Middle Eastern region telecommunications infrastructure

Competition is driving telecoms growth in the Middle East

In the Middle Eastern region telecommunications infrastructure varies from very advanced to very rudimentary. Fibre to the Home projects are well advanced in Israel and the Gulf countries but in Yemen and Iraq fixed-line penetration is only around 5%. The area is well served with international links via submarine cables with more under construction.

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, figures can be misleading due to the larger household sizes compared with Europe or the USA, plus large hostel-accommodated expatriate populations in some countries. In fact in many countries household penetration is at or near 100%. Several markets are showing decline due to mobile substitution, particularly dramatically in Jordan with its very competitive mobile market.

The fixed-line sector has been the last to be opened to competition and in all markets the incumbent remains the major player in the fixed-line voice market but change is underway, mostly through VoIP and calling-card operators and later WiMAX operators, but in the case of the UAE, also through sharing infrastructure.

All fixed-line incumbents also offer mobile services and in many countries operators who began in the mobile sector are also moving into the fixed-line sector.

The Middle East in telecoms statistics

Where available, statistics are given up to and including 2010. Where not available, estimates are given and, in some cases, subscribers up to 2015 are forecast.

Statistics are grouped by country into three sections: telecoms and fixed-line operations; Internet Broadband and Digital media; and mobile communications and mobile data.

Fixed-line and telecoms infrastructure

In the Middle Eastern region telecommunications infrastructure varies from very advanced to very rudimentary. Several FttH projects are under development in Israel and the Gulf countries but in Yemen and Iraq fixed-line penetration is only around 5%. The area is well served with international links via submarine cables.

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, figures can be misleading due to the larger household sizes compared with Europe or the USA, plus large hostel-accommodated expatriate populations in some countries. In fact in many countries household penetration is at or near 100%. Several markets are showing decline due to mobile substitution, particularly dramatically in Jordan with its very competitive mobile market.

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 Arab Middle East there are as yet no serious competitors to the incumbents but this is beginning to change, first in Bahrain through VoIP and calling-card operators and later WiMAX operators, and now also in Saudi Arabia, the UAE and Jordan. All fixed-line incumbents also offer mobile services.

Internet, broadband and digital media

Internet and broadband penetration rates remain low in many countries of the Middle East, access speeds are often relatively slow and tariffs are relatively high compared with other regions in the world but the region is making a strong push towards higher broadband penetration. The young population will be a driver for growth as they grow up with Internet use as the norm. In addition liberalisation and increased competition are producing a greater variety of services and mediums.

While broadband growth has taken off in the small, oil-rich and developed countries of the Gulf, wide income disparities across the Arab Middle East region as a whole are echoed by wide disparities in Internet and broadband penetration rates. Computer penetration levels are generally low. Qatar, Bahrain and UAE all have high household broadband penetration, particularly among nationals. The largest country in the region, Saudi Arabia, has low broadband penetration but it is rising quickly.

ADSL is the prevailing broadband Internet technology in the region. Only in Israel does cable have a significant market share. Services are provided by HOT Cable Systems Media, which is subject to the same broadband universal service obligations as is DSL network operator Bezeq. This has resulted in broadband being available to 99% of all households. Much is being promised by WiMAX across the Middle East region but projects have still to come to fruition.

All the GCC and Israeli operators, with the exception of recently launched Vodafone Qatar, offer HSPA mobile broadband services. Mobile broadband prices in most countries remain relatively high but the introduction of some affordable, flat-rate pricing plans has encouraged higher take-up rates. Saudi Arabia’s second mobile operator, Mobily, said it could not cope with the level of demand when it introduced flat-rate price plans. It claimed to have 600,000 subscribers in June 2009. This subscriber number is very high when compared with a total of just over 1 million Saudi ADSL subscribers at end-2008.

One of the reasons for slow Internet and broadband subscriber growth in Arab Middle East countries has been a lack of sufficient content in Arabic for users to need a high-speed broadband connection in their daily lives. There has been too much emphasis on hardware and the latest must-have gizmo and not enough on creativity. This is beginning to change with the increasing digital content produced by the flourishing Direct-to-Home satellite TV sector, including entertainment, educational programming, news and sports. At least 60-70% of homes across the Middle East have access to multi-channel TV, much of it Free-to-Air DTH satellite. Around 70% of the 400+ channels are privately owned.

