Yemen’s telecom limbo

Yemen’s telecom sector struggles to realise its potential as instability and a weak economy hinder growth

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Yemen’s telecom limbo
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By  Roger Field Published  September 13, 2010

While its Gulf neighbours, Oman and Saudi Arabia, continue to develop and modernise their telecom sectors, Yemen has remained the region’s perennial under-achiever.

The country, which has a population of some 22.8 million, has made attempts to improve its telecoms sector in recent years, and at first glance, Yemen’s telco market looks reasonably competitive.

With three GSM operators, a mobile CDMA operator, and a fixed line operator, Yemen has more operators than some other markets in the region, including the UAE, Oman and Syria.

But a combination of low per capita income, political instability, and what amounts to a GSM duopoly between MTN Yemen and Sabafon appears to have hindered growth.

Yemen has three GSM operators: MTN Yemen and Sabafon, which both have similar market shares, and Y-Tel, which entered the market in about 2007 but failed to gain traction. But another mobile operator, Yemen Telecom, which is 55% owned by the state incumbent PTC and uses a CDMA network, is a significant player in the market, with a similar to market share to MTN and Sabafon.

According to Dubai-based research and consultancy firm Delta Partners, the market share of the four mobile operators in 2009 stood at: 37% for MTN; 31% for Yemen Mobile; and 29% for Sabafon, while Y-Tel trailed on 5%. Delta Partners forecasts that these four operators will achieve markets shares of 38%, 30%, 24% and 8% respectively, by 2014.

Yemen Mobile, which offers mobile services using a CDMA network, may be the second biggest mobile operator at present, but is also likely to find ongoing growth more difficult compared with its GSM competitors, according to Fede Membrillera, a partner at Delta Partners.

“From a market evolution, we expect MTN to continue to be the market leader. Probably, Sabafon is growing, and clearly, the one that has less room in the long run for growth is Yemen Mobile, the CDMA player,” he adds.

“For CDMA, there is a requirement for a different kind of handsets (subsidised handsets) and for a low value market, it is always difficult to handle it. So, Yemen Mobile has a relevant challenge in this area,” he says.

But in a sign of just how difficult it is to extract reliable information from Yemen’s telecom sector, estimates about the market vary considerably.

UK-based research firm Onda Analytics estimates that at the end of 2009, Sabafon had a 34% market share with 2.5 million subscribers, while its closest rival, MTN Syria had a 31.9% market share with 2.3 million users.

Yemen Mobile, meanwhile, had a 29% market share, with some 2.18 million users, while Y-Tel had managed to attain a market share of just 4.5%, with 329,000 users, according to Onda Analytics.

Slow progress

However, both Delta Partners and Onda Analytics agree that the pace of growth in Yemen’s mobile market has been painfully slow. “Despite competition between four mobile operators in Yemen, penetration has increased slowly in recent years, up from 20% in 2006 to 30% at the end of 2009,” says Daniel Jones, a partner at Onda Analytics.

“Low average income levels mean that mobile telephony is outside of the reach of many, keeping penetration low.”

Furthermore, a fast-growing population means that many Yemeni’s are outside of the addressable market, with 44% of the country’s population under 15 years of age, according to Jones.

Onda Analytics predicts modest growth in Yemen’s mobile sector, and expects the country’s mobile subscriber base to reach 53% penetration in 2014, with 14.3 million subscribers.

“Although this represents significant growth, this penetration rate is still much lower than any other country in the MENA region, due to its poor economic situation and young population,” Jones says.

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