Batelco posted net profits of BD19.3m for the three months ending 30 September 2010 – a fall of 24 per cent compared with third quarter profits in 2009. Based on the current outlook, the firm’s management expects net profits for 2010 to be about 15 per cent lower than in 2009.

The sharp decline in third quarter profits is a sign that increased competition in Batelco’s home market is already having an impact. Bahrain was the only market where Batelco experienced a reduction of customers for mobile and broadband services in the quarter, falling 4 per cent and 2 per cent respectively.

Bahrain is one of the smaller telecoms markets in the region, but it is also one of the most competitive as it was among the first countries to privatise the sector. Batelco is the leading telecoms and IT provider in the country with its overall market share hovering at about 67 per cent, but it faces fierce competition.

There are now three mobile firms, including Batelco and Kuwait’s Zain, competing for market share following the arrival of Viva, a subsidiary of Saudi Telecom Company, earlier this year. Batelco also shares the fixed-line market with 14 other telecoms operators offering international call services.

With a mobile penetration rate of 150 per cent and a broadband penetration of 120 per cent, there is little room for growth and the addition of a new player in the market is causing customers to switch allegiances and seek lower prices.

Batelco is responding by focusing on growing its business in the wider Middle East, Africa and Asia. Fortunately, it began its overseas expansion more than five years ago and is well established in some of these markets.

Customer growth is especially encouraging in Yemen and Jordan; Umniah’s subscribers have grown from 1.6 million at the end of December 2009 to 1.8 million by the end of September 2010, and those in Yemen have risen from 2.6 million to 3.2 million over the same period.

The strongest growth, however, will be found in high-margin markets where demand for data packages is strong. For this reason, a greater presence in Saudi Arabia can be expected to be a key priority.