KSA: The mobile market in Saudi Arabia is reaching saturation with a mobile penetration rate of 186% in 2011. The total numbers of mobile subscribers were nearly 54 million, from 51 million in 2010.
We estimate that the subscriber base will increase to 71.9 million by 2017 at a Compound Annual Growth Rate of 4.9% with the penetration likely to reach 221.7%. Revenue growth rate in the Saudi Arabian market has been declining due to falling ARPU and increasing mobile subscriber penetration rate and is expected to be at 2.4% in 2016 at a CAGR of 4.2%.
The Enterprise Resource Planning (ERP) market in Saudi Arabia was estimated at USD 155.2 million for the year 2010. ERP and CRM form a significant portion of the total enterprise application market in the region. The need to automate and integrate enterprise-wide resources has led to higher adoption of ERP in Saudi Arabia.
For 2010, the ERP market was primarily driven by government, manufacturing, retail and distribution, and telecom sectors signing in for large scale implementations, which contributed to 60% of the total ERP revenue. ERP market in Saudi Arabia is expected to grow at a CAGR of about 18% to reach revenues of $494.4 million by 2017.
UAE: A key element in the strategy of the UAE government has been to get the legal framework right. The UAE telecommunication market has grown from $8.2 billion in 2005 to $13.6 billion in 2011, achieving a 20% annual growth rate. Much of this has been due to the new legal framework with Telecommunications Regulatory Authority (TRA) issuing several regulations to foster advancements in the ICT sector.
The UAE continues to have two operators, Etisalat and Du. Each operator offers fixed-line, mobile and internet services though Etisalat remains the much larger provider of fixed line and internet services. The mobile penetration rate is over 200% and is likely to reach 250% by the year 2015 and 270% by 2017.
Together, the operators have over 10 million subscribers. Since the market is already mature and saturated, Frost & Sullivan estimates unsteady growth in mobile subscribers, with the subscriber base expected to increase at a CAGR of 3.7% to reach 15.67 million by 2017.
Bahrain: The smallest market in the Middle East by population size but it is also one of the most competitive. It was one of the foremost to liberalise its market and have a well-established regulatory authority. Bahrain has a 188% mobile penetration rate and over 1.6 million subscribers.
Qatar: The Qatar telecommunications market has witnessed tremendous growth; largely driven by sustained progress in the mobile market and recent expansion of access to high-speed broadband internet services. The market totaled $1.7 billion at the end of 2010 and was largely dominated by the mobile segment, which made up two-thirds of the total telecommunications services market. The mobile industry has witnessed a period of rapid growth with subscriber penetration expected to reach 210% by 2015, up from 160% in 2011.
Egypt: The mobile subscriber base in Egypt has been growing steadily year-on-year. The total number of mobile subscribers in Egypt as of 2011 stood at nearly 74 million recording a year-onyear increase of 20-30%. Frost & Sullivan estimates that the subscriber base will increase to 97.3 million by 2017 at a CAGR of 4.7%. As of 2011, the mobile penetration had reached to over 93% and is anticipated to reach more than 113% by 2017.
Iran: Iran’s telecom market continues to be weighed down with significant regulatory and legal hurdles. The government exerts a lot of control over the market and most telecommunications companies are state owned. Additionally, the broadband market is quite nascent and mobile telephony is not as developed as some of Iran’s neighbours. The business sector presents its own set of challenges, including weak infrastructure and low spending on information and communications.
An emphasis on the “Arabisation” of content in the Middle East has continued to see an increase in interest in creation of applications as well as employment as a result of the skills required to achieve this objective.
Technological impact: With a parallel launch of LTE services in Saudi Arabia, by Mobily, STC and Zain, the intense data race has become even more evident with a clear agenda to maximize market share and gain early leadership. Seamless connectivity, geographic reach, quality of service and content are amongst the other likely contributors.
Social networking, video sharing and online gaming is increasing in popularity, and thus mobile customers in the Kingdom now record higher mobile data usage levels. The initial launch of LTE services will be limited to only major cities, with operators expected to increase service coverage gradually in 2012-2013. LTE subscribers in the country are estimated to reach 11.8 million by 2017 and revenues are expected to reach $368.4 million, over the same period.
