OMAN
ALL OUT LIBERALISATION

THE liberalisation of market and technology upgrade have catapulted Oman’s telecommunications industry on the fasttrack of development surpassing all expectations
 Though Oman’s entry in World Trade Organization (WTO) in 2001 had heralded the era of competition, the liberalisation and privatisation became a reality in 2005 only. Telecommunication was no more a public service provided by the government for the welfare of the population. It transformed into a profit-oriented service to increase telecom consumerism in the society.
  When the first private telecom service provider in Oman, Nawras, owned by Qtel led consortium and Omani investors, started operations, the telecom market in Oman was monopolised by state-owned Omantel in fixed line and Internet space, and Oman Mobile (owned by Omantel) in the mobile segment.
 The total subscriber base was 1,136,734 in January 2005 as per Telecommunication Regulatory Authority of Oman (TRA). But with the entry of Nawras in March 2005, the telecom market was set for a boom led by a quantum leap in the mobile segment. In just two years, the Omani telecom market has grown to a base of 2,195,869 subscribers (as on Jan 2007 according to TRA) driven largely by more than 120 percent increase in mobile segment. The telecom penetration has jumped to more than 85 percent.
 On 16 March this year, while celebrating the second anniversary of Nawras, the company’s CEO Ross Cormack stated, “Nawras has totally changed the experience of mobile users in Oman. When we started operations, we said that we would change the telecommunications’ landscape in Oman. And I think we have done this.” How right he has been!
 Lot of credit goes to Nawras for changing the rules of the game by introducing customer-friendly offerings and value-added voice and data services. No wonder Nawras has contributed almost 60 percent to the expansion of mobile market by crossing 600,000-subscriber mark in just two years’ time.
 Oman Mobile, on the other hand, also changed gears to match the competition by reducing its tariffs and undertaking high-decibel promotions. As Omantel went public in June 2005, Oman Mobile obviously had more pressure to perform from the shareholders. As seen in other markets, the mobile users have benefited from the intense competition between the two as rates have gone down to as low as 19Bz per minute.
  However, Oman Mobile’s parent company Omantel is still the sole operator in the fixed line market. It has resulted in a sluggish growth in the fixed line and Internet segment. The Average Revenue Per User (ARPU) of the fixed line segment has declined from RO27.4 per month in 2004 to RO18.6 per month in 2006, according to Omantel’s Annual Report 2006.
 In May 2006, the government announced its intention to entirely deregulate the telecom sector including fixed line and Internet, but has yet to specify when this will occur. The market is expecting the second operator in the fixed line space sometime by the end of 2007 or beginning of 2008.
 TRA recently released details of the next deregulation phase of Oman’s telecommunications market. Mohsin al Hafeedh of the TRA informed that the government is in the process of finalising the administration of Class II licences, which will cover ISP services, value-added services and resale services. “This will be a gradual process in order that we don’t disturb the market. Competition will open up more choices, while the responsiveness of the services provided to customers will be quicker. We also envision
a reduction in prices because if you are buying bulk time from a main or dominant operator, you will get discounts.”
 What it means for Omantel (combined with Oman Mobile) that still commands 75 percent of the telecom market share? “In spite of competition, the Omantel group was able to
pose a healthy growth in revenue and profitability. Our continued efforts to reduce costs and strengthen the service efficiencies are paying off. With the implementation of the Free Trade Agreement with USA, the sector liberalization programme will intensify
in the coming months. The Company has already initiated steps to prepare for this evolving competitive scenario and it has appointed the renowned international consultant to assist Omantel in this process,” said Saud bin Nasser Al-Shaikili, Chairman, Omantel.

