2010 Middle Eastern Regulatory, Infrastructure and Fixed-line Market

Competition is driving telecoms growth in the Middle East

In the Middle Eastern region telecommunications infrastructure varies from very advanced to very rudimentary. Fibre to the Home projects are well advanced in Israel and the Gulf countries but in Yemen and Iraq fixed-line penetration is only around 5%. The area is well served with international links via submarine cables with more under construction.

At first glance fixed-line teledensity in the Arab Middle East would appear very low, even in the wealthier countries, compared with teledensity rates of around 60% in the USA for example. However, figures can be misleading due to the larger household sizes compared with Europe or the USA, plus large hostel-accommodated expatriate populations in some countries. In fact in many countries household penetration is at or near 100%. Several markets are showing decline due to mobile substitution, particularly dramatically in Jordan with its very competitive mobile market.

The fixed-line sector has been the last to be opened to competition and in all markets the incumbent remains the major player in the fixed-line voice market but change is underway, mostly through VoIP and calling-card operators and later WiMAX operators, but in the case of the UAE, also through sharing infrastructure.

All fixed-line incumbents also offer mobile services and in many countries operators who began in the mobile sector are also moving into the fixed-line sector.

Market Highlights

Bahrain

All sectors of the Bahraini communications market have been liberalised. Incumbent Batelco shares the fixed-line market with around fifteen other operators providing international calling services using international direct dial, carrier pre-selection or prepaid calling cards. Around 50% of international call minutes originating from fixed lines use prepaid calling cards. Like other GCC countries, Bahrain has a large expat population (approximately 50% of the total) and this has been the cause of the impact of prepaid VoIP-based calling cards on the market and on Batelco’s international call revenues.

Infrastructure is excellent – Batelco completed the rollout of an NGN in January 2009.

Israel

Whilst incumbent Bezeq still has a big majority of the domestic fixed-line market, its share has fallen rapidly since the introduction of number portability in December 2007 and going into 2010 was down to around 75% of the consumer segment by revenue and 85% of the business sector. VoIP operators and cable company HOT are the beneficiaries.

The international fixed-line market has been very competitive for many years. Three operators dominate the market with roughly equal shares. All are keen to move into providing domestic call services and the three already share the majority of the ISP market. This market is particularly interesting as these players, together with the three mobile operators who are also moving into the fixed-line voice and Internet market, jostle for position.

Significant investment is being made in NGN infrastructure. Bezeq commercially launched an NGN in September 2009. It had 374,000 subscribers connected to the network at end-2009 and 580,000 by early May 2010 (around 25% of Israeli households). Bezeq plans to make the NGN available to approximately 50% of Israeli households by end-2010 and 90% of households by end-2012. The network is ‘fibre to the curb’ and allows for an up to 50MB bandwidth offering.

United Arab Emirates

In July 2010 incumbent Etisalat and alternative operator du completed negotiations to open their networks, allowing each to use the other’s networks and compete across all fixed-line infrastructure in all parts of the country. A testing phase began, with a commercial launch of services expected in late 2010.

Etisalat has a very substantial FttH project, which is being completed in phases. The first batch of Abu Dhabi subscribers received last mile FttH access in January 2008. By end-2009 Etisalat claimed to have completed 60% of the network. It expected to make Abu Dhabi “the first capital city in the world with 100% fibre deployment” by 2010 and at end-2009 had completed the roll-out for 85% of Abu Dhabi households. Completion of the entire national network is expected by 2011 at a total cost of AED5 billion.

Top five Middle East countries – estimated fixed-line teledensity - 2010

(Source: BuddeComm based on IMF and industry data)

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