International telcos will stay out of Middle East

The current economic environment means that international telcos are unlikely to seek a piece of the action as deregulation sweeps the Middle East, according to the Arab Advisors Group.

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By  Neil Denslow Published  October 1, 2002

International teclos are unlikely to seek a piece of the action as deregulation sweeps the Middle East telecommunications market, according to the Arab Advisors Group. The analyst house says that the current environment in the global telecom sector will deter international players from investing in the Arab World, leaving the way clear for regional players to clean up.

Arab Advisors say that in the short to medium term the international telcos will focus on strengthening their financial bases instead of looking to invest in the region. Key activities for the big players are reducing debt, selling non-core assets, cutting capital expenditure (CAPEX) and enhancing customer retention.

Given these priorities, the analyst house feels it is unlikely that many teclos from outside the Middle East will be looking to invest in the region soon. This will then allow regional telecom players to capture opportunities in many Arab markets, which are, for the most part, still underdeveloped, profitable and growing markets. Companies like UAE's Etisalat, Qatar's Q-Tel, Bahrain's Batelco and Kuwait's mobile operators are all profitable, secure in their home markets and able to grow regionally.

"The tough state of the global telecom vendors may have unexpected benefits for the Arab World's communications markets. The vendors are suffering from a decreased demand for infrastructure by their global customers. This makes these vendors more likely to discount pricing for new networks in the Arab world in order to increase revenues. New operators therefore could have lower CAPEX costs, although it may be difficult to obtain vendor financing arrangements," adds Arab Advisors Group's president, Jawad Abbassi.

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