KUWAIT
REGIONAL TRENDSETTER

THOUGH the first in the GCC to introduce a second telecom operator in 1999, Kuwait is without a telecommunications regulatory authority (TRA) and is the only country in GCC not to have a TRA. At present, the Ministry of Communications is responsible for regulatory matters for telecommunications in the country. Currently there are two players in Kuwait’s mobile market – MTCVodafone and Wataniya Telecom.
 The already competitive mobile telecom market in Kuwait will experience increased competition in coming days with the entry of a third player. In December 2006, the Kuwaiti Cabinet approved a proposal to establish a third mobile operator. The decision by the Kuwaiti cabinet to back the proposal for a third operator came after considerable pressure from the opposition, which had long contended that establishing Wataniya in 1999 had not done enough to boost competition in the telecom market and had failed to cut prices and improve services. Under the Cabinet’s proposal, 60 percent of shares in the new firm will be available to the public, 24 percent to State-owned authorities including a pension fund and an investment body and the other 16 percent to a core local or international investor.
 According to reports, a consortium led by Kuwait Finance House is preparing to bid for Kuwait’s third telecom licence and plans to run the company as the world’s first Islamic Shariah-compliant telecom operator. The consortium comprises KFH, the Public Authority for Minors Affairs and the Kuwait Awqaf Public Foundation, both of which are government entities that own shares in KFH.
 In contrast to a competitive mobile telecom sector, the fixed-line telecom business in Kuwait is still government owned. The fixed-line penetration rate at year-end 2005 was approximately 19 percent, very low compared to the mobile telecom penetration, which is hovering around 90 percent.
 Telecom sector constituted 12.72 percent of the total market capitalisation of the KSE as on December 2006, which indicates the importance of the sector. MTC -Vodafone is the largest company in terms of market capitalisation in Kuwait with a market cap of KD4.19 billion as at year-end 2006.
 Mobile segment revenues in Kuwait grew by 13.3 percent year-onyear in 2005 to reach KD364.4 million. During the same period, the total number of subscribers in the mobile segment grew by 11.4 percent to reach 2.38 million at the end of 2005. During the first nine months of 2006, total number of subscribers in the mobile segment grew by 6.6 percent over end-2005 to reach 2.54 million and the total revenues recorded for these nine months were KD303.4 million.
 Mobile penetration has gone up from 71 percent in 2003 to 89 percent in recent times. The penetration rate compares favourably with other GCC markets. Looking at higher penetration in countries like UAE and Bahrain, it seems that still there is room for growth for the mobile telecom companies. With the rise in population (mostly due to increase in number of expatriates), the growth is expected to be high in the prepaid categories. Mobile Telecommunications Company (MTC) is one the pioneers of mobile services in the Middle East and now a major player in Africa. The company was established during 1983 in Kuwait as one of the region’s first mobile operators and is now present in 20 countries. MTC recently announced that it was considering placing a bid for Paktel, Pakistan’s fifth largest mobile phone company.
 Wataniya Telecom, now part - owned by Qtel (see pg 56), was commercially launched in December 1999. This company is currently present in six countries. It has recently also won the bid to build and operate the second mobile telecommunications licence in Palestine.
 MTC-Vodafone leads the Kuwait telecom sector in terms of subscriber base, revenues and profits. Of the total revenues of KD303.4 million for nine months of 2006, the share of MTC-Vodafone was 57.1 percent. This has come down marginally from its market share for 2005, which stood at 57.4 percent. In terms of subscriber base, the share of MTC-Vodafone was higher at 59.7 percent as on 30 September 2006. As on 30 September 2006, the total number of mobile subscribers in Kuwait was 2.54 million and out of that number, MTC-Vodafone subscribers was 1.51 million.

