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Kuwait's QualityNet being courted for acquisition

Country’s biggest Internet provider in talks with major global player

Al Qallaf: A major deal is going on now.
Al Qallaf: A major deal is going on now.

Kuwait's QualityNet, the Gulf state's largest Internet provider, is currently in talks with a major global telecoms operator for possible acquisition, CEO Waleed Saleh Al Qallaf has told Arabian Business.

"Yes, one major [deal] is going on now... talking with the owners of QualityNet and the owners of that entity. They have an interest to acquire us," Al Qallaf said when asked if the company had been approached by any international telecoms firms.

Kuwait is one of the region's most mature Internet markets.

In 1992, only months after US-led allied troops forced invading Iraqi soldiers out of the country and restored peace, Kuwait became the first country in the Gulf to establish Internet services for its citizens.

QualityNet was only the second Internet provider in the country when it was set up in September 1998 after the government sought to privatise the sector and reduce the monopoly of the government-controlled sole operator.

It was set up by a trinity of major players in the region: local conglomerate Ali Alghanim and Sons Industries, telecoms giant Batelco and lender National Bank of Kuwait and competes with rivals FastTelco, KEMS and GulfNet.

Since the 90s, Kuwait has embraced the Internet, growing from 150,000 users in 2000 and a penetration rate of 5.8% to around 1.1m within a decade.

Currently, it has an Internet penetration rate of around 74%, much more than the UAE (70.9%) or Saudi Arabia (49%), but just beaten by Bahrain (77%) and market leader Qatar (86%).

According to data from InternetWorldData.com, Kuwait's 1.9m users make up just 2.2% of the entire Middle East market of 223.6m users, which itself only accounts for 3.7 of the global online community.

Kuwait is largely a copper-based network, which currently cannot carry sufficient bandwidth to satisfy consumer demand for broadband, which is used by just 5.5% of the population, Essa Al-Kooheji, general manager at QualityNet, told Reuters.

At present only 15% of homes and offices use the faster fibre connection, or Gigabit Passive Optical Network (GPON) as it is known in the industry, but Al Qallaf said government investment will help change this and improve the company's growth levels.

Over the last two years, QualityNet's market share has dropped by 5% to 40% of the fixed Internet market and its annual growth rates have dropped from 12% to 5% or 6% at present, but Al Qallaf said government investment in GPON will help change this.

"There is a plan to expand more. Today about 15% of Kuwait is GPON. Clients are happy with the fibre, most clients on copper are having some problems as it is not a stable service," he said in an interview in the company's headquarters in Kuwait City.

"The [market] growth is single digits; it was estimated to be double digit but it's now single. Assuming that everything stays as is, it is not going to improve. But with the plans for GPON, they are now in the pipeline. There are now around 27 areas to go live in GPON in six months, so the more GPON the better the growth," Al Qallaf said optimistically.