JOHANNESBURG, South Africa-Operators in the Middle East are focusing on extending coverage and considering networks upgrades. The region offers enormous potential, considering the cellular penetration is only 3.5 percent-very low in comparison with world standards. However, penetration rates in some single markets exceed 30 percent.
Prepaid, although it has not caught on as quickly in the Middle East as it has in Sub-Sahara Africa and Europe, has contributed considerably to the expansion of mobile technology. Bahrain’s Bahrain Telecommunications Co. (Batelco) introduced prepaid two years ago, and now those subscribers exceed postpaid customers. Prepaid has helped boost Bahrain’s wireless penetration rate to about 26 percent, while mobile penetration is about 33 percent in the United Arab Emirates (UAE). The prepaid market in Kuwait is strong, and in Egypt, the demand has been so great operators MobiNil and Misrfone have struggled to keep up.
GSM is the dominant mobile technology in the Middle East, with more than 8.1 million subscribers and 22 operators in 16 countries.
“Due to the success of GSM globally, all operators are moving to this technology in the Arab world with no other competing digital technology deployed,” said Mohamed Alhashili, manager for mobile services for Batelco and GSM Arab World Chairman. “The trend is to upgrade to GPRS (General Packet Radio Service) and pave the way to UMTS (Universal Mobile Telecommunications System). GPRS trials are currently being conducted in the UAE and Qatar in the Persian Gulf area. Bahrain’s operator Batelco is to kick off with GPRS in 2001, as will most operators in the region.”
Dual-mode GSM 900 MHz networks have been deployed by most of the Gulf countries and some outside the Gulf area. In the Arab world and Middle East, licensing regulations differ from country to country, with the Gulf area opting for “beauty contests,” but auctions are in vogue in the remainder of the region.
“I don’t see third-generation (3G) technologies being deployed for another two years, at least as there are no clear guidelines or regulatory policies in place. My own company, Batelco, does include 3G in its business plan for the next three to five years. But overall, for us it is still very much a learning process, and I don’t know if we are ready for it,” said Alhashili.
“Currently, there is a shortage of handsets for GPRS services and no handsets for 3G. There are only one or two manufacturers supplying them in very limited quantities. We have to become familiar with the Internet and the services offered by the Internet such as e-commerce and m-commerce. At this stage 3G does not have a business case; GPRS will teach us a lot.”
The competition factor
Competition is currently an important issue in the Middle East. Only four countries-Kuwait, Egypt, Morocco and Jordan-have more than one operator.
Chief analysts from the U.S. Pyramid Research office said while Middle Eastern governments initially dragged their feet at introducing competition, the success of liberalized markets across the region puts pressure on them to open their markets.
As more operators will be introduced in more markets, there will be a terrific upswing in growth. Mohsen Malaki, a senior analyst with Pyramid Research, mentions Kuwait as a typical example of “spirited competition.” Kuwait is the only member state of the Gulf Cooperation Council with more than one operator.
“Reduced rates and added services stem from the mobile market’s new competitive environment,” reads a Pyramid Alert report of 28 September. “Competition between (Kuwait’s) MTC (Mobile Telecommunications Co.) and the National Mobile Telecommunications Co. (NMTC), albeit muzzled by the government’s controlling stake in both companies, has delivered significant benefits to consumers.”
MTC for example, maintains broader international roaming coverage and more branch offices than its rival, whereas NMTC has cut the high deposit rates traditionally charged to non-Kuwaitis.
Yemen is also about to introduce competition with the launch of two new GSM operators by year-end. According to Pyramid Research, the two operators-Sabaa-Fon and Spacetel Yemen-purchased their GSM 900 MHz licenses from the government for US$10 million each and are planning to spend US$85 million on network infrastructure and services in their first year of operations and up to US$230 million during the next four years.
Following the worldwide trend of moving beyond voice to the Internet and to applications, such as e-commerce, cellular operators are forming strategic alliances with Internet service providers (ISPs).
“Operators are realizing that a mobile standalone operator will not survive and are forming alliances with Internet providers. Many operators have or are about to deploy WAP (Wireless Application Protocol) as the Internet service,” said Alhashili.
Earlier this year, Morocco saw the entrance of its first international ISP, France Telecom’s Wanadoo, while the UAE announced plans for the establishment of an Internet City-a free trade zone dedicated to cultivating Internet growth and e-commerce in the region.
Political implications
Meanwhile, the political strife in the Middle East is taking its toll.
Said Alhashili: “The Palestinian operator PalTel is struggling and has been severely affected by the conflict in the region. A lot of the work they have achieved so far has been destroyed. With well over 40,000 subscribers, they were very keen to start international roaming and finalize their rollout, but it has all come to an abrupt halt.”
“In the GSM Arab world, we are continuously working to improve GSM technology and report our requirements to the GSM Association. One of our requirements is the `Arabization’ of services such as SMS (short message service). We need Arab characters to be standardized on handsets, and presently only a few manufacturers provide this service. This would be of assistance to certain Arab countries, such as Saudi Arabia and Egypt, where the English language is not so easily understood. It would contribute immensely to the growth of the mobile industry,” Alhashili added.
