The growth in both fixed and mobile telephone subscriptions, while remaining high, has been decelerating over the past few years in the Middle East and North Africa (Mena); a clear indication of a market approaching saturation.
Mobile subscriptions across the 18 Mena countries in 2009 accounted for 79 per cent, of the region’s population. This rate is 7 per cent higher than the global average, but is significantly lower than the level seen in developed regions, particularly Europe, where mobile subscriptions have exceeded the population by 13 per cent, according to data from the Geneva-based International Telecommunications Union (ITU).
Telecom operators are responding to the slowing growth by upgrading and expanding the coverage of their mobile networks, lowering call tariffs and introducing to the region innovative services, such as mobile broadband.
The service that is showing most promise is mobile broadband services. Etihad Etisalat (Mobily) reported one million mobile broadband subscribers in 2009 – about 5.5 per cent of its mobile subscription base in Saudi Arabia.
If mobile broadband subscriptions across the Mena region accounted for the estimated 2 per cent of all mobile subscriptions, then there would have been at least 5.2 million mobile broadband subscriptions in the region in 2009. This segment of users is expected to grow even more strongly in future. As a result, mobile networks are being upgraded across the region.
And several companies, including Du from the UAE and Zain Bahrain, already have begun deploying the forerunner of the much-anticipated fourth-generation (4G) long-term evolution (LTE) technology.
The internet high-speed packet access (I-HSPA) or HSPA+, which is often referred to as 3.75G or 3.9G, allows data download speeds of up to 42 megabits per second (mbps). This is significantly faster than 3G, with a top speed in the region of 14 mbps.
LTE aims to deliver data downlink speeds at an impressive 100 mbps through an all IP (internet protocol), packet-switched network.
Such speed will allow subscribers to access high-quality multimedia applications including high-definition television (HDTV) content, IP TV, and real-time audio, in addition to other applications that are available using 3G.
New technologies, such as wireless local loop (WLL), have also allowed telecom companies in most countries with low telephone density to reach new areas, where the cost of installing copper wires is prohibitive.
Mobile subscriptions in 2009 exceeded the population in eight Mena countries, including all the GCC states plus Jordan and Libya, with Saudi Arabia attaining the highest mobile penetration rate at 173.2 per cent, followed by the UAE with 155.8 per cent.
And if mobile telephone subscriptions were to grow by a conservative 9 per cent a year between 2010 and 2014, then the region’s subscription base would rise to about 405 million by the end of 2014, bringing mobile telephone penetration to an average 107 per cent, factoring in population growth.
Fixed-line falls behind
The prolific uptake of mobile services in the Mena region stands in stark contrast to the lack of demand for fixed-line services, for which the penetration rate averaged 10.8 per cent in 2009 – barely more than half the world average of 19.63 per cent.
Fixed teledensity in 2009 is below the global average in all Mena countries except the UAE, with fixed-line telephone services least accessible in Sudan, where subscriptions equated to a mere 1 per cent of the population. Markets such as Gaza/West Bank, Iraq, Jordan, Oman and Yemen also have single-digit, fixed-line penetration rates.
The factors contributing to the low fixed-line subscriptions in these countries vary widely. In Iraq and Gaza/West Bank, security issues mean consumers prefer mobile to land-line services, and in Jordan the rapid rise of mobile subscriptions has had an opposite effect on its fixed-line subscriptions.
A further reason for the slow adoption of fixed-line services among these countries is the high cost of monthly tariffs. Monthly tariffs for fixed-line services account for 3.5 per cent of average individual income in Jordan and Oman, and for 5.5 per cent in Sudan, against a mere 0.3 per cent in the UAE and Bahrain, according to ITU data.
Beating the competition
But a region where an estimated 34 million inhabitants still do not have a telephone subscription is a potentially lucrative market for any telecoms operator.
Several regional firms, including Kuwait’s Zain and Wataniya, the majority share of which has been bought by Qatar Telecom, and the UAE’s Etisalat have successfully crossed borders in the past few years, building networks independently or in partnership with local operators in countries including Sudan and Tunisia.
European operators France Telecom, Vodafone, Vivendi Universal and others have also bought into several mobile operators or established subsidiaries in the Levant and North Africa. South Africa’s MTN Group has also been asserting its presence in Sudan, Yemen and Syria, with plans to acquire the African operations of Egypt’s Orascom Telecom.
The entry of Wataniya into Gaza/West Bank and Vodafone into Qatar in 2008-09 brought to an end the era of mobile telephony monopolies in Mena countries. Today, eight markets have a mobile duopoly, while 10 others have three or more mobile service providers.
But despite the opening up of the mobile sector, several countries remain fiercely protective of their fixed-line market. The fixed-line sector is still dominated by a single state-owned operator in Egypt, Kuwait, Lebanon, Libya, Palestine, Syria, Tunisia and Yemen, despite long-running plans for market liberisation.
Ripe for investment
Mergers and acquisitions are not uncommon in the region’s telecom industry, with Qatar Telecom’s acquisition of Kuwait’s Wataniya in 2007 the most recent. The combined Qtel-Wataniya mobile networks is still a small player, accounting for just 6.5 per cent of the estimated 263 million mobile subscriptions in the Mena region at the end of 2009.
Orascom Telecom’s subscription base accounted for the largest single share, at 45.2 million, followed closely by Etisalat on 32.61 million or 12.4 per cent. Zain, Saudi Telecom and MTN Group were among the other key players in the region. These six companies’ combined subscriptions accounted for 59.3 per cent of the total.
But despite the slowing growth of fixed-line and mobile subscription take-up rates, the pace of development in the region during the past three years has been truly impressive. Operators across the region are investing large sums in getting cost-effective telecoms networks into the region, resulting in greatly improved fixed-line and mobile services.
In addition, the current infrastructure is opening up opportunities for providers to implement technologically advanced broadband services, an indication that the Mena telecoms market is still ripe for investment.