Mobile market

Despite bordering Saudi Arabia and Oman, Yemen has more in common with telecoms markets across the Gulf of Aden and the Red Sea in Africa. George Bevir looks at some of the pressing issues affecting the country.

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By  George Bevir Published  February 18, 2009

An additional incentive for telecoms operators is the high proportion of young people in the country. Yemen has a very young median average age of just under 17, which is even lower than the young average age of neighbouring countries Oman and Saudi Arabia.

Qablawi says that he thinks networks will be well equipped to deal with the growth rate. "[NSN] just recently signed a big expansion deal with Sabafon which covers them for the next 3 million subscribers and although we're currently rolling out that expansion we're already talking about the next two million, taking them to five million. They are doing the planning early on, and they are matching their forecasts with the analysts forecast well," he says.

Most of the operators are focusing on voice; the fixed network is not yet deployed properly in the country. Gaby Abou-Zeid, Ericsson’s country and key account manager for Yemen

Despite the impressive mobile growth rates, it will be difficult for Yemen to match the overall teledensity levels of other Middle Eastern countries. According to the International Monetary Fund, GDP per capita in Yemen is US$1,453 and analysts agree that together with underdeveloped rural areas it is one of the biggest inhibitors to growth in the region.

"Whilst there is great disparity of wealth amongst Middle East countries, Yemen's GDP per capita is only half that of even Syria or Egypt, the next lowest in the region," says Lewis.

Arab Advisors' senior research analyst Issa Goussous suggests that one way for the mobile market to attempt to tackle the problem of such low spending power and grow even further is by offering lower rates and cheaper mobile handsets.

"The handset from ZTE which was recently introduced to the Yemeni market cost $20 and was a hit," he says. "Another aspect is the distribution channels: 65% of the Yemeni population - or let's say potential mobile subscribers - live in rural areas with primitive infrastructure. They don't think of getting a mobile phone because they do not have electricity to recharge the battery!" Goussous says.

Extracting a higher spend from customers remains a challenge that appears to be almost insurmountable. In its last set of results, MTN reported that ARPU had declined by 1% quarter-on-quarter to $8, and with only half of the population above the age of 15 able to read and write, it presents another challenge to operators who could look to drive ARPU through increased data usage with SMS and mobile internet services.

The launch of 3G networks may help operators to sell additional content and services, but it is not clear when the technology will be licenced.

"Maybe as early as 2010 we will see a licensure for 3G services," says Qablawi. "I think by the second half of 2009 we will have more clarity about when and how 3G will be tendered and subsequently offered to subscribers. It is a fast growing low ARPU market but on the other hand having the opportunity to tack on 3G services is something we're looking forward to," he says.

Internet connections

Lewis describes internet penetration levels as "very low, with very hazy statistics". While research firm Budde estimates internet penetration to be 1.4% of the population, Arab Advisors suggest it is "less than 6%". The disparity between the two figures is due to confusion over the number of subscribers versus the number of users.

Lewis thinks that internet penetration is unlikely to change greatly over the next year, with analysts at Budde suggesting that 50% literacy levels and low incomes are major reasons for the lack of growth. PC ownership is low, with "the majority" of users accessing the internet via internet cafes, according to Budde.

The internet was introduced to Yemen in 1996 under brand of Ynet, which offers ISDN and ADSL services. According to Ynet's website, the monthly fee for a 512kb connection is YR65,000 (US$320). Such high costs, combined with low literacy levels do not create an environment for large scale take up.

Figures from the ITU show that Yemen had 320,000 internet users as of March 2008, which represented 1.4% of the population. Only Iraq, according to the statistics, has a lower penetration level in the Middle East region.

"Most of the operators are focusing on voice," says Gaby Abou-Zeid, Ericsson's country and key account manager for Yemen. "The fixed network is not yet deployed properly in the country. There is a network capacity of 1.5 million, but they did not reach yet 1 million in the whole country, so that means that penetration of the cellular network is growing much better than the fixed," he says.

M-Commerce growth

Another avenue that operators are beginning to explore that could help to generate more revenue is M-commerce.

"We see tremendous growth of M-commerce in the region, and particularly in Yemen" says NSN's Samer Qablawi.

"There are talks concerning putting in micro facility payments but as of today, I would say the two leading operators, MTN and SabaFon are doing the most R&D in that respect. They are not there yet, but they are already prepared to start offering these services but from a regulatory point of view it's still a challenge.

"If you look at the existing banking regulation it puts you in a position to not really make growth in M-transaction commercially viable, so this is one of the challenges," he says.

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