2009 Middle Eastern - Mobile Communications and Mobile Data Market

This Middle East market report covers the mobile telephony and mobile data markets in each of the following countries: Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, UAE and Yemen.

Across most countries of the Middle East, including even some of the most highly penetrated, growth rates are surprisingly high. This is often due to an increase in competition – a second or third operator has entered the market or a new investor has bought a share of an existing operator – causing a subsequent drop in tariffs or improvement in services. Highest growth rates are in the relatively undeveloped markets of Egypt, Iran and Yemen.

Multi-SIM ownership is common as subscribers aim to maximise special offers and different deals, leading to sky-high penetration in some Gulf countries and particularly high rates in Jordan for its per capita GDP. The large number of expatriates in many countries is also a factor in encouraging competition, and thus growth and penetration rates; with a fluid population, new operators stand a better chance of gaining market share.

In recent years the region has become home to some large international players. Etisalat of the UAE and Zain of Kuwait have been particularly aggressive buyers of both new licences and existing operators in Africa, the Middle East and Asia. Qtel of Qatar, STC of Saudi Arabia and Batelco of Bahrain have also taken this route for growth.

In the more developed Gulf countries and Israel, operators are pinning their growth hopes on persuading their mobile subscribers to take up data and broadband services. Customers want the latest in high-end handsets and have the income to pay for them. 3G services in these countries are well established, together with HSPA. Outside the Gulf countries, Israel and Turkey, no operator has launched 3G or HSPA although Jordan issued a licence to Orange in August 2009.

HSPA services are now offered throughout the Gulf region and in Israel. Speeds are increasing, with HSDPA USB modem broadband packages commonly up to 7.2Mb/s. There are several regional factors that favour mobile broadband. The populations are very young and there are very large numbers of expatriates. Fixed-line penetration levels are generally low. In addition there are several dynamic regional mobile operators whereas fixed-line operators are generally state-owned incumbents accustomed to little competition.

Key highlights:

Iran

The Iranian market grew very strongly during 2008 due to the continued affects of the competition from second operator MTN Irancell and the introduction of prepaid services. A question hangs over the market however after the unsuccessful tender for a third licence in late 2008 / early 2009. The licence was first awarded to a consortium led by Etisalat of the UAE and then withdrawn, echoing the problems of the second mobile licence tender. It was then awarded to a consortium led by Zain of Kuwait but then again withdrawn. By late 2009 the licence had still to be awarded. These regulatory problems must inevitably make this otherwise very promising market less attractive.

Israel

The Israeli market has been stable for some time but the Israeli government is moving to create a wholesale market in all sectors of communications, leading to jostling for position between mobile, fixed-line and Internet players. Some merger and takeover activity is anticipated. 3G subscriber levels made up at least a third of total subscribers in mid-2009 and revenue from mobile data has grown steadily. The launch of Pelephone’s new network, moving away from its CDMA2000 / EV-DO network to a UMTS network, has had a significant impact on the market.

Qatar

Competition finally came to the Qatari mobile market in July 2009 with the launch of services by Vodafone. Vodafone has had mixed success in the Middle East to date, with poor results in Turkey but faring much better in Egypt.

Saudi Arabia

After the launch of second operator Mobily, mobile subscribers grew rapidly, leading to penetration levels similar to those of the smaller GCC states, at well over 100%, despite Saudi Arabia’s much higher total population. With third operator Zain’s launch in August 2008 the market became even more competitive. It is the only market where the region’s three largest operators – Etisalat of the UAE, Zain of Kuwait and STC on its home turf – go head to head.

UAE

Mobile penetration levels in the UAE are quite spectacular, passing the 200% mark. Growth has been astonishing since the launch of second operator du. 3G subscribers make up over 25% of the total but the percentage has not grown over the past year – the growth has been at the lower end of the market.

Data in this report is the latest available at the time of preparation and may not be for the current year.