Long-term evolution (LTE) or 4G services loom as the next major market driver for Middle East and North Africa (Mena) telecoms firms, particularly those in the Gulf.

Already, operators in the UAE, Saudi Arabia, Bahrain and Kuwait have deployed LTE services, which enable mobile download speeds of 100Mbps, doubling the capability provided by 3G services.

Saudi operators STC, Zain and Mobily remain on track to report 390,000 LTE subscriptions combined by the end of 2012, according to data supplied by US analyst ABI Research. This figure makes the kingdom the largest and fastest growing market for LTE in the Middle East, with a compound annual growth rate of 457 per cent.

Omantel launched its LTE services in July, predominantly covering Muscat, while its Qatari-owned rival Nawras aims to launch its own service in 2013. In Qatar, Qtel is investing $55m to develop the country’s first LTE service, which is scheduled to launch before the end of 2012.

Rapid maturation

“The regional telecoms market has rapidly matured in recent years,” says Matthew Reed, Mena telecoms analyst at the UK’s Informa Telecoms & Media. “It has moved beyond the rapid growth and big infrastructure investments we saw during the 2000s. As a result, regional operators are eyeing new services and smarter networks to drive revenues, and LTE looms as one of the most important developments of 2013.”

While LTE services remain immature in the Gulf, international developments hint at the technology’s commercial potential. According to the UK’s Juniper Research, LTE services are expected to generate $100bn in revenues globally in 2014, driven by the uptake of new handsets and other wireless devices. Informa estimates that regional LTE subscriptions will top 15 million by 2016, driven by early adopters and enterprise clients mostly based in the Gulf.

Regional telecoms operators are eyeing new services and smarter networks to drive revenues

Matthew Reed, Informa Telecoms

While this figure may sound optimistic, in a recent research paper, Mikko Hietanen, head of global business development for mobile broadband at Finland’s Nokia Siemens Networks, estimated that by 2020, mobile users worldwide will each consume 1GB of data a day. Given the relative lack of fixed broadband infrastructure in the region, it is little wonder LTE is being aggressively promoted by local operators in a bid to create new revenue streams.

Still, fixed broadband networks should not be discounted. In Qatar, the government has committed $500bn to developing a national broadband network prior to its hosting of the 2022 football World Cup, while Bahrain is expected to commence development of its own fibre optic broadband network in 2013, despite ongoing political and economic uncertainty.

The UAE and Saudi Arabia already boast extensive fibre optic broadband networks. State-owned operator Emirates Telecommunications Corporation (Etisalat) has invested more than AED15bn ($4.08bn) laying more than 2.8 million kilometres of fibre optic cable across the UAE over the past four years, making it the second most-connected country in the world after South Korea. Etisalat is currently conducting trials of a 300Mbps broadband service in Abu Dhabi, with a commercial launch expected in 2013.

Saudi growth

In Saudi Arabia, fibre optic networks have been established in the main urban centres, although analysts argue broadband services remain largely underutilised, given the kingdom’s large population. But, according to Dubai’s Delta Partners, the country’s broadband subscriptions have grown ten-fold since 2005 and are expected to nearly double from 3.2 million users in 2010 to 5.9 million in 2014.

Elsewhere, 2013 could be an important year for underdeveloped markets such as Iraq, whose telecoms sector has been hindered by political indecision and claims of corruption. A recent decision to place a $3bn price tag on 3G spectrum concessions by Iraq’s Communications and Media Commission (CMC) was met with dismay by the country’s three operators – Asiacell, Korek and Zain Iraq – which were forced to pay more than $1bn each for operating licences in 2007. The stalemate between the CMC and the operators is likely to continue, with sources anticipating a compromise in the latter half of the year.

In Egypt, outdated infrastructure, political uncertainty and a hard-hit economy present significant issues for a telecoms market known as one of the region’s most dynamic before the 2011 revolution. Upgrading capacity, particularly in Cairo, should be a priority for the country’s major operators – Etisalat Misr, Vodafone Egypt and Mobinil – in 2013, with the deployment of next-generation small-cell base stations an emerging trend.

On the technology front, operators are expected to invest heavily in sophisticated monitoring systems in a bid to boost the efficiencies of their mobile networks in 2013. “Building in latency to cope with rising data traffic is becoming a major concern of regional operators,” says Roger Field, editor of Dubai-based telecoms publication CommsMEA. “The majority are planning investment in new software that identifies network hotspots and in the long-term can help identify usage trends.”

In terms of the broader outlook, Field suggests the aggressive market expansion of the industry’s larger players during much of the 2000s is unlikely to return in 2013.

“Etisalat and other firms in the region might look to acquire smaller assets in Africa, but they’ll be competing with the likes of [South Africa’s] MTN for any deal, which will be challenging,” he says.