Breaking the duopoly

Mobile broadband and a lack of regulation are the defining characteristics of Kuwait’s telecoms sector.

Tags: Delta PartnersKuwaitNokia Siemens NetworksSaudi Telecom Company
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Breaking the duopoly Ghassan Hasbani, CEO of international operations at STC.
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By  Roger Field Published  June 7, 2010

Dual sim

The high penetration rates also led to an increase in the dual sim effect, with many of the country’s wealthier residents holding two sim cards, which also served to disperse revenues further.

According to Carvalho, the ARPU in Kuwait decreased from $62 in 2008 and was most likely just above $40 at the end of 2009. “It was $45 in Q308, so you can see there was a dramatic change,” he says.

However, Zain’s ARPU remains above this country average, at about $56-$57, while Viva’s ARPU is most likely just above $30. In terms of market share, Zain is on about 48%, Wataniya 38% and Viva 13%, according to Carvalho.

The different ARPUs that the three operators command is a reflection of the different segments of the population they cater to, with Carvalho describing Zain as the “emotional leader” that attracts and retains customers who are least price conscious. It is also the operator that is most associated with being at the cutting edge of technology.

“Zain is very much the Kuwaiti player, very much deploying the most innovative products and services, the first one to really deploy 3G,” he adds.

“The majority of wealthier clients in Kuwait are not price sensitive at all and are more sensitive to their initial number. They are practically all with Zain.

“Then we have Wataniya, which belongs to Qatar, and Viva belongs to Saudi. There is a distinction, but it is more functional positioning than emotional,” he adds.

However, the “emotional” attachment of long term, wealthy Zain subscribers to their operator does make it difficult for Wataniya and Viva to poach older, wealthier customers.  “The challenge is still how to break into the most valuable clients,” according to, Carvalho.

Mobile broadband

In this light, the main area for expansion for the three mobile operators is mobile broadband, and the potential of 3G and HSPA in the country is increased by the limited fixed infrastructure and services.

The mobile operators also have the benefit of being in a small country, which makes it easier to deploy the necessary infrastructure for data.

This is a situation that Khalid Aziz, Nokia Siemens Networks’ country director for Kuwait and Iraq is familiar with. He says that the Kuwaiti market is still considered to be at “the edge of technology leadership” as well as high end growth and ARPU.

He points out that all three players have HSPA+ networks, and that Nokia Siemens Networks provided Zain and Wataniya with technology giving speeds up to 21Mbps.

“This has provided perfect substitute for fixed line,” he adds. “It is available far more quickly than fixed and has grown out of all proportion. If you take the three mobile operators together they are bigger than any of the existing ISPs in the country combined. This is a major shift in the market.”

Despite this reputation for leading with technology, Kuwait’s operators are at risk of falling behind some neighbouring markets when it comes to deploying LTE, and this is also partly due to the lack of a proper regulator in the country.

“The latest technology is still held back,” Aziz says. “In Western markets we are already seeing LTE trials and roll outs taking place but in Kuwait the operators are still being held back by not knowing which frequencies they are going to be operating on, and they are not running very extensive LTE tests.”

He added that it remains to be seen how the government will act to encourage continued investment in new technology such as LTE.

WiMAX woes

The lack of guidance on LTE from Kuwaiti authorities is perhaps not surprising given its track record with existing 4G technology WiMAX. Indeed, the way WiMAX was licenced in Kuwait has been widely criticized.

Most industry insiders agree that too many licences were issued around 2007, which led to several WiMAX players serving a small market.

“About 4-6 WiMAX licences were awarded to different operators,” Aziz says. “From the way we see the market this is not very healthy because it deprives any of them the ability to build the scale of consumers to provide a reasonable service.”

He adds that these operators are only able to deliver services to a certain segment of the population, such as the oil and gas sector, banking, or real estate projects.

Carvalho agrees that a lack of regulation played a big role in the problems that WiMAX operators face in Kuwait. “Today you see the WiMAX players lack the capacity to fully serve the market.”

He suggests that the authorities may have believed they were doing the right thing by awarding more licences in a bid to create greater competition, although this can be a very misguided strategy when done in the wrong way.

“Competition does not just mean more players in the market. You need to take the long term perspective and see how the market should evolve, what would be a healthy competition in two, three, five or 10 years down the road,” he says.

The problem faced by the WiMAX players was compounded by the aggressive broadband strategies adopted by the mobile operators, which responded to the perceived threat from WiMAX by investing more in mobile broadband, subsidising dongles and launching bundles.

Future potential

While Khalid Aziz sees some issues with spectrum allocation for LTE, he has no doubts that the future for mobile operators lies with mobile broadband, and the convergence of technologies that increased use of mobile data will inevitably lead to.

“The major opportunity lies in the convergence in its true sense,” he says. He adds that Nokia Siemens Networks has been working with both leading operators as well as the Ministry of Communications to look at ways of encouraging a “convergent ecosystem”.

He moots a convergent environment where fixed and mobile alternatives are available at the same time. “I think that is one of the things that the mobile broadband has started to enable, which has been starting to replace the traditional fixed ISP model of using the internet at home.”

To help make this a reality, Nokia Siemens Networks has been working closely with the operators to develop a femtocell concept, which will allow for ADSL connectivity on wireless networks for end users.

“Going forward, the major opportunity lies with whichever of the operators will provide an end to end solution of a converged network, so you as a subscriber do not have to go to different companies for different fixed billing or different broadband and mobile services, for example,” he says.

“The other opportunity lies in value added services. We do have a plethora of services available in the country now, but there are far more to go like mobile TV and mobile banking apps.

“Still there is a mile to be done on that side,” he adds.

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