Competition sees Middle East telecoms go global (page 1 of 3)

The landscape of the Middle East telecom market has changed dramatically in recent years.

A sector that was once dominated by state-controlled monopolies has now given way to a liberalised market that allows for open competition among regional and international operators.

The fierce competition for access to these markets has led to soaring prices for licence fees, but it should be a boon for consumers, who are likely to benefit from improved quality, greater services, and better value in the long run.

The Middle East telecom market is by no means homogenous, as some markets are more liberal than others. But the regional market as a whole has become more open to competition, driven in part by the requirements for joining the World Trade Organization.

Most Arab countries have gained accession to the Organization, which requires its members to agree to liberalise their telecom markets.

'All Middle East and North African markets have now passed primary legislation along with secondary and tertiary regulations to liberalise their telecom sectors in general and the mobile segment in specific,' said Booz Allen Hamilton, Vice President Karim Sabbagh. 'The only exception is Libya, where the deregulation thought process is underway.'

More Operators

The liberalisation of the Middle East market has led to a proliferation of operators in the region. Overall, there are more than 30 mobile operators in the Arab market, with many countries such as Jordan, Egypt, and Saudi Arabia having three or more operators offering mobile services, according to a recent survey by the Arab Advisors Group.

Until recently Qatar was the lone remaining country in the region with a single incumbent operator, but Vodafone and its partners Qatar Foundation Consortium recently outbid six other companies for the country's second telephone licence.

As Middle East markets have opened up, western companies, with saturated markets at home, have been eager to gain a slice of the rapidly growing Arab sector.

The UK's Vodafone has a large presence in the Middle East, owning 55 per cent of Vodafone Egypt, which is the largest mobile operator in country, and the Vodafone brand is used in Bahrain and Kuwait via a partnership with Zain. The company also has recently bid for a licence in Qatar.

Meanwhile, France Telecom (Orange) is a 71 per cent shareholder in Egypt's Mobinil and the majority shareholder in Jordan Telecom, while French media conglomerate Vivendi is a 53 per cent shareholder, and operator, of Morocco's Maroc Telecom.

But while there are no barriers for foreign operators to move into the region, they face challenges as they try to compete with local firms, which have a competitive advantage due to language similarities and cultural commonalities, according to Stephanie Pettit, a principal analyst at Gartner Research.

Western operators also tend to be more price sensitive than their Middle East counterparts, making it more difficult for them to compete as the costs for licence fees skyrocket.

Indeed, UAE-based Etisalat, the second largest telecom operator in the region, has recently said it is willing to overpay for licences in order to establish a major footprint in the region.

Not surprisingly, many Western operators have fallen short in bidding for Arab telecom licences, Sabbagh noted.

Looking Overseas

As markets in the region have become more saturated and competition has grown increasingly fierce, some of the big local players have set their sights beyond their borders.