SAUDI ARABIA
FIXED LINE GOLD MINE

SAUDI Arabia, the largest market in the region, will end state-owned Saudi Telecom’s hold over fixed line services.
 In 2004, the regulator finally went ahead with the licensing of a second mobile operator, while also issuing licences for datacoms and VSAT. Although most of the datacoms and VSAT operators started providing services in 2004 itself,
2005 saw the operational launch of the second mobile operator,
Mobily.
 Issuances of licences in these past two years have resulted in significant
demand for all the services in question – datacoms, VSAT, and
mobile telephony.
 To expedite the country’s entry into the World Trade Organization, Saudi Arabia moved its deadline from 2008 for issuing a second fixed and a third mobile licence. In addition, to ensure that foreign players find it attractive to invest in the country’s telecom sector, while issuing these additional licences, the Communications and Information Technology Commission (CITC) and the Saudi government may raise the cap on foreign investment. This move would increase foreign investment from the current 49 percent (giving foreign entities a controlling financial and management stake), to 66 or 74 percent.
 With the latest entrant, Mobily, witnessing an unprecedented response of 2.3 million subscriptions in its first nine months of operation, the entry of additional players will significantly liven up the Saudi telecom sector.
 Consortia led by Qtel (with Atco Clearwire Telecom in a consortium led by Telecommunication Holding of Saudi Arabia), Verizon Communications and India’s Mahanagar Telephone Nigam Ltd are among 10 companies bidding for Saudi Arabia’s second fixed line licence, according to the CITC.
 Other consortia, bidding with local partners, include Hong Kong’s PCCW, China Telecom, Bahrain Telecommunications Co and South Korea’s KT Corp, the CITC has announced.
 One of the bidders for the fixedline licence is Etihad Etisalat (Mobily), which operates Saudi Arabia’s second mobile phone licence.
 CITC is expected to name the winning consortium this year. The Commission did not give details on the offers for the licence. STC has around four million
fixed-line phone subscribers, which gives it a penetration rate of around 16 percent of the Kingdom’s 25-million population. Internet penetration barely exceeds three percent.
 Analysts say the low penetration rate means strong growth potential
for the new fixed-line operator. STC executives disagree, citing the high number of users of each fixed telephone line.
 CITC will also grant a third mobile phone licence this year for which nine consortia are bidding. They include Egypt’s Orascom Telecom, Kuwait’s Mobile Telecom Co and South Africa’s MTN.
 A consortium led by UAE telecom giant Etisalat paid SR12.21 billion for the second GSM licence in 2004. Etihad Etisalat, in which the UAE company has a 35 percent stake, captured 30 percent of the market within 18 months after the launch. The third licence is expected to generate SR20 billion for the Kingdom. Other consortia in the race are Kingdom Holding Co., owned by Prince Alwaleed bin Talal, which is bidding with Turkish mobile operator Turkcell, and Dubai-based Oger Telecom, Reliance Telecom with local partner Abdullah Abdulaziz
Al-Rajhi, Samawat with Bharti, Al-Shoula with MTNL, and Tawasul Digicel. The CITC did not give any value for its second land phone licence and third mobile
licence.
 Saudi Arabia’s mobile penetration rate is close to a 100 percent.

BAHRAIN
MASTER OF THE MOBILE

BAHRAIN’S mobile market is a duopoly market made up of Batelco and MTC Vodafone Bahrain (MTC-VB). Bahrain had the second highest fixed line penetration rates in the Arab region, 2005, which stood at 26.6 percent.
 In the GCC region, Bahrain is the most penetrated telecom market, with its penetration level nearly touching 120 percent.
  Leading the pack, Batelco has the subscriber base of over 600,000 mobile users while MTC-VB has the rest. However, as the mobile penetration level is already high, the market is nearly saturated and is likely to offer very limited growth opportunities to the mobile operators but it is making new innovations. Bahrain’s telecom sector has seen major developments and an in-flow of investments due to various types of new licences offered by the Telecommunications Regulatory
Authority (TRA).
 Bahrain’s TRA has awarded two National Fixed Wireless Services (NFWS) licences to MTC-Vodafone Bahrain and Mena Telecom, following an auction, which ended on 13 December 2006. MTC-Vodafone Bahrain paid around BHD5.5 million ($14.6 million) for its concession, while Mena Telecom won its licence with a bid of approximately BHD4.5 million. Under the terms of the licences, both firms must launch commercial national fixed wireless services within 18 months of the date of the award. Their obligations include a minimum requirement of 40 percent population coverage, rising to full national coverage in four years.
 Batelco, the former monopoly telecom, invested a record BHD39.5 million ($105 million) in upgrading its telecom infrastructure in 2006, including the rollout of a next generation network (NGN), expansion of its mobile network and enhancements to international capacity. According to statements from the company portfolio, during the year Batelco upped its maximum retail broadband connection speed to 2Mbps (downstream), and introduced BlackBerry and i-Teq X-Bond (the first Microsoft based PDA mobile with television in the Middle East), new content for mobiles including Multimedia Message Service (MMS), pre-paid international VoIP calling cards and regional corporate IP-VPN services based on MPLS technology. It also began the deployment of a nationwide 3.5G WCDMA / HSDPA wireless network, scheduled for launch in the second quarter of 2007.
 But the company suffered a setback in December when it lost the WiMAX licence auction to Mena Telecom and MTC-Vodafone Bahrain. In June last year, Batelco bought a 96 percent stake in Jordanian GSM operator Umniah for approximately
$415 million. Data, Internet and mobiles services revenues contributed to the growth of Batelco while international call revenues declined as a result of fierce price competition from VoIP calling cards with lower quality, prepaid services.
 Batelco also introduced a BD10 Broadband Package, the most affordable across the GCC. Meanwhile Batelco is increasing its global reach through satellite based Internet Protocol (IP) services. Batelco has partnered with SpeedCast, a leading satellite services provider in Asia to enhance its service offering and global satellite coverage over the Middle East, Asia, Africa and Europe.
 With the Bahraini telecom industry’s penetration level reaching 150 percent, pricing pressure will begin to affect the net profit margins in the years to come. It may be hard to further improve its market share with the increasing competition on the back of telecom liberalization by TRA. However, the introduction of new products and services by the companies could marginally help improve customer base.
 MTC-Vodafone Bahrain, the second player, was launched with the first 3G/EDGE nationwide network in the world. MTC entered into a Partner Network Agreement with Vodafone, the world’s leading mobile community in Kuwait creating MTC Vodafone Kuwait.
 Mena Telecom, the other NFWS provider, is one of the region’s first GCC based Satellite Access Service Providers (SASP). Leading the way for others in the industry to follow,
 MENA Telecom was one of the first in the telecommunications sector to adopt and actively promote SASP technology, which provides high speed WAN connectivity and enables access to the World Wide Web through an advanced two-way satellite network.

