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Focus on data will drive Mideast telco earnings

Pricing and smartphone penetration key to telecom sector growth as voice revenues wane

  • Picture for illustrative purposes only
    Etisalat has posted an increase in its quarterly profit, buoyed by growth in the broadband businesses.Image Credit: Francois Nel/Gulf News
  • Picture for illustrative purposes only
    Du said it expects growth to come from data usage going forward as acquiring additional marketshare at home Image Credit: Francois Nel/Gulf News
Gulf News

Dubai: Arab Gulf telcos are seen ramping up their data-service offerings to boost earnings as smartphone penetration increases, a strategy that may help the operators counteract falling voice revenues, analysts say.

Most regional operators for years enjoyed strong voice revenues as they catered to a fast expanding local and expat market, but more competition at home and slowing subscriber additions have translated into some mixed earnings in recent quarters — forcing the telcos to look elsewhere for growth.

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- Reda Haidar | Informa Telecoms & Media consultant
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“Current strategy is largely focused on growing data revenues faster than the decline in the voice counterpart to keep a steady growth,” Reda Haidar, a consultant at Informa Telecoms & Media, said.

Kuwait’s Mobile Telecommunications Co., better known as Zain, which operates in eight markets across the Middle East and North Africa, last week said its plans to focus on data services to boost growth, after reporting an almost flat bottom line in the second quarter.

Nabeel Bin Salamah, the telco’s chief executive, said in the earnings statement that there “will be greater emphasis placed on data due to pent-up demand for such services, particularly in light of the growth in the usage of smartphones.”

Regional telcos have seen their earnings fluctuate in the past few quarters as most continue to consolidate their operations and cut costs, while some have also been affected by adverse forex moves in the international markets they operate in.

Dubai’s du, the UAE’s No. 2 telco, is also pinning its hopes on higher data revenues to boost its earnings. After reporting a 57% jump in quarterly profit before royalty fees late last month, du said it expects growth to come from data usage going forward as acquiring additional market share at home becomes more difficult.

“Broadband is indeed already proving to be the main growth provider for [some] GCC operators both nationally and in their international footprint,” Haidar said.

Regional heavyweights such as Saudi Telecom Co., or STC and etisalat both posted an increase in their quarterly profits, buoyed by growth in their broadband businesses.

But Haider noted that steeper data pricing has diluted the effect of higher smartphone penetration in the UAE. “A big opportunity still lies on the horizon once data pricing is adjusted.”

And one segment that telcos are likely to focus on to drive growth is the usually lucrative enterprise sector. Most regional operators have been slow to tap this segment so far with sporadic and somewhat weak attempts, but this will be a key revenue driver in the future, analysts say.

“There is still healthy revenue to come in from improved domestic enterprise-focused offerings,” said Raza Rizvi, a telecom media and technology lawyer at international law firm Simmons & Simmons.




Jump in du’s quarterly earnings before royalty fees.