Saudisation impacts Kingdom’s mobile market in Q3: IDC

Report reveals every country in the GCC recorded quarter-on-quarter declines in Q3 2016, with Saudi Arabia suffering the most

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Saudisation impacts Kingdom’s mobile market in Q3: IDC Mobile shipments in the region totalled to 23.8 million units, compared to 23.9 million units in Q2.
By  Aasha Bodhani Published  December 14, 2016

Research house, International Data Corporation (IDC) has highlighted that the Middle East mobile phone market has suffered its third consecutive quarter-on-quarter decline in Q3, however Q4 looks promising.

According to IDC shipments in the region totalled to 23.8 million units, compared to 23.9 million units in Q2. Also, every country in the GCC recorded a quarter-on-quarter decline in Q3, with Saudi Arabia suffering the biggest hit with -18.3%. The UAE's mobile shipments declined -10% quarter-on-quarter in Q3 2016, while the remaining GCC countries (Qatar, Bahrain, Kuwait, Oman) fell a combined -4.1% over the same period.

"The effects of the challenging macroeconomic climate are being compounded by the impact of Saudisation on the mobile market, which is now in full effect," said Saad Elkhadem, a research analyst at IDC MEA. "The law stipulates that only Saudis can now be employed within the mobile phone industry - covering sales, after-sales maintenance, and accessories. The kingdom's mobile market is predominantly driven by independent retailers, and the new law has taken a drastic toll on this space, with almost 50% of stores shutting down. The impact of these closures has been huge so far with an immediate drop in shipments; however the expectation is that the channel will shift slowly and steadily towards organised retail as the market seeks to correct itself."

"The underlying reason for the overall decline seen across the GCC is the continuation of low oil prices and constrained government spending in the region," added Nabila Popal, research manager for mobile phones at IDC MEA. "The lack of overall innovation in the smartphone industry and the flattening of price declines have also reduced consumer demand for upgrades, thereby lengthening the refresh cycle. This marks the dawn of a new era for the smartphone market, since these two factors were the main drivers of the high double-digit growth rates the industry had previously become accustomed to. As such, I expect the smartphone market to see flat or modest growth at best until the next big innovation comes along."

Channels and retailers are struggling to keep up with these developments, and we are now seeing major consolidation occurring in the market. Declining demand and diminishing margins have even caused some of the largest and most established players to cut costs, trim their headcounts, and look for alternative non-mobile business opportunities.

However, Q4 is traditionally the best quarter of the year for mobile shipments, so IDC expects the market to see modest growth of 8% quarter on quarter and 8.1% year on year in Q4 2016.

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