Middle East firms eye global reach

Dubai: Telecom operators in the Middle East are now looking at international operations to boost revenues as the regional markets become saturated and the services are becoming more commoditised, according to industry experts.

"The Middle East continues to be the major source of revenues for the regional operators. However, as the regional operators and specifically the GCC incumbents continue with their expansion plans, an increasing amount of revenues will be proportionally generated from other markets," Hilal Halaoui, principal at Booz & Company, said in a telephone interview with Gulf News.

He said the Middle East telecom sector will continue to grow in terms of subscribers and revenues. But the growth is expected to slow down as competition intensifies, prices drop and markets saturate.

The operators are increasingly looking to develop data and value-added services. Mobile broadband services will become increasingly important.

Even though the mobile subscriber base in the Gulf is expected to surge 149 per cent to 62.4 million next year compared to 55.9 million this year, the fixed line subscriber base is expected to rise by a mere 17.8 per cent to 7.5 million compared to 7.2 million this year.

Revenue

Regional operators are expected to achieve around $35 billion (Dh128.4 billion) in consolidated revenues this year.

"As the demand for 3G facility gained momentum this year with the robust demand for smart phones, we expect five million mobile broadband subscribers in the Gulf in 2009 with a 13 per cent penetration rate and around 8 million subscribers in 2010, representing a 19 per cent penetration rate," Halaoui said.

Regarding fixed broadband, he expects 2.8 million subscribers in 2009 and 3.9 million in 2010, representing a household penetration of 40 per cent and 53 per cent respectively.

Difficult year

According to Ihab Ghattas, assistant president, Huawei-Middle East, next year will also be another difficult year. "We may see a number of mergers and acquisitions in the market and we may also see a number of operators reducing their investment in the network deployment.

"We may also see some changes in the business plans of some operators; those who would capture the new market directions will be more able to survive compared to the traditional ones," he said.

"With the continuing fin-ancial difficulties around the world, there will be more room for automation and technology take over. This is the time when operators should move and offer a new set of services which can compensate for the reduction in manpower to keep the momentum of the activities.

"As network services become commoditised and margins erode for those not able to increase scales, telecom players are turning their attention from infrastructure investments to applications and content innovation," stated Karim Sabbagh, the partner leading the global Communication, Media, and Technology practice at Booz & Company.

"All the telecom operators are looking at some form of convergence. Fixed-mobile convergence [FMC] is the integration of operators' fixed and mobile networks to offer converged services to customers. Full embracement of FMC could result in tangible benefits to both operators and subscribers. It is also a stepping stone toward quad-play [TV, mobile, internet and fixed telephony] to deliver ubiquitous communication services through a unified customer experience.

"Operators like etisalat, du and Q-Tel are already offering double and triple play fixed voice , broadband and TV facilities while operators like STC are beginning to offer fixed-mobile broadband bundles at reduced rates. But the region is lagging behind international standards. France, the UK, Italy, Singapore and Hong Kong are leading the market," Halaoui said.

Sabbagh said every player must develop the capability to assess its position within its market and then develop a strategy appropriate to it. Du, for example, operates within a single market, the UAE, where it competes with etisalat. In hopes of improving its position, it has opted for an innovation-based strategy that focuses on differentiation rather than scale.

"I personally think that the window of opportunity here is much bigger compared to the one in Europe and North America," Ghattas said.

Major telco event

The 14th Annual GSM>3G Middle East Telco World Summit is to be held today and tomorrow at the Dubai International Convention and Exhibition Centre.

The two-day strategic conference and exhibition includes 85 leading telecommunications and mobile operators from the region and beyond along with over 100 international ICT vendors.

This year's event, which will be held on the theme "Setting the Middle East Telco Agenda," is being attended by over 2,500 decision-makers from over 80 countries to learn about the strategies that are shaping the future of telecommunications in the Arab world.

The event will also hold workshops and roundtable talks on major challenges and potentials posed by convergence and the transition to newer technologies like 3G and broadband.