Gulf telecoms enters next phase

The offering of a third GSM licence in Saudi Arabia and the opening of the Qatar telecom market to competition will lead the next wave of telecom liberalisation and deregulation in the Gulf.

The developments will happen in the next six to 12 months, and come as Middle Eastern countries strive to adapt to the World Trade Organisation (WTO) guidelines on free trade.

Despite these anticipated moves, telecom industry liberalisation and deregulation will not be a quick process in the region.

Opening the Local Loop (LL) and Long Distance and International telecom services for private and foreign participation in major markets will take some time.

Regulatory approval is needed to foster Voice over Internet Protocol (VoIP), Local Loop Unbundling (LLU) and Mobile Virtual Network Operator (MVNO) in each market, and that process will be time consuming even in more liberalised markets such as UAE, Bahrain and Jordan.

However, sooner or later, MVNOs are expected to spur competition and drive down average monthly revenue per user (ARPU) for regional fixed and mobile operators in the next five years.

In the UAE, du and etisalat, the two operators on the fixed-line and mobile fronts, will be impacted negatively by the introduction of new services such as VoIP that will cut into their tariffs and operating margins.

Following other markets such as Saudi Arabia and the UAE, Qatar will be granting licences for network and telecom services in the coming year, though there is no specified timeline yet.

In the latest step that ends Qtel's monopoly in the domestic telecom sector, the Supreme Council of Information and Communication Technology (Ict-Qatar) has been made responsible for adopting and implementing a comprehensive regulatory framework for the sector.

The Qatar mobile market will mimic the developments in other partly-liberalised markets with higher penetration rates, lower tariffs, consequently lower ARPUs and more value-added services for consumers as a duopoly ensures competition for more market share.

It would not be a far-fetched conclusion that Qtel will be looking more aggressively to expand in other markets to compensate for the loss of market share on its own turf.

We noted the same type of behaviour by some of the well-known regional telecom players such as etisalat and MTC Kuwait.

Wi-max technology is expected to become more prominent although no licences are expected to be granted in the very near future in most Middle Eastern markets or the spectrum has not been opened up by the local regulators for the adoption of the technology.

As the appetite for new technologies and investments stays strong, the transition to wireless technologies will boost fixed-line adoption in the Middle East as most countries currently lack the infrastructure on the ground to reach every corner of the continent.

Under this scenario, the widespread supply-side problems would cease to exist.

Finally, regional and international expansion will continue to be under the spotlight for the usual suspects in the region.

Whether it is a wise decision by some of the gargantuan names in the Middle East such as Orascom, etisalat and MTC Telecom to expand to the "mature" telecom markets of Western Europe hangs in limbo for the time being.

We can expect price tags to remain high as new licence tenders are to follow in markets such as Syria, Saudi Arabia, Qatar and government-owned entities such as Algeria Telecom are privatised.

The writer is director, TMT Group, Fitch Ratings.