Explosion in Middle East

Boom in Mobile Phone Revenues

A report published by Analysys on Tuesday concluded that "the Middle Eastern mobile market presents greater revenue opportunities than markets in Europe," once size and spending power are factored in.

The analyst firm predicts that total mobile service revenue will grow at a CAGR of 10%-plus to US$39.7 billion by the end of 2012, up from $22 billion in 2006. Strong subscriber growth will more than offset declining ARPU in many markets.

The firm went on the explain that revenue per capita in the region showed a trend above that of European markets, when two markets with similar levels of disposable incomes were compared.

"For example, in a Middle Eastern market where disposable income is $10,000, total mobile revenues would be expects to be 20% higher than an equivalent European market," said Analysys.

However, author of The Middle Eastern mobile market: trends and forecasts 2007-12 Daniel Jones notes that to date operators in the region have benefited from the lack of competition in their home markets.

"As competition intensifies across the region, operators will have an increasingly tough time trying to maintain this premium," said Jones.

In a research note published Wednesday, the Arab Advisors Group noted that Qatar remains one of the few markets in the region with a complete monopoly; Qatari incumbent Qtel is likely to retain this status until as late as early 2008.

"Qtel is operating in a well-penetrated cellular market, with more than 121% penetration by [the] end of March 2007, compared to 110% by end of 2006," said Faten Bader, research analyst at Arab Advisors Group. "The Arab Advisors Group projects cellular subscribers in Qatar to grow at a CAGR of 5.74% between 2007-2011 for a cellular penetration of 125% by end of 2011."

While Qatar ranks lowest in terms of competitiveness, Arab Advisors Group named Jordan as the Arab world's most competitive market, followed by Iraq.

Saudi Telecom makes its first overseas acquisition, while analysts point to revenue opportunity in Middle Eastern mobile markets. But for how long?
While analysts wax lyrical about the potential the Middle Eastern telecoms markets have to offer, the region's home-grown operators are facing up to the realities of competition and spreading their wings.


On Tuesday Saudi Telecom Company (STC) made its first foray outside its home market with the $3.05 billion acquisition of a 25% stake in Malaysian operator Maxis Communications, a move that will also give it a presence in Indonesia and, crucially, India.

On completion of the deal, which will see STC tie-up with Maxis' majority shareholder Binariang, STC will hold a 51% direct stake in Indonesian operator PT Natrindo Telepon Seluler and an indirect interest in Indian mobile operator Aircel, of which Maxis currently holds 74%.

Announcing the deal, STC chairman Muhammad Bin Suliman Al-Jasser noted that the move expands STC's footprint to over 1.4 billion people, in some of the fastest growing telecoms markets in the world.

"This transaction is consistent with our strategy and objective to expand into high growth emerging markets not only to diversify our revenue to countries outside Saudi Arabia, but also to generate sustainable long-term growth for the future," he said.

STC president Saud Al Daweesh added that the telco's investment in Maxis would enable it to achieve its objective of generating 10%-plus of revenues outside of Saudi Arabia by 2010.

STC follows in the footsteps of a number of Middle Eastern telecoms players that have broken out of the region in recent years.

And two of those operators – Kuwait's MTC and UAE-based Etisalat – are indirectly fuelling STC's drive to diversify revenues, since both hold licences to offer mobile services in Saudi Arabia.

Etisalat's local subsidiary already offers services under the Mobily brand name, while MTC plans to launch in early 2008. Etisalat's other major overseas investment is in Pakistan's PTCL, but expansionist MTC operates in 14 sub-Saharan African countries, as well, as six markets in the Middle East, and has made no secret of its ambitions to establish a presence in Europe and further afield.

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