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Study shows ME telecom markets nearing saturation levels

A new study by Booz & Company shows great growth for the Middle East telecom sector but notes that markets are approaching saturation stage

The Middle East telecommunication sector has seen great growth in terms of telecom subscribers and mobile penetration rates in the last three years but most markets are reaching saturation levels, according to a new study conducted by Booz & Company.

The sector witnessed a compound annual growth rate (CAGR) of 44 % between 2003 and 2007, with subscribers increasing from 24 million to 103 million. This is reflected in mobile penetration rates, most notably in the UAE, Qatar and Bahrain, where penetration levels reached 178%, 129% and 124% respectively.

“Because competition in the sector is further intensifying, operators are seeking new sources of growth to capitalize on their share of the market,” explained Ghassan Hasbani, vice president of Booz & Company, a leading global management consulting firm.

The market’s competitive landscape last year highlights the competition. In Jordan, there was one fixed operator in the market, with four mobile operators competing for the country’s 85% mobile penetration level. In the UAE, two fixed operators and two mobile operators competed for a share of the 178% mobile penetration rate.

Future growth strategies for telecom operators fall largely under two key categories: scale and scope. “Essentially, potential growth paths for telecom operators rely on growing revenue share and growing the customer base, and most preferably a mix of the two,” said Hasbani.

In order to grow, operators must be able to anticipate competition and leverage the critical mass for competitive advantage. In terms of scope and growing revenues, operators must extend and diversify their business to include offerings that go beyond basic telecom services.

“As for extending scale, operators must acquire and/ or pursue strategic alliances, either with local or international players, to create a much sought-after critical mass,” Hasbani added.

The study also pointed out that telecommunication investment activities in the MENA region have increased considerably, growing from $5 billion in 2004 to $20.6 billion in 2007.