UAE
NON-STOP GROWTH

 LIKE Qatar, the UAE has opened its mobile telephony sector, after penetration rates had crossed 100 percent, through Etisalat, which until recently, was the monopolist. Du is the second player, ending Etisalat’s 28-year monopoly.
  Both the mobile and fixed line segments have the players operating and vying for increased market share, though it will be some time before Du catches up.
 Du launched mobile services across UAE on February 11, and is set to roll out fixed line, pay TV and internet services in stages. It currently provides TV services in some of the
free zones.
 As per the TRA statute, the $1.1 billion new telecoms provider is 40 percent owned by the UAE’s General Pensions and Social Security Authority and other State interests, with the remaining shares earmarked for private sector shareholders including an initial public offering, which may or may not be open to foreigners.
 Du comes with four core products in the mobile segment – Monthly Plan (post-paid) and, Pay As You Go (pre-paid) for their personal customers; Business Pay As You Go Plus (prepaid) and Business Mobile Connect (post-paid) for small, medium and large enterprises. The company has dedicated account managers for large enterprises. Du mobile services will be available in 85 percent of the populated areas in the UAE. The remaining 15 percent, comprising remote villages and deserts, will be covered by national roaming facility where customers can switch to the Etisalat network, if available. To this end, both Du and Etisalat had reached an agreement on interconnection in December 2006.
 At the end of September 2005, the number of lines in service are 1,222,905 for telephone, 4,305,821 for mobile and 4,698,17 for internet. Mobile penetration now exceeds 100
percent.
  In less than two years, mobile subscriptions are expected to exceed 125 percent, according to the figures released at the Seventh Global Symposium for Telecommunications
Regulators held in February 2007. Dr Mohamed Al Ghanem, Director General, TRA of the UAE has said, “Between 1999 to 2006, global mobile subscribers increased from 500 million to nearly 2.5 billion, with consumption in the UAE alone “surpassing
125 percent”.
 The TRA is considering allowing companies to provide internet services by renting lines from the country’s two telecom operators Etisalat and Du. Al Ghanem said that this proposal is currently under consideration by the government.
  “If the proposal is approved, there is a possibility of granting licences to companies so that they can offer internet services by renting cables from Etisalat and Du, but under the supervision of the Committee and the Authority,” he said.
 The entry of Du into the UAE telecom market is part of the government’s telecom deregulation policy and will widen the options for the country’s internet users. It is, however, not clear if this will result in a reduction in internet tariffs.. Al Ghanem said the number of companies offering these services has yet to be fixed. The Authority is also considering reducing royalties on the country’s two telecom operators. Etisalat has been active in its expansions too, securing licences through joint ventures in Saudi, Sudan, Afghanistan, Egypt and Pakistan.

