Despite fierce competition, falling voice revenues and regional issues rocking the telecoms sector in Jordan, there remains room for growth and expansion.
The telecoms scene in Jordan is booming, and despite the fact that competition is fierce, the country's operators continue to roll out new infrastructure and services as they make an aggressive play for market share.
The country’s mobile penetration rates exceed 118% at the end of 2011, and are constantly rising. In 2010, that figure was 112.6%, and by Q1 2012, 8.2 million users were connected. Zain Jordan seems to lead the market, with a reported 38% market share, followed by Orange and Umniah with 33% and 28% respectively. On the other hand, fixed line connections are dwindling. Josep Que, partner, Delta Partners said: “The number of fixed lines has been declining since 2004, when there were 637,000 lines in service, to an estimated 418,000 at the end of 2011. This sharp decline paired with the ongoing increase in cellular subscribers suggests that enterprises too are migrating to wireless and voice-over-internet protocol (VoIP) connections.”
Paul Kwon, researcher, BuddeComm, described Jordan as a modern liberalised telecoms market. “Jordan has emerged as a regional tech start up due to low start up costs and business-friendly government. Its reputation is increasingly attracting international capital eager to tap into the region’s growing online market as most start ups target the region, particularly the wealthy Gulf Region countries.”
Speaking about the fixed broadband market, Kwon added: “The fixed broadband market is served by a number of technology platforms including ADSL, FTTx, WiMAX and leased-line. Jordan recently announced plans to revive its National Broadband Network after construction was halted due to lack of funds. WiMAX makes up a significant proportion of total fixed broadband subscriptions although its long-term prospects are questionable given the growing popularity of mobile broadband via 3G technology.
Growth in the 3G sector has been phenomenal, Que said that in the first six months from the introduction of a second 3G operator in March 2011, customers subscribed to 3G services increased to 1.15 million from 391,000, an increase of 194%. Zain claimed to have signed up 700,000 3G subscribers by the end of December 2011 and expected that number to double in 2012.
Que added that fixed broadband penetration grew very slowly over the past two years. “From 27.5% at the end of September 2009, penetration grew by 6.8% to reach 34.3% at the end of September 2011, representing an increase from 248,217 subscribers to an estimated 314,000. Including mobile services, the Telecommunications Regulation Commission (TRC) claimed that there were some 564, 296 internet subscriptions at the end of Q3 2011, translating to some 2.81 million internet users and a population penetration of 45%. The TRC’s report includes 250,000 broadband users utilising 3G/3.5G networks. Wireless Intelligence estimated 1 million mobile broadband subscribers by end of June 2012,” Que said.
Further information about the type of internet connections reveals that, of the 616,983 internet subscriptions at the end of Q411, 8,163 were dial-up subscriptions. The remaining subscriptions are served by broadband services based on ADSL, WiMAX and mobile broadband networks. 3G-based mobile subscriptions assumed the dominant broadband access technology ahead of ADSL.
Growth in voice revenues is reducing by nearly 4% every year. Data revenues however, are still growing. According to Que however, this growth is declining and expected to stagnate in the coming years. Eventually, data growth will stop protecting the revenue loss from other areas.
For Ihab Hinnawi, CEO, Umniah, one of the advantages of being the third operator to launch 3G was that it could move straight to the latest technology, and also enter the 3G arena at a point when the country’s population had become familiar with mobile broadband but penetration rates remained relatively low.
From a business perspective, mobile broadband can present a challenge to operators in that the revenue it generates often fails to offset declines from more traditional voice and SMS. However, Hinnawi was optimistic that Umniah, which has prided itself on value since its launch back in 2005, will generate a strong return from its 3.75G network because of its careful segmentation of the market.
Hinnawi said: “Definitely 3G data revenue, generally speaking, does not offset the drop in traditional voice revenue that operators have been making. This is the area that makes operators lose sleep. But looking at Umniah’s model, we have from day one been a lean and efficient operator. Our place in the market has always been at an affordable level and we believe that the drop in revenues will not be as major for Umniah as for some other operators.
“The penetration rate of the internet and mobile internet in the country is still 50%, so if we can make it reach every subscriber in the country I believe we can offset that,” he added.
Jordan’s broadband speeds are still not at the level of other countries in the region. LTE has not been launched yet and mobile internet propositions available in the market are between 7-21.1 Mbps. Que of Delta Partners also added that for fixed broadband, the most advertised product offering is still 1Mbps.
He said: “Clearly one of the challenges of the telecom companies in Jordan will continue to be to keep upgrading the networks to be able to offer higher speeds. The implicit challenge to this is that telecom players need to have an acceptable business case to deploy new technologies. Since the Jordanian market is one of the most competitive markets in the region, ensuring acceptable business cases for additional network investments will be one of the key challenges that telecom players will face in the near future.”
He added that Jordan was not immune from the threat posed by OTT players, and Jordanian operators will need to work collaboration models that will allow them to successfully navigate through the challenges posed by OTTs.
Speaking further on the growth of internet services, Hinnawi added: “The telecom industry in Jordan, since it started, has witnessed an aggressive growth with positive trends. Today the telecom industry is going through its normal life cycle, a stable trend regarding voice services’ revenues and an increase in the revenues of internet as a result of an increased demand on internet.
"The awareness on internet is increasing, which will continue leading to higher consumption especially when this is supported by the expansion of smart phones and special services such as 3.75G,” he said.
Another important moment in Jordan's telecom scene was when Friendi Group launched the country's first MVNO, operating on Zain’s network, in June 2010. The venture didn’t actually take off until June 2012, due to issues with other operators. Since the telecoms industry in Jordan is already incredibly competitive, many are watching to see how Friendi fares. If successful, it could reveal an opportunity for other MVNO’s to enter the territory.
While Umniah sees significant opportunities in Jordan, Ihab Hinnawi admited that the market also presents its share of challenges, particularly in terms of regulation. “We believe the regulator should accelerate projects such as Mobile Number Portability. This is very much needed in the market and we believe this would support further liberalisation of the sector. We are pushing for that.”
He added that energy prices in Jordan have also skyrocketed by 150%, specifically applied to the telco sector. “The other issue is that there are more taxes on the sector. We hope that the country is not supporting other sectors at the expense of the telecom sector,” Hinnawi added.