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This growth is also reflected in mobile penetration rates, most notably in the UAE, Qatar and Bahrain, where penetration levels have reached 178%, 129% and 124% respectively.
"Because competition in the sector is further intensifying, operators are seeking new sources of growth to capitalise on their share of the market," explained Ghassan Hasbani Vice President, Booz & Company.
The market's competitive landscape in 2007 highlights the competition. In Jordan, there was one fixed operator in the market, with four mobile operators competing for the country's 85% mobile penetration level, and last year in the UAE, two fixed operators and two mobile operators competed for a share of the 178% mobile penetration rate.
Future growth strategies for telecom operators fall largely under two key categories: scale and scope. "Essentially, potential growth paths for telecom operators rely on growing revenue share and growing the customer base, and most preferably a mix of the two," Hasbani explained.
In order to grow, operators must be able to preempt competition and leverage the critical mass for competitive advantage.
In terms of scope and growing revenues, operators must extend and diversify their business to include offerings that go beyond basic telecom services.
"As for extending scale, operators must acquire and/ or pursue strategic alliances, either with local or international players, to create a much sought-after critical mass," Hasbani said.
Geographic Expansion
So far, operators in the MENA region have mainly relied on geographic expansion as a principal source of non-organic growth, and all of the key telecom players in the region have garnered an extensive geographical footprint. Zain International, the Kuwaiti based operator, has extended its operations to 22 countries, including seven in the MENA region, with the rest extending throughout Africa and Madagascar.
MTN, the South African operator, extends across 21 countries - stretching from Guinea Bissau in Western Africa, to Afghanistan; the UAE's Etisalat's footprint extends from the Côte D'Ivoire across the continent and the Middle East to Pakistan; while Egypt's Orascom telecom stretches from Italy and Greece in Europe to parts of Africa, Pakistan and North Korea.
All have plans to increase and expand their scale across even broader geographies over the coming years.
Cross Border Consolidation
"Going forward, high growth levels will become increasingly difficult to sustain by relying only on traditional expansion, so cross border consolidation is expected to become increasingly common in the region," commented Hasbani.
Over the past four years, telecom investment activities in the MENA region have increased considerably, growing from $$5bn in 2004 to $20.6bn in 2007. "Consolidation has therefore been a key feature of telecom operator strategies in a bid to sustain growth," commented Hasbani.
South Africa's MTN bought a 100% share in Syria's Investcom in 2006, paying $5.5bn. And earlier this year, Saudi Arabian operator STC bought a 25% stake - worth $2,650m - in Turkey's Oger Telecom.
Capitalizing on convergence trends
For telecom operators, seeking scope is further enabled by convergence trends between telecom and other industries such as media and the financial sector.
Eman Hassan
