Estimated number of mobile broadband subscriptions in the Middle East by 2013
Estimated number of mobile broadband subscriptions in the Middle East by 2015
Source: Booz & Co
The seemingly insatiable appetite of the region’s young population for accessing online content through their mobile phones has left telecoms operators struggling to cope with inadequate third-generation (3G) networks that are running out of capacity.
The rising demand for video, music, games and the internet has made the rollout of long-term evolution (LTE) – fast-speed mobile broadband technology – a necessity in many markets.
“In 10 years, no-one will be talking about voice and data will be the biggest driver of revenue”
Ali Amer, Saudi Telecoms Company
Currently, most of the region’s mobile phone operators offer 3G networks, which have a top download speed of about 14 megabits a second (Mbps). To enable a smooth transition to LTE, most of the operators and particularly those in the GCC have upgraded networks to the internet high-speed packet access (HSPA+).This allows data download speeds of up to 42Mbps.
LTE, however, aims to deliver data download speeds at an impressive 100-150Mbps.
Such speeds will enable subscribers to access high-quality multimedia applications including high-definition television (HDTV), internet protocol television (IPTV) and audio streaming. Applications currently available on the 3G network will also be accessible.
LTE will provide subscribers with a better surfing experience, higher resolution on streamed mobile content and improved interactivity. It will also give them access to other wireless applications which require high bandwidths to operate.
“In 10 years, no one will be talking about voice,” says Ali Amer, senior adviser at Saudi Telecoms Company (STC). “Data will be the biggest driver of revenue.”
LTE is set to be launched in the Mena region before the end of the year, ahead of many countries in Europe.
Currently, there are 166 LTE network commitments in 62 countries around the world. This includes 12 commitments in eight Mena markets.
According to the US’ Pyramid Research, LTE penetration in the Middle East will reach 11.1 per cent by 2014, more than the 7.7 per cent projected for Western Europe.
The absence of robust fixed-line internet and broadband infrastructure and the high mobile phone penetration levels across the Middle East will drive the growth for LTE.
Currently, 40 per cent of all mobile users in Mena use some form of mobile internet. By 2013, there will be more than 266 million mobile subscribers in the Middle East and mobile broadband subscriptions are expected to reach 50 million.
By 2015, the number of mobile broadband subscribers is expected to reach 100 million according to research done by US-based consultancy Booz and Co.
The region’s young population is the industry’s biggest opportunity. More than 30 per cent of the Mena population is aged between 15 and 29. In the GCC, this age group is thought to make up almost 70 per cent of internet traffic.
“[Network operators] are investing in new technologies … but revenues are not growing at the same pace”
Mohamed Abdelrehim, Nokia Siemens Networks
About 60 per cent of internet traffic on mobile phones is for video services. Every minute, nearly 35 hours of Youtube videos are being uploaded online. Research shows that over-the-top (OTT) video services revenues will grow from $1bn in 2010 to more than $20bn by 2014.
Current networks are becoming increasingly congested and will not be able to cope with growing data demand. Also, the cost for each megabit is expensive for mobile operators who are faced with increasingly lower prices and stiffer competition.
“Network operators have several challenges,” says Mohamed Abdelrehim, head of networks systems for Middle East and Africa at Finnish equipment vendor Nokia Siemens Networks (NSN). “They are investing in new technologies and these investments are growing, but their revenues are not growing at the same pace.”
The rise in data consumption requires more bandwidth and LTE appears to be the solution for these problems.
LTE was first introduced in Norway and Sweden in December 2010, and has been marketed as fourth-generation (4G) technology.
Saudi Arabia is set to be the first country in the region to launch LTE commercially. Operators STC and the UAE’s Etihad-Etisalat (Mobily) are scheduled to launch the technology by the end of the third quarter of this year, making it the largest LTE rollout in the region.
Both will start operating the new networks in the larger Saudi cities initially, before extending it to a total of 33 cities in the country. The two networks are struggling to keep up with the rise in data consumption, the highest in Mena.
Mobily, which has a 75 per cent share of the mobile broadband subscriptions in the kingdom, is experiencing more than 200 terabytes (TB) of data downloads a day, growing 300 per cent from 62TB a day in April 2010.
The company’s data revenues reached 20 per cent in the first half of this year, up from 17 per cent in the same period last year and 14 per cent in 2009. It has invested about $400m in its LTE plans.