Mobile communications and mobile data

The six countries of the Gulf Cooperation Council all have penetration rates well in excess of 100%, with the UAE, Bahrain and Qatar nearer 200%. This is due to intense competition and to multi-SIM ownership as subscribers aim to maximise special offers and different deals. The large and transient expatriate populations in the Gulf countries are also a factor in encouraging competition, and thus growth and penetration rates - with a fluid population new operators stand a better chance of gaining market share. Inevitably there must also be a significant number of inactive prepaid SIM-cards.

Growth rates are also high in the less developed markets of Iraq, Iran and Lebanon. Amongst the lower growth countries, Turkey was hit hard by the Global Financial Crisis, leading to a recession and a fall in mobile penetration. Israel has also seen low growth rates, partly due to much a much lesser economic slowdown and partly to saturated markets and perhaps distraction due to considerable industry structural changes.

The region is home to some very large international players. Etisalat of the UAE and Zain of Kuwait have been particularly aggressive buyers of both new licences and existing operators in Africa, the Middle East and Asia. Qtel of Qatar, STC of Saudi Arabia and Batelco of Bahrain have also taken this route for growth.

In the more developed Gulf countries and Israel, operators are pinning their growth hopes on persuading their mobile subscribers to take up data and broadband services. Customers want the latest in high-end handsets and have the income to pay for them. 3G services in these countries are well established, together with HSPA. Outside the Gulf countries, Israel and Turkey, no operator has launched 3G or HSPA although Jordan issued a licence to Orange in August 2009.

For those needing high level strategic information and objective analysis on the Internet and broadband markets in the Middle East, this report is essential reading and gives further information on:

• The rapidly developing broadband markets in wealthier countries in the region;
• The dynamic Arab satellite TV market;
• VoIP developments and problems;
• Digital media developments and challenges.
   

Middle East Internet Usage & Population Statistics

Bahrain

All sectors of the Bahraini communications market have been liberalised. Incumbent Batelco shares the fixed-line market with around fifteen other operators providing international calling services using international direct dial, carrier pre-selection or prepaid calling cards. Around 50% of international call minutes originating from fixed lines use prepaid calling cards. Like other GCC countries, Bahrain has a large expat population (approximately 50% of the total) and this has been the cause of the impact of prepaid VoIP-based calling cards on the market and on Batelco’s international call revenues.

Infrastructure is excellent – Batelco completed the rollout of an NGN in January 2009.

Israel

Whilst incumbent Bezeq still has a big majority of the domestic fixed-line market, its share has fallen rapidly since the introduction of number portability in December 2007 and going into 2010 was down to around 75% of the consumer segment by revenue and 85% of the business sector. VoIP operators and cable company HOT are the beneficiaries.

The international fixed-line market has been very competitive for many years. Three operators dominate the market with roughly equal shares. All are keen to move into providing domestic call services and the three already share the majority of the ISP market. This market is particularly interesting as these players, together with the three mobile operators who are also moving into the fixed-line voice and Internet market, jostle for position.

Significant investment is being made in NGN infrastructure. Bezeq commercially launched an NGN in September 2009. It had 374,000 subscribers connected to the network at end-2009 and 580,000 by early May 2010 (around 25% of Israeli households). Bezeq plans to make the NGN available to approximately 50% of Israeli households by end-2010 and 90% of households by end-2012. The network is ‘fibre to the curb’ and allows for an up to 50MB bandwidth offering.

United Arab Emirates

In July 2010 incumbent Etisalat and alternative operator du completed negotiations to open their networks, allowing each to use the other’s networks and compete across all fixed-line infrastructure in all parts of the country. A testing phase began, with a commercial launch of services expected in late 2010.

Etisalat has a very substantial FttH project, which is being completed in phases. The first batch of Abu Dhabi subscribers received last mile FttH access in January 2008. By end-2009 Etisalat claimed to have completed 60% of the network. It expected to make Abu Dhabi “the first capital city in the world with 100% fibre deployment” by 2010 and at end-2009 had completed the roll-out for 85% of Abu Dhabi households. Completion of the entire national network is expected by 2011 at a total cost of AED5 billion.

Top five Middle East countries – estimated fixed-line teledensity - 2010

Middle East Internet Usage & Population Statistics

NOTES: (1) The Middle East Statistics were updated as of June 30, 2010. (2) CLICK on each country name to see detailed data for individual countries and regions. (3) The demographic (population) numbers are based on data from the US Census Bureau. (4) Internet usage numbers come from various sources and are compiled here, see the site surfing guide. (5) The most recent usage information comes mainly from the data published by Nielsen Online, ITU, and other reliable sources. (6) For growth comparison purposes, the usage data published by ITU for the year 2.000 is furnished.