Telecoms companies are expected to target data and international expansion
With mobile phone penetration in many regional markets close to saturation, telecoms operators are seeking new ways to enhance their profitability.
GCC operators are looking at expanding beyond their borders as well as introducing new services, while countries in the wider Middle East and North Africa (Mena) region are exploring ways to upgrade their infrastructure.
The coming year is likely to see a continued rolling out of data services, with the introduction of long-term evolution (LTE) technology a faster wireless data service for handheld devices and a mobile data platform across the GCC.
Plans by the governments of the UAE, Qatar and Saudi Arabia to extend fibre networks should also have a dramatic impact in the near future.
The common theme is the big growth opportunity in data. Were seeing more usage of these services, says Matthew Reed, Dubai-based principal analyst for the Middle East and Africa at Informa Telecoms & Media. LTE is still in the early days, both in the region and elsewhere, but its beginning to change and accelerate a bit.
Investment in data-centre-delivered services and managed services will continue to remain important in operators strategies as they look to add new services, says a report by intelligence services company IDC.
Etihad Etisalat (Mobily) in Saudi Arabia and Du and Etisalat in the UAE spearheaded the development of information and communications technology services portfolios in 2013, raising expectations that companies across the region will follow suit.
Operators are also likely to invest in developing their professional services capabilities. They will particularly focus on integration services, consulting services for data centre design and build, and implementation services related to disaster recovery and cloud services, according to IDC.
The firm predicts that telecom providers will shift their focus towards more established and less risky software-as-a-service (SaaS) offerings. Established vendors such as SAP, Oracle, Microsoft and IBM, which have yet to aggressively market their SaaS offerings in the region, may choose to partner with telecoms firms to tap into a potentially large market for SaaS among small and medium-sized enterprises.
Meanwhile, countries in the wider Mena region are looking to develop 3G networks. While Iraq has yet to award 3G licences to operators, it is expected to launch a formal tender soon. Algeria has already awarded three 3G licences, which will see Algerie Telecom Mobile (Mobilis), Wataniya Telecom Algerie (Nedjma) and Orascom Telecom Algerie (Djezzy) roll out a network across the country.
The regions largest operators are also likely to continue reshaping their international strategies. As their home markets become more competitive, firms are expanding into new territories, while exiting loss-making markets. For instance, Etisalats acquisition of a majority stake in Maroc Telecom in 2013 shows it is strategically strengthening its presence in French-speaking African countries.
The expansion drive could lead to GCC operators entering countries such as Libya, which is keen to reconstruct after an estimated $1bn of telecoms infrastructure was destroyed. Tunisia will also likely continue to attract interest, although it may not appeal to all.
Qatars Ooredoo is mainly looking at southeast Asia for growth. After winning a licence in Myanmar, it will be investing an estimated $2bn-3bn to roll out a network across the country.
Within the GCC, the awarding of mobile virtual network operator (MVNO) licences in Oman and Saudi Arabia is expected to lead to more coverage in the mobile space. That does not necessarily mean new entrants will eat up significant market share from other players, as the newcomers could, for instance, focus on specific segments such as specific expatriate demographics.
Domestic markets are still forecast to see increased competition, however, as operators already present in the countries continue to battle for market share.
Fitch Ratings says more regional cooperation could be on the cards. In June, Saudi Arabia agreed to provide financial support for the local operations of Kuwaits Zain, postponing SR800m ($213m) a year of government entitlements for seven years. Moves such as this will help avoid the collapse of troubled telecoms firms.
However, Fitch says, We believe most Gulf markets can only support two strong operators in the long term, due to their demographics and relatively small size, but many, including Saudi Arabia, Jordan and Bahrain, have more than this. Growth is slowing in these markets, causing third and fourth-place operators to struggle.
In the longer term, governments may push for consolidation rather than propping up struggling telecoms companies.
It is predicted that providers will shift their focus towards more established software-as-a-service (SaaS) offerings