Mobily’s owners, Emirates Telecommunications Corporation (Etisalat) will also be launching LTE in the UAE, working with China’s Huawei. Etisalat is also planning for a third quarter launch.
The UAE’s second operator, Emirates Integrated Telecommunications Company (Du) completed its pilot of LTE in May this year and is planning to launch the service before the end of the year.
Unlike Saudi Arabian operators, UAE telecom firms have not had problems getting the spectrum required for LTE.
Spectrum is a scarce resource and the region’s regulators have a challenging role on their hands, when it comes to allocating it.
Saudi Arabia’s Communications and Information Technology Commission (CITC) refused Mobily and STC the optimum 2.6 gigahertz (GHz) frequency required for LTE. It allocated it instead to the Ministry of Defence.
The operators have now opted for time duplex (TD) LTE, a sort of portable form of the technology as opposed to mobile LTE. This means that users will only be able to achieve high speeds on mobile devices through dongles – electronic devices that allow Internet access when plugged in. Oman’s Omantel has adopted the same strategy and is looking to launch the service in the next year.
Zain Bahrain, a subsidiary of Kuwaiti telecom firm Zain, is the only other company with a firm commitment to launch LTE next year. It was the first to showcase an LTE call in March 2010, with a download speed of 70Mbps.
Bahrain’s Batelco announced in June 2010 that it had set aside $38.5m to upgrade its network to LTE, but these plans were abandoned due to lack of funding. It is unclear whether it will resume these plans anytime soon.
In Qatar, Vodafone trialled LTE in December 2010 with France’s Alcatel-Lucent and incumbent Qatar Telecom (Qtel) has a trial planned for this year.
Before the revolution, Vodafone Egypt was trialling the technology with Huawei, but these plans are still on hold as the country struggles to return to stability. Its other operators Mobinil and Etisalat Misr were also in the trialling phase before the unrest.
Tunisia selected Alcatel-Lucent to upgrade its 3G network to LTE, but these plans also face a delay in light of the political changes in the country this year.
Some of the countries in the region still only have second-generation (2G) networks. Iraq has considered making the jump straight to LTE, but Algeria, which also considered the possibility, has opted to tender a 3G licence early next year. Lebanon’s state-owned mobile operators will soon upgrade their networks from 2G to 3G.
Almost all of the region’s operators have trialled LTE and have it in their sights to launch it. But for those that have only just adopted 3G, there is a desire to maximise the investment before upgrading to a new technology.
LTE is an expensive investment for the operators and consumers are unlikely to migrate over in large numbers when it is first launched.
The technology will not be of use to everyone. Those who use their mobile phones just to make calls and send messages will see little point in paying a premium for a connection that is geared towards heavy data consumption. LTE will be expensive for the consumer.
“There is no use giving a Porsche to someone who does not know how to drive,” says Abdelrehim.
Already, telecoms tariffs in the region and particularly in the GCC are above the world average. Operators will be forced to reassess their pricing strategies and segment the market accordingly.
In countries where the gross domestic product (GDP) per capita is high and smartphone penetration levels are on the rise, the transition to LTE will be smoother for the operators.
In the poorer countries in the Middle East, smartphone penetration is still low and internet browsing and data consumption on mobile phones is moderate.
On average, smartphone penetration is very modest across Mena at about 3 per cent, but this is set to increase to 8 per cent over the next two years.
The availability of LTE-ready devices is scarce. Some manufacturers such as China’s HTC have produced a line of 4G phones, but the market is still in its infancy. The battery life of these devices will be short. For now, the limitations of mobiles are holding back the potential of LTE, but as the technology improves, so will the devices.
While a high-speed mobile network improves connectivity, the region’s content and applications market are not yet robust enough to justify an early adoption of LTE.
Mobile applications downloads are expected to number about 1.5 billion by 2015 in Mena, 15 per cent of which will be paid applications. Because LTE is so apt for data, there is a need for more content online.
LTE may take some time before it is adopted across the region, but it is the next phase in telecommunications advancement.
The technology will pave the way for more machine-to-machine (M2M) communication. This presents opportunities for the region’s software development sector as manufacturers work towards turning daily electronic tools into more interactive products that are able to communicate directly with a user’s mobile phone or other personal devices.
“LTE will change the lifestyle of the people,” says Abdelrehim.
Already, new technology LTE Advanced is being demonstrated and trialled. It may take another few years, but if the pattern of data consumption is to continue as it is, particularly in the GCC, this new technology may be needed earlier.