Competing in Qatar
Qatar’s telecom operators view broadband as the next area of rapid growth.
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Qatar might be one of the region’s smallest countries, but since the launch of Vodafone Qatar back in 2009, its telecoms sector has attracted significant attention.
The launch of the country’s second operator certainly helped shake the market up, forcing the incumbent operator, Qtel, to receive its first taste of competition in its home market, and making Qatar one of the few countries in the Middle East to welcome a Western mobile brand.
Vodafone Qatar has certainly managed to gain traction in the market, with most analysts estimating that the company now has a mobile market share of more than 20% by value.
In its Q3 2010 results, Vodafone Qatar claimed it had 601,000 mobile subscribers, equating to a market share by population of some 30%. This compared with Qtel’s mobile subscriber base of more than 1.2 million subscribers in 2010.
According to Business Monitor International, subscriber numbers rose 46.9% to reach 2.472 million in 2009, despite penetration rates topping 150% at the end of the year.
But while Qatar appears to have provided ample growth opportunity to both operators, the market does have its limitations, and Qtel reported continued falling ARPUs, reaching QAR123.2 ($33.7) at the end of Q409, according to BMI.
In its first year of operations, Vodafone Qatar’s achievements have impressed market analysts. Mark Kremers, asscociate partner, Oliver Wyman, describes Vodafone’s 20% market share as “an impressive accomplishment”.
“With this performance Vodafone ranks among the top performing start-ups in the region,” he says.
However, Kremers sees the level of mobile voice saturation and declining ARPU, which will put value growth and margins under pressure, as a challenge. But despite this, the two operators can still look forward to a population increase that is estimated to be about 10% over the next five years, and to strong demand for fixed and mobile broadband services.
“Qatar is one of the most advanced markets in the region when it comes to internet usage, and this has not been fully capitalised on yet by operators,” Kremers says. He points to further FTTx and LTE or HPSA deployments as projects yet to be implemented.
Jacobo Garcia-Palencia, partner, Delta Partners, attributes Vodafone Qatar’s success to date in attracting customers to the brand value, and some “extremely aggressive pricing schemes”.
“They came in with a value proposition with a lot of support on the brand,” he says.
He adds that Vodafone Qatar has also performed better than expected in the post-paid sector, gaining a market share of about 15% in terms of customers.
“They are targeting the low end of the market but also the high value customers with good post paid value propositions,” Garcia-Palencia says.
But for the directors at Vodafone Qatar, this growth in the high end of the market is not enough, and it is an area the company is keen to develop further, according to acting CEO, John Tombleson.
Indeed, Tombleson says that while the operator was ahead of forecast in terms of the subscribers in the third quarter of 2010, with 601,000 active customers, ARPU was slightly behind forecast. “That tends to balance it out, because as we have been building our network, we have attracted more price conscious customers,” he says.
“As we get to parity with Qtel in terms of network we will then be able to target the more high value customers.”
Tombleson adds that he expects to see mobile number portability (MNP) introduced in the market in May or June 2011, and he thinks this will benefit Vodafone Qatar.
“That is the point where we want to have network parity so that we can attract customers that are higher value and quality conscious,” he adds.
“MNP takes one barrier away. People don’t want to lose their Qtel number that everybody already knows, so that is a barrier that any new entrant has.”
Fixed line growth
While Qatar’s mobile voice sector is already saturated, both of the country’s operators are ramping up investment in the fixed sector. The regulator, ictQatar awarded the country’s second fixed-line licence to Vodafone Qatar. In the licence agreement, Vodafone Qatar’s fixed-line licence initially included 100% coverage of The Pearl development, with broadband internet services to be provided within three months and fixed-line voice services to be provided within 12 months. The fixed license contains further obligations to provide 100% coverage in the rest of Qatar.
Qatar’s government is currently working with ictQatar, Qtel and Vodafone Qatar on the deployment of a national broadband network. Under this scheme, the two opertators will both own and operate their own fixed-line backhaul infrastructure, and they will use the national broadband network for last mile access. As CommsMEA went to press, plans for the national network were still being finalised. The national broadband network is expected to give last mile access with speeds of up to 100Mbps to about 95% of homes in Qatar by 2015.