Mobile broadband opportunity in MEA expected to reach $6bn with 40 million subscribers by end of 2011

The Middle East and Africa region has been the world's fastest growing region in terms of mobile penