Telecoms operators need to invest in networks

24 November 2010

New study reveals rise in demand for data

Telecoms operators based in the Middle East will need to invest in their networks and discover new revenue streams if they are to maintain profitability, according to research carried out by US research firm Alix Partners.

As voice revenues continue to decline in saturated markets, data is fast emerging as the main opportunity for revenue growth. This will continue to put pressure on the networks. Data traffic is expected to increase by 25 per cent from 5,000 terabytes to 125,000 terabytes over the next four years. Firms will have to increase capital expenditure by 13 per cent in order to meet these demands for data.  

“The winners will be the operators with the most efficient operations and most effective investments in infrastructure. The challenge in the current climate will be within operations to release tied-up cash to support new investments,” says Nnenna Ilomechina, a director at Alix Partners.

The study suggests that telecoms operators in the region could save up to $8bn if they improve business practices.

Recently, local operators have adopted expansion policies outside of their domestic markets through acquisitions. While this increases revenue, “telecoms companies are losing profitability, either by paying too much or overestimating the profitability of the acquisition”, says Alix Partners managing director Eric Benedict.

Qatar Telecom has announced its takeover of Tunisiana. Abu Dhabi’s Etisalat is planning to acquire Kuwait’s Zain once the due diligence process is completed in January next year. If the deal is closed, Etisalat will have operations in 23 countries worldwide.  

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