Qtel invests to fend off rival operator

24 November 2007

Qtel is investing heavily in its telecoms network to try to keep as much of its market share as possible, ahead of the award of a second mobile phone licence.

Qatar's telecoms regulator, ictQatar, is due to announce the winner of the auction imminently.

Two of the region's biggest telecoms operators, Etisalat from the UAE and Zain from Kuwait, are among those competing for the licence. The winner is expected to launch mobile phone services in the summer of 2008.

Qtel has invested heavily in fixed and mobile telecoms infrastructure over the past three years, according to its chief executive officer, Nasser Marafih.

The firm hopes its investment will make it more difficult for the new operator to compete with the quality of its network coverage. It will also enable Qtel to launch high-margin services such as mobile email and mobile broadband.

Qtel will attempt to defend its market share by offering existing customers a triple-play offer of a fixed-line phone, internet con-nection and mobile phone. Called Mozaic, it is designed to prevent cus-tomers from switching their mobile account to the new operator.

Qtel has a lot to lose from the launch of a second operator, with its home market accounting for the vast majority of its revenues and profits.

However, Marafih defends Qtel's acquisition of 51 per of Kuwait's Wataniya Telecom in March this year for $3.7bn.

Qtel's net profits in the three months to the end of September were $148.6m, less than the $169m it would have made in the same period in 2006 had it owned the Wataniya stake then. The Qatari operator generated $117m in net profits in the three months to 30 September 2006, while Qtel's 51 per cent stake in Wataniya generated $52m over the three-month period.

“In the initial phase of such long-term investments, the financing costs are expected to have a temporary impact on the profits,” says Marafih. “This trend is expected in the short term only and will be reversed as the growth from various operations starts to contribute to the profits.”

Despite being a monopoly, Qatar's mobile phone market is the most developed in the region. At the end of June, mobile phone penetration was 173 per cent, according to Wireless Intelligence, a research body.

The penetration rate is far ahead of other highly developed markets such as Bahrain, where penetration was 95.7 per cent at the end of June.

The other five companies competing for the second licence are Airtel from India, AT&T from the US, Bahrain's Batelco, Verizon from the US and Vodafone, the UK operator that already has an operation in Egypt.

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