand in the Middle East and Sudan [and mtc Touch in Lebanon],” explained Ibrahim Adel, chief communications officer for Zain. “The remainder currently falls under the Celtel brand [Zain’s wholly-owned African subsidiary] although in the near future, these African operations will re-brand to Zain.”
Saudi Arabia has a large market of 27 million, almost half below the age of 20 and a population growth of around 3% per annum. “We expect that these factors will result in Saudi Arabia continuing to be one of the fastest growing mobile markets in the world. It is anticipated that mobile penetration will reach over 140% by end of 2012 from its current figure of some 82%,” said Adel.
Batelco, Bahrain’s first telecom, extended its operations across the region including Egypt, Kuwait, Jordan, Yemen and Saudi Arabia, now covering over 60 million people across the Middle East. It recently acquired a 20% shareholding in Sabafon, Yemen’s leading mobile company. Batelco also focuses on wireless networks across the region with a Wimax license in Saudi Arabia and Jordan. In addition, explained Nadia Hussain, corporate affairs general manager for Batelco, “We reached over 1.7 million mobile customers in Bahrain and Jordan and launched ICT business solutions in Bahrain and Kuwait. Whereas we don’t foresee significant opportunity for growth in the home market, there is much scope for growth through our subsidiaries and affiliates overseas.
“Furthermore, we will continue to explore further opportunities to acquire new acquisitions and licenses throughout the MENA region and have started to explore opportunities in the Indian and Asian markets,” she said.
On the home front in Bahrain, with penetration rates over 100% in the kingdom, Hussain explained, “As the market matures however, we need to seek diversification in ICT related markets, grow our scale in overseas markets and manage our costs tightly. Whilst doing all of the above we need to ensure that customer experience improves — we need to understand and better serve specific customer segments, we need to deliver innovation and we need to be more responsive than ever.”
In April 2008 Zain announced “One Network,” the first borderless mobile service available to four countries in the Middle East market. The service made telecom history when it was launched in 12 operations in Africa a few years ago, as it allows Zain/Celtel customers the ability to make calls across borders at local calling rates. In the Middle East, Zain’s 14 million customers in Bahrain, Iraq, Jordan and Sudan are now under one mobile rate umbrella.
As Adel explained, “One Network also enables them to top-up their mobile phone credits with locally purchased scratch cards, which are widely available in more than 200,000 points of sales. Furthermore, there is no need for pre-registration, no extra fees, no roaming deposits, no complicated dialing formats, etc. Customers are automatically switched onto One Network when they cross borders.”
Networks
Throughout the region, the push has been mainly toward unveiling new technologies for wireless. For Zain, network capabilities vary across MENA. In Africa, Iraq and Lebanon operations provide a minimum of 2.5G service (GPRS/EDGE that provides high-speed wireless Internet access). This year 3G deployment has been planned for Jordan and Saudi Arabia providing a richer mobile and multi-media experience. Bahrain and Kuwait have network capabilities that go beyond 3G (often referred to as 3.5G) to include WiMax and high-speed packet access (HSPA) service delivering up to 7.2 Mbps internet speeds, according to Ibrahim Adel, chief communications officer of Zain.
Zain Bahrain launched WiMAX in September 2007. The service has been very successful, and this is especially true from the technical and technology point of view. “The deployment of WiMAX came as a part of a complete offering of broadband and voice services to residential and business customers, and the take-up has been excellent. The interest in the service has been high due to both the commercial attractiveness of the offer and the technical quality of service,” explained Adel. “From the technical point of view, all customers enjoy download speeds higher than that of the highest paying ADSL subscribers of other networks. Being wireless, service is provisioned in a few days, and the service virtually covers the whole country from day one.”
Batelco has also upgraded its networks. It offers Wimax in two markets and 3G in Bahrain. As Hussain explained, “We have made a decision three years ago to upgrade our legacy network to an MPLS based NGN with full IP Core. This was meant to be a five-year project but we are on track to complete it earlier. It will give us tremendous capabilities for the deployment of new and sophisticated products and services.”
WiMax Difficulties
Adel explained that the difficulties faced by other WiMAX operators stem from the fact that these operators are overtaken by the hype of WiMAX being a “4G technology,” a technology that provides “super” high speeds, on the move, anywhere, anytime. “The fact is that such technologies are not ready yet,” he explained.
Adel attributes the success of Zain’s deployment of WiMAX to the fact that the company was clear about what it wanted from the technology — a system that provides broadband and voice services to (mainly fixed) residential and business customers to compete against PSTN/ADSL networks. Although Zain already operates an HSDPA (High Speed Data Packet Access) network, it did not want to be in the situation of competing against its own mobile data network.
According to the Zain communication officer, “The future for telecoms is wireless; the future for wireless is high-speed data and for the majority of customers this means accessing multi-media applications at speeds that deliver a rewarding and enjoyable experience. In this part of the world, we are seeing such high-speed networks become increasingly available as access channels to content/media using these high bandwidths. It is an unstoppable eventuality.” In the Middle East in particular, such content also needs to be available in Arabic and whilst this is increasingly so, it is still not on par with English language content.
“The sector will face the 3 Cs: convergence, consolidation and content partners or competitors. Add commoditization of basic connectivity to get the fourth ‘C’,” said Hussain. “However, trusted branded operators, offering value and service and part of the content ecosystems, will continue to grow and be relevant to customers for many years to come.”
