Moving away from 2G, operators in the MEA region are now under pressure to enhance their networks with advanced technologies such as 3G, HSPA and ultimately LTE. This kind of technology not only enables operators to provide new and better services to customers, but also helps to provide spare capacity to cater for future demand.
Mark Kremers, associate partner of Oliver Wyman says that as people continue to switch from 2G to 3G, a "revolutionary change in user behaviour" has started to take place. "Mobile applications are mainly driven by productivity and social networking, and it is an inevitable move for operators to keep up with the demands of consumers," he says.
As an operator, Du's Hatem Bamatraf, vice president of network development technology, says: "As a worldwide trend, the data bandwidth is increasing due to the demand from customers looking for data services. The introduction of smart devices such as iPhone, BlackBerry, Android and the latest Nokia Windows devices have helped in increasing bandwidth utilisation in mobile broadband that has pushed operators to come up with solutions to upgrade their networks.
Increasingly mobile phones are being used for internet services, as a substitute for fixed line. Ahmad Zeidan, general manager of Netgear, points out that mobile devices are becoming the main point for internet and even overtaking fixed internet, especially in some markets like Saudi Arabia, which had only 4% broadband penetration in 2007. Bamatraf says that 3G offers a more practical solution enabling operators to offer more advanced services that require high bandwidth such as mobile TV, video streaming, and services including online gaming and multiplier gaming.
Zeidan says that when Mobily entered the Saudi market, there was great interest to invest in mobile broadband connectivity. "This created a very compelling alternative to the typical fixed line access, which is a kind of an inverse world. This has seen a complete shift in the revenue from mobile operators who are now seeing significant revenues coming from data services. I believe that the business case for operators to move to 3G is positive in this region," he says.
It is stated that the number of smart phones globally will be around 900 million in 2013 compared to about 500 million in 2010. Rakesh Lakhani, director mobile broadband, Middle East and North East Africa, Ericsson says that the enormous increase in smart phones works as a revenue booster for operators, as revenues from a smart phone user are 1.8 times higher than the normal user. "An analysis says that a smart phone user generates 10 times more traffic than a normal user, which calls for a big expansion to the network. With this, operators are fast gearing up to meet mass coverage with high quality on their networks through 3G and HSPA investments," he says.
Jihad Srage, vice president and president of MEA region at Qualcomm, says: "The technology trend continues with strong support around 3G and around the evolution of the 3G roadmap. This will continue over the next few years building over the existing networks and their optimisation.
"We now actually see additional testing and deployments and trials happening in other markets around similar technologies. Usually, markets like the UAE, Saudi Arabia, Egypt and South Africa, they lead in the MEA region, and like a domino effect, other countries in this region will follow.
"The Middle East is starting to see a lot of services being developed to fill the network pipe. There was a recent study which showed that in Saudi Arabia, 24 million minutes of mobile video streaming on a daily basis happens on YouTube alone, out of the 120 million minutes of mobile video streaming that's being done on YouTube," says Srage.
Lakhani says that with advanced technologies such as LTE and HSPA+, the cost per gigabit for operators decreases. "Operators need to look at innovative business models that call for operators to offer differentiated services based on usage or application to explore new revenue streams and maintain cost balance," he adds.
However, Zeidan sees the current focus of 3G being targeted more at end-users than enterprises, at least in the UAE. "As the UAE has more of private sector companies who are already aware of 3G technology, operators should really work on encouraging young students and developers to start developing regional applications for mobiles. This will be an excellent way to increase the demand of 3G consumption," he says.
Lakhani adds that one of the biggest needs for a company is to ensure connectivity of their employees on the move, and 3G and HSPA allows this. "Some operators have started corporate sales push programme of their 3G network to increase awareness." Kremers says that earlier it was the licence obligations on operators that were driving the rollout strategy more than anything else. Now, with 3G networks in place, operators are moving on to the next stages of investing in HSPA and LTE technologies to push for more data usage services on their networks.
"The evolution of HSPA+ technology, also known as dual-carrier or DC HSPA+, delivers today twice the speed at 42MB/sec to consumers," adds Srage.
Kremers says: "More than coverage or performance, we are now discussing with operators how to use new technologies for value-driven rollout strategies. It is too tricky now. The balance sheets are about to explode. If they do any wrong decisions, it can have serious ramifications on the financial performance of operators."
Du was the first operator in the region to deploy the DC HSPA+ technology late last year with Qualcomm as its main partner. Etisalat quickly followed with a similar announcement. In January, this year, STC launched its commercial dual-carrier HSPA+ technology. Srage says: "On the technology side, the DC HSPA+ deployment with Du was the first in the region. Following Du, Etisalat and STC announced their HSPA+ rollouts. We also expect a few other announcements to happen in Egypt, South Africa and other places with Qualcomm collaboration soon."