EGYPT is by far the biggest telecom market in North Africa and the largest in the Arab region, after Turkey. Egypt’s telecom revenue represents an estimated 4.0 percent of its GDP with mobile revenue generating 56 percent of the total, compared with 39 percent in 2000. The remainder of the revenue (44 percent) is generated by fixed services.
 The buoyant economy, between 2000 and 2005, helped stimulate a steady growth in the Egyptian fixed, mobile and internet telecom market. At the end of 2005, the country’s fixed incumbent (Telecom Egypt) boasted 10.4 million fixed subscribers, representing a 14.4 percent penetration rate. The market continued to see healthy growth at an average rate of 13.7 percent between 2000 and the end of 2005.
 Over recent years, around 3,000 new fixed lines have been installed in the country on a daily basis, which has helped reduce the waiting list by around 90 percent. The incumbent Telecom Egypt is highly profitable, and was partially privatised (20 percent stake) through an IPO at the end of 2005. The end of its fixed-line monopoly in 2006 has been a good
opportunity for competitive service providers, as is the award of a third mobile licence. Efforts are underwayto roll out Next Generation Networks (NGN), offering converged IP-based voice and data services.
 Telecom Egypt was founded in 1854 and celebrated its 150th anniversary in 2004. The company offers various telecommunication services including data, voice and internet services through its ISP ‘TE Data’, Egypt’s largest IP based data communication service provider.
 In November 2006, the sole operator pioneered in the Internet Protocol Television (IPTV) segment with the launch of the service under the name TE-VU in Egypt. The IPTV service has been introduced by TE Data, Telecom Egypt’s ISP, providing a range of streaming and Video on Demand (VoD) content to TE Data’s ADSL subscribers over TE Data’s IP MPLS network and Telecom Egypt’s last mile copper lines.
 Egypt’s mobile market had its debut in May 1998 with the inception of Mobinil, the first mobile phone operator. Right afterwards, Vodafone Egypt, then called Click GSM, launched its service in November 1998. It was geared to compete with the then-recently-privatised operator, Mobinil, formerly owned by the Egyptian National Telecommunication
Authority (now Telecom Egypt).At this time, too, MobiNil had the advantage of a headstart and an existing client base of 80,000 subscribers.
  Since then, the market has consistently grown at around 30 percent per year, but accelerated to 67 percent in 2005 in anticipation of the country’s third mobile licence which was awarded in July 2006, including a concession for both Second Generation (2G) and Third Generation (3G) mobile services. Both existing networks have launched a range of mobile data and information services.
 Mobinil’s coverage extends to over 99 percent of the Egyptian population. It was the first company to make use of the GSM system in Egypt. The company is partly held by Orange
and Orascom Telecom. Mobinil was the first telecom company to receive ISO 14001 certificate in Egypt and the Middle East. It has also obtained of- ficial renewal of the ISO 14001 for the fifth consecutive year.
  Vodafone Egypt has secured a customer base of over two million subscribers. Vodafone Egypt is now a widely recognised brand name in the Egyptian consumer market.
 Vodafone Egypt (then Click GSM; officially Misrfone Telecommunications) penetrated the market heavily by introducing the concept of prepaid mobile phone plans.
 In a few years, the introduction of prepaid by Vodafone, and later on by its competitor Mobinil, has made a paradigm shift in Egyptian culture, making mobile phones a necessity
rather than a luxury. Now, nine years later to the launch of prepaid services in Egypt, mobile phones are owned by over 15 million Egyptians, almost split in half (49 percent Vodafone, 51 percent Mobinil).
 The third mobile operator licence was awarded to a consortium led by the UAE based Etisalat, including two local banks and the governmentowned Egypt Post. The consortium had to pay a record L.E 16.7 billion for the licence fees for both 2G and 3G service classes. This record payment reflects the potential of Egypt’s mobile market, at less than 20 percent market penetration about equally shared between the two GSM operators. The third company was found under the name Etisalat Misr and is currently in the pre-launch phase.