Kuwait telecoms sector loses advantage

23 November 2010

Lack of an independent regulator and the ministry’s restrictive monopoly have curtailed growth

Kuwait’s telecoms sector will continue to suffer until the government establishes an independent regulator. As the first country in the Middle East to introduce competition to its market, it should have continued to lead the way and become an example to the rest of the region. Instead the ministry’s restrictive monopoly over the industry has resulted in stagnation.

The country is now the only one in the region without a regulatory body. Before the arrival of competition, Kuwait only had one operator - Zain. Wataniya’s entrance in 1997 boosted both operators’ performance and added a more dynamic and stimulating aspect to the industry. Zain eventually became the world’s third largest operator and Wataniya expanded its presence outside of Kuwait to four other countries.

Earlier this year, Zain sold 18 of its units to India’s Bharti Airtel and is currently in the process of selling its remaining five units to the UAE’s Etisalat. Qatar Telecom (Qtel) bought a 52.5 per cent stake in Wataniya in 2007. Kuwait has lost its incumbents to its neighbours and the only other operator is Saudi Arabia’s STC, which entered the market in 2008.

Focus has shifted away from voice revenue to data and value-added services, a trend driven by a young population with high spending power and changing consumer habits. All three mobile operators are faced with falling average return per user levels. Currently, the operators are self-regulating in order to avoid a damaging price war.

Other telecoms companies in the region are better placed to make better use of their networks. Opportunities to provide more competitive pricing or enter adjacent markets such as data centres would be difficult to establish in Kuwait since they require flexible use of the country’s gateways, which are wholly controlled by the state.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications