The gulf countries have benefited to differing degrees, depending on their reserves, from the very high oil and gas prices. Even countries with less oil such as Bahrain or the emirate of Dubai have benefited from the wealth coming into the region. All countries realise the need to use the bonanza to upgrade their infrastructure. They are also keen to increase the ‘knowledge component’ of their economies as a bulwark against a potentially less profitable future. All of these factors have had a strong bearing on their telecoms industries. In addition, all the GCC countries have liberalised their markets to a greater or lesser degree, resulting in much greater competition, particularly in the mobile sector. This trend towards greater competition is still continuing, extending into the fixed-line and Internet sectors.
Other than in Israel, each country has a national fixed-line operator but no other large players in the fixed-line sector. Even in the more liberalised markets of the Middle East there are no real competitors to the incumbents other than in the area of international calling cards and VoIP-based services. A number of licences have been awarded in both Bahrain and Jordan for fixed-line domestic and international services but none of the alternative operators individually have yet made much impact.
Telecom infrastructure in the Middle East varies from rudimentary to highly advanced. At first glance, fixed-line teledensity in the Arab Middle East would appear very low, even in the wealthier countries, compared with teledensity rates of around 60% in the USA for example. However, notice must be taken of the larger household sizes compared with Europe or the USA. Even in Saudi Arabia, which has teledensity at only 15%, around 75% of homes had fixed-line telephones in early 2007.
As in the rest of the world, fixed-lines and fixed-line voice revenues are in decline, partly as a result of substitution by mobiles, and telcos are turning to broadband services to improve profits.
Internet and broadband
Internet user statistics are very vague and it is difficult to get anything like precise figures. However, user numbers are definitely increasing quite quickly, albeit from a low level in some countries. Annual growth across the region is of the order of 20% and may be as high as 30%. The rate of growth also appears to be accelerating. There is a huge gap between countries however, from the UAE on the one hand to Yemen on the other.
One of the reasons for slow Internet and broadband growth in the past has been a lack of sufficient content in Arabic for users to need a high-speed broadband connection in their daily lives. The Arabic script also causes problems in using international software and web browsers. However, there has been a change in atmosphere regarding broadband in the Arab Middle East over the past year. Although Internet and broadband penetration rates remain low in many countries, with slow access speeds and high tariffs, the wealthier countries of the Gulf are making a strong push to follow in the UAE’s footsteps towards higher broadband penetration. Israel has become one of the most developed broadband markets in the world.
The Arab Middle East has a flourishing pan-regional satellite TV market with over 300 FtA channels available. Lack of locally produced content is a problem both for the Internet and TV sectors. Digital Media in the region is a small but growing market.
The very dynamic mobile market of the Middle East already has very high penetration rates but continues with surprisingly high growth rates as competition continues to increase. All countries now have at least two licensed operators and new licences continue to be auctioned. In addition MVNOs are appearing. Several very large players have grown by buying both new licences and established operators in the Middle East, Africa and West Asia, and this increasing pan-regional competition should be an added factor to greater growth. 3G services are operating in the more developed markets, together with HSDPA.
Five countries in the region have penetration levels well over 100%. The mobile markets of Israel and the Gulf Cooperation Council (GCC) countries of Bahrain, Qatar and the UAE would appear to be saturated. In all cases however penetration levels cannot be exactly determined. Israeli subscriber numbers include many Palestinians who are not included in population statistics. The populations of the GCC countries are very fluid with a very large number of expatriates, which again makes determining exact penetration levels very difficult. The fluidity of this expatriate population also makes growth possible for new competitors in the market despite the high penetration levels. Bahrain, Qatar and the UAE appear to have quite astonishing annual growth levels considering their high levels of penetration. In addition, both Syrian and Jordanian subscriber numbers will include the large proportion of the Iraqi middle class that are currently residents but will not be included in population totals.
Data in this report is the latest available at the time of preparation and may not be for the current year.