In the UAE, Both the operators – Etisalat and Du – are competing on technology and gearing up towards launching 4G networks. The operators have announced their commitment towards LTE and are working with infrastructure vendors in trials and deployment of LTE networks. Etisalat announced the launch of its LTE network in H2
2011. Du has also conducted its LTE trials and is finalising the infrastructure vendor for LTE network deployment. The initial launches will be limited to only major metros, with operators increasing coverage gradually in 2012-2013. LTE subscribers in Saudi Arabia are estimated to grow at a CAGR of 84.7%, to reach 4 million by 2017.
LTE revenues are expected to grow at CAGR of 75.6% over the same period. Other technologies being utilised for wireless broadband are 3G, HSPA+ and WiMAX. However, these services are limited to a few cities and therefore there is huge scope of expansion in the broadband market with the introduction of LTE technology in Saudi Arabia.
After rigorous testing by both, Etisalat and Du, ‘Mobile Number Portability (MNP) is finally set to be launched in the UAE by early 2012. Both Etisalat and Du are fine tuning their systems to ensure they retain their existing customer base. Bahrain is one of the first countries in the Middle East to launch MNP services, other countries may soon follow suit.
Fixed-line infrastructure sharing is a key part of the TRA’s plan to increase competition in the fixed-line voice and data sector. Infrastructure sharing will now allow residents from any part of the UAE to choose their fixed-line provider. Efforts and investments are expected to be seen in the area of broadband technologies (4G), satellite communications, wireless technologies, security and encryption and sensor area networks.
The rising prominence of Middle East operators such as Etisalat, Qtel and Batelco has propelled these players to the global stage and there is now greater potential for their expansion into other markets. There is also potential for greater inflows of foreign telecommunications investment into the region with European and Pan African operators expected to show greater interest in the Middle East and North Africa (MENA) region.
The region represents a strategically and geographically accessible opportunity for these operators to grow, either through acquisition or in limited cases, through the issuance of new licenses.
Outlook for 2012
Frost & Sullivan expects to see some continuing merger and acquisition activities in the MENA telecommunications region during 2012. The Middle East and North African market is dominated by major global tier-1 telecom service providers, followed by a host of smaller regional and locally owned companies. Outsourcing service providers conduct customer care operations with onshore, near shore and offshore operations. By nature of the geography and multiple languages and cultures in the region, MENA market is very fragmented.
Financial services, high technology, credit card, insurance and communications continue to represent the most prominent vertical markets. Help Desk, especially information technology, high-tech and general customer servicing continue to be one of the fastest growing segments within the contact centre outsourcing. Content generation is likely to be another area of increased activity in 2012 on all sorts of media platforms.
There is an active participation by various stakeholders such as content and media companies to promote activity in this segment and Frost & Sullivan expects these to bear their first fruit in 2012. The development of mobile and web applications is likely to be the greatest area of focus in this regard.
The historic growth levels of the MENA mobile market are unlikely to continue as most countries in the region are nearing maturity, but the region’s fixed line market is expected to show high levels of growth as operators make increased investments in fibre-to-the-home (FTTH). The UAE is expected to be the first country in the world to have 100% broadband internet penetration through FTTH technology. Frost & Sullivan observes that in order to fully realise growth potential, it is essential that market liberalisation efforts are continued.
While there has been significant progress in this regard such as the launch of triple-play licences in Egypt, the UAE issuing Voice over Internet Protocol (VoIP) licences, Qtel’s tie-up with Skype to offer VoIP services in designated countries with local presence there are instances in which improvements have to be made. Most notable in this regard is the example of Lebanon, one of the few countries in the world where there is absolutely no privatisation of telecommunications services.
With economic growth seemingly back on track, 2012 should be a year in which telcos within the MENA region can reinstate their growing trends. Frost & Sullivan expects the market to continue to feature as one of the most dynamic and fast growing telecommunications sector in the world.
Vivek Malhotra is Principal Consultant, Information and Communication Technologies Practice, Middle East and North Africa, Frost & Sullivan.