Bahrain Telecommunications Report Q1 2013

BMI View: Bahrain’s mobile market recorded a marginal growth in Q212, a sign of increasingsaturation in the voice segment. However, strong growth of mobile broadband subscriptions supports ourview that data services are the next growth frontier for the telecoms markets. We expect the country’sthree mobile operators, and perhaps one or more new entrants, to take advantage of this opportunity withthe development of 4G/LTE services after the expected allocation of frequencies in early 2013.

Key data

Mobile growth in Q212, at just 0.6% q-o-q, was the slowest in five consecutive quarters.

Bahrain’s mobile ARPU edged up by around 10% as a result of growing mobile data usage.

Postpaid subscriptions continue to rise, albeit it at a slower pace than prepaid subscriptions, asoperators shift their strategy towards boosting high-value subscriptions on their networks.

Risk/Reward Ratings

Bahrain moved up one place to seventh position on BMI’s telecoms Risk/Reward Ratings (RRR) tablewith an aggregate score of 52.1, slightly less than the average regional score of 52.3. Bahrain’s lowestscore is in the industry risks category, which reflects strong state influence on the telecoms sector, despitethe existence of an independent telecoms regulator, and continued government ownership of theincumbent operator. Bahrain’s industry rewards score rose this quarter after we factored our five-yearbroadband growth forecast into our revised ratings methodology. Bahrain scored above the regionalaverage in the industry rewards and country risks categories in this quarter’s update to our RRR table.

Key Trends And Developments

Bahrain’s telecoms market is moving rapidly towards data-centric, high-value services as operatorsattempt to offset revenue shortfall from traditional voice services. This trend is reflected by operators'product development and network investment strategies. In September 2012, Zain Bahrain announcedplans to invest US$100mn in the latter part of 2012 and in 2013 to upgrade its network and build a newdatacentre. This followed the launch of cloud computing services by incumbent operator Batelco in Q312.Batelco’s launch of infrastructure-management-as-a-service (IMaaS) is part of the company’s wider cloudcomputing strategy. Meanwhile, the Telecommunications Regulatory Authority (TRA) has reiterated itsintention to allocate 4G/LTE spectrum in early 2013, a situation that improves the outlook for advancedmobile services in the country.