Kuwait is something of a typical Gulf telecoms market, with high penetration of mobile devices, demanding consumers with a taste for new technology and operators who have been able to invest in modern infrastructure and services. Where Kuwait does stand out among the GCC states however, is as the only country without an independent telecoms regulator. This situation should be about to change, however, with the passing of a bill in March and April by Kuwait’s National Assembly to create a regulator.
While the new regulator might not come into existence any time soon, especially given that the proposals for a regulator have been in the works for over a decade, the news was welcomed by the industry.
Omar al Omar, CEO of Zain Kuwait commented: “Zain Kuwait has always been a supporter of having a regulator in the market and we are quite happy to hear about the recent establishment of the regulator law in Kuwait. As always, the proper procedures, appointment, and establishment of the regulator need to happen so that the operators can work effectively with the regulator. We are quite keen to see that come to fruition.”
While Victoria Strand, president of Ericsson for GCC & Pakistan said that the creation of an independent regulator could “herald a new era of liberalisation, as it might empower operators to advance their service quality and innovation”, Adel Belcaid, principal with Strategy&, (formerly Booz & Company) said that, although regulation is long overdue, the market had managed without it to an extent.
“Adequate regulation would have made it easier for late entrants to achieve market traction earlier, but judging by the recent success such late entrants are enjoying in Kuwait, one realises that, with the right strategies and people, there is always a way even when regulation is not there to support and guide,” he said.
Belcaid added that there are a number of issues including interconnection, licensing, infrastructure sharing, and market dominance to address by any regulator. He also highlighted the possible role of the regulator in improving the overall ICT regulatory landscape. In the recent INSEAD-WEF Global Information Technology Report 2014, Kuwait has slipped down the Networked Readiness Index to 72nd place worldwide.
Another area of regulation is addressing the monopolistic fixed-line market in the country. While Belcaid points out that fixed-line voice is declining, in line with global trends, fixed broadband is underserved in the country, ranking lowest in the GCC. Developing fixed-line broadband as part of a national infrastructure initiative, with an investment of $2.5 billion, would have a major impact on the country’s economy Belcaid said: “If sector stakeholders… put in the necessary efforts, we expect to see a positive incremental GDP impact of $50bn and up to 47,000 new jobs created by the horizon of 2020."
The main focus for investment and growth in Kuwait has been high-value, mobile services. Strand points out there has been a great deal of investment in 3G, 3.5G and 4G networks, and while the small population and high mobile penetration of around 170% limit organic subscription growth, operators are still looking for growth.
“Opportunities lie in the fact that Kuwait has some of the highest ARPUs in the world, despite the market demanding lower mobile tariffs due to saturation and competition. There will be growth in the years to come, though it may be at a slower pace than previously. The 3G/4G market is dynamic, driven by the significant number of users switching to wireless data networks given the increasing prevalence of smartphones. This, therefore, presents an opportunity for Kuwaiti operators to capitalise upon; streamlined network experiences, high-quality connectivity and data bundles will be in high demand,” she said.
Zain’s Al Omar pointed out that operators in the country are still able to grow revenue through focusing on customer experience. Zain Kuwait grew overall revenue 9% year-on-year in Q1 2014 while data revenues were up 23% in the same period. The operator has deployed a countrywide 4G LTE network, and will continue to focus on mobile innovation.
“The major opportunity for Zain Kuwait is capturing the data market by differentiating its service to focus on the customer experience,” he said. “Zain Kuwait’s main investment priorities are centered around the customer and the experience they have using the Zain Kuwait network.”
Connectivity is key to this experience, Al Omar noted, both for consumer and business users. Last year, Zain Kuwait and Huawei signed an MOU for a Joint Innovation Centre in the country that focuses on R&D around new LTE-compatible services and applications. And Zain is not the only Kuwaiti operator investing in innovation for customers; VIVA has also signed an MOU with Huawei this year to create a similar Joint Innovation Centre.
The focus for Kuwait, then, is very much on providing excellent service to a demanding customer base, and meeting their bandwidth demands while protecting revenue streams.
“I think operators will invest increasingly in premium services, such as faster mobile internet download speeds, and in propositions for high-value postpaid customers. These will help to promote ARPU stability, and customer acquisition and retention, as will a concentration on mobile value-added services and data bundles,” said Strand.
“There is a demand for increased access to faster network speeds, which has been satisfied with the upgrades that all three operators’ networks have seen recently. These have contributed to growth in the value-added market, though the real opportunity would seem to be in the prepaid user market, as users’ migrations to postpaid lines is slow. The opportunity for migration remains, however; this might require suitably attractive packages.
“IT services, such as cloud computing, e-government and machine-to-machine services, present significant growth opportunities as companies recognise the benefits of using such services. The provision of enterprise telecommunications services may represent the largest opportunity for Kuwait’s operators,” she added.