"When you look at emerging markets such as China and India, and developed markets such as Europe or the US, the major markets in MEA are in certain cases better than developed markets," he says.
Some of the countries that are lagging behind in technologies such as 3G are Algeria, Libya, Lebanon and Iraq. Srage says that until political problems are resolved in these countries, it is uncertain when they will deploy mobile broadband networks.
"We also have the low GDP markets in Africa that are lagging either due to political security situation or due to the financial status itself. However, we are starting to see a domino effect happening, for example, in West Africa there have been 3G deployments in some countries such as Sierra Leone and Zambia," says Srage.
Lakhani says that most 3G subscribers are individual customers, but a surge in mobile subscriptions is expected to come with M2M connections in application areas involving simple systems such as smart meters to heavy network capacity applications such as connected cameras that allow clicking and uploading of high resolution pictures on the move. "With 3G and HSPA technologies, both quality and reliable connectivity coupled with huge data capacity on the move can be achieved," he says.
Overall, the MEA region has seen a big variation when it comes to 3G and HSPA maturity. According to Kremers, Saudi Arabia is one of the most advanced when it comes to coverage and speed on mobile broadband. "Mobily initially drove this a lot.
The operator took it as one of its key missions to bring mobile broadband to the Kingdom to gain market leadership," he says. He quotes a study saying that about 92% of Saudi Arabia's population has access to mobile broadband. "That's a very high percentage," he adds. While Srage says that countries like Egypt, Morocco and South Africa have been on the leading edge of technology deployments with HSPA+ delivering 21MB per second speed; Lakhani divides the entire MEA region into three segments based on mobile broadband.
"The developing mobile broadband countries are Bahrain, Turkey, Oman, Kuwait and UAE where operators are pushing for differentiated services to increase traffic from smart phones. While voice is still the dominant revenue source, data revenue is becoming sizable with over 15% of total revenue," Lakhani says.
"In the buildup phase of mobile broadband are Jordan, Egypt, Sudan, Syria and Ethiopia, where though mobile broadband is launched, penetration is low. And, the countries with no mobile broadband due to unavailability of spectrum are Lebanon, Iran, Iraq and Palestine," he adds. "Among operators taking their networks to the next level in 3G and HSPA in partnership with us are Turkcell and Avea in Turkey, STC and Mobily in Saudi Arabia, and Vodafone and Etisalat in Egypt," he adds.
Kremers adds that other markets such as the UAE and Qatar have "very advanced" networks and operators. "Kuwait is quite advanced on the 3G front as well. Jordan has only one licence since last year, and it is quite strange that the country which is one of the progressive markets in the region hasn't picked up on 3G yet," he says.
Zeidan also thinks that the UAE is the most advanced country in terms of providing a ‘standard network'. "There has been a huge demand to offer 3G service from PDA users. Moving from 3G to 4G, it's going to be a huge investment, and telcos can increase their revenues by offering differentiated services to customers such as movies, stocks or a favourite program, and browsing internet and download," he adds.
Jordan in particular is a country that divides opinion in terms of the 3G potential. Kremers says that the business case for 3G "was not that obvious" owing to affordability and the large number of DSL providers.
"There are three big mobile operators, another operator using a different technology, and many fixed operators, and lot of DSL providers. The Jordanian telco market has to liberalise big time. Coupling this with macro-economics of the country where affordability is an issue, operators need to be very creative in making money there. The business case for 3G was not that obvious for operators because the regulator chose to go for one licence with one operator," he says.
Zeidan agrees that Jordan is a problematic market for 3G, and he attributes this partly to the country's focus on WiMAX that delayed 3G. "The 3G rates were extremely expensive and the offers they made were not really matching the offers you get with the SIM cards.
"Jordan has four operators and until recently only one operator launched 3G. The 3G operator will not lose anything by keeping the high pricing, due to lack of competition," he says.
The increasing demand for data from smart phones has also created challenges for operators in managing network capacities. Zeidan believes that one of the major obstacles that operators face is how to refine charging mechanisms for 3G data services.
"The reason why it's expensive is the bandwidth that we use. In reality, operators are not using full equipment for 3G towers to support data demand specific to an area. For a download that should take only a couple of minutes with proper equipment takes more than 30 minutes with these cell towers. Here, with less charging comes longer time to download," says Zeidan, adding that there is the need to improve some of the regulations in this space.
Kremers says that the short-term issues for operators are that they have invested significantly in their networks and they want to get the best returns by providing appropriate value propositions, using caps on usage, and charging realistic prices.