View from afar

Daniel Jones, Analysys research analyst, on the company's more to cover the region's telecoms industry.

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By  Administrator Published  June 4, 2007

CommsMEA: What do you view as the main general trends in the Middle East telecoms space in the short, medium and long term?

Daniel Jones: Over the last few years we've seen a great deal of liberalisation in the market, especially on the mobile side. I see this trend of increasing competition continuing over the medium term, in the fixed as well as mobile markets. Although many Gulf markets have reached relatively high levels of mobile penetration, I would expect that subscriber growth in these markets will remain strong, though of course growing at a slower rate than has been seen over the past five years. Those markets that have more room to grow are likely to see subscriber growth accelerate as new entrants join incumbents, or there is a threat of increased competition. In the long term, competitiveness of markets is likely to increase throughout the region, leading to decreasing ARPU levels, as witnessed in other parts of the world. Strong economic growth may help to counter this trend but will have a limited impact.

CommsMEA: What is your view on the pace and nature of consolidation taking place within the sector in the region?

DJ: We are seeing a number of players making strong moves towards expansion outside of their domestic markets, whether this is through acquisition of licences or existing operators. While the pace may seem quick at the moment, I think the moves are timely, as gaining share in many of the markets where penetration is already near saturation will become increasingly tough in future. There are now a number of operators with networks in many parts of the Middle East and Africa region, such as MTC and Etisalat both moving into African markets and MTN having moved in the opposite direction. With further opportunities expected to present themselves this year, such as new licences in Qatar and privatisations in Algeria and Lebanon, we will no doubt see further bids from the region's heavyweights as they aim to expand their territorial reach.

CommsMEA: How significant a role do you see 3G playing in the region at this stage?

DJ: The region contains a number of quite dissimilar markets in terms of disposable income levels. Until 3G handsets reach mass affordability, the potential role for 3G services, which allow operators to differentiate themselves, is limited in many countries. GCC countries will see the highest usage of 3G services over the next five years.

CommsMEA: Do you believe the door to significant external (foreign) participation in the regional industry has effectively been closed?

DJ: It would be difficult for major foreign players to have a significant impact in the Middle East, where local operators dominate the market and penetration is already high. Limits in some countries on foreign ownership may well have contributed to this situation. As these rules are relaxed we may see increased external interest in taking a stake in regional operators, but it is difficult to see regional operators being toppled from market-leading positions by foreign competition in the Middle East.

CommsMEA: How would you rate the region's record on deregulation and market liberalisation?

DJ: The Middle East is clearly behind other regions in terms of liberalisation in the telecoms sector. If we consider the region's mobile markets, the era of monopoly rule has ended in most countries, but competitiveness is not at the level of Western Europe, for example, where four or more mobile network operators is common, as is the existence of MVNOs. While this extent of competition may not be necessary to achieve competitive outcomes, there is scope for further liberalisation in many Middle East countries.

CommsMEA: How significant are service differentiation strategies to operators in the region at this stage of the market's development?

DJ: The market, at the moment, is seeing many new entrants trying to take on incumbents with a very strong hold on the market. For a new competitor, differentiation is key to being able to encourage subscriber churn from the incumbent. Some challengers, such as Nawras in Oman and Mobily in Saudi Arabia, have done a good job of building market share. Future new entrants should learn lessons from these successes, whilst incumbents must look at how to defend their positions.

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