Mobilising markets

With the current wave of market liberalisation paving the way for the first MENA mobile virtual network operation, CommsMEA examines the business case for the model and the possible consequences for the regional telco space.

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By  Administrator Published  December 16, 2007

When i2 eventually realised its ambition to become the first MVNO in Jordan and the MENA market, it was hailed as a ‘natural step' in the development of the kingdom's telco market.

Industry analysts had touted the Jordanian telco space as the most obvious MENA market to debut the model, given the presence of four infrastructure-based mobile operators and the country's regulator articulating its desire to drive investment there.

It is a truly disruptive model that requires careful analysis by all stakeholders” Rogier van Driessche, a partner with Delta Partners.

With the Saudi company in the final stages of its agreements with both the Jordanian TRC and its prospective host operator, the identity of which was unknown as CommsMEA went to press, the next 12 months is expected to witness the proliferation of the model throughout the MENA region.

Dubai-based consultancy firm Delta Partners produced a report entitled ‘MVNOs in the Middle East - Threat or Opportunity' using the examples of MVNOs in European markets as a potential yardstick to measure the feasibility of the model in the MENA region.

At present, many Middle Eastern markets hardly lag behind their European peers in terms of penetration, which is viewed as quite a remarkable feat, taking into account that competition in most of these markets is still very young and only in its early stages, according to the report.

"The introduction of MVNOs would fundamentally change the industry landscape," says Rogier van Driessche, a partner with Delta Partners and co-author of the report. "It is a truly disruptive model that requires careful analysis by all stakeholders.

Published in July 2007, the report correctly predicted that Jordan would be the first market to house such an operator with Delta Partners also predicting that more will follow in the coming 12 months.

The firm thinks that launching an MVNO could be a "capital-light" way to gain access to a market that is growing at 15% a year, making it the fastest growing telecom market in the world.

For investors in the Middle East's telecommunications market, the arrival of MVNOs represents an exciting opportunity for exposure in the telecom sector, according to Delta Partners. Based on the experience of European MVNOs, the company predicts that the potential value of MVNOs in the Middle East market could be as much as US$5 billion.

"As the last of the monopolies in the Middle East telco space comes to an end, with the second mobile licence auction in Qatar, the regional telco space is approaching the next phase of liberalisation," says van Driessche.

He adds that markets cannot be described as ‘competitive' until there are three or four players in a given market's mobile space and that the MVNO model can offer favourable margins to operators.

"It would be difficult for an infrastructure-based operator to turn a profit and generate a significant return-on-investment for investors in a market that already hosts four mobile operators," van Driessche adds. "The main reason for this is that infrastructure-based operators almost universally rely on volume to maintain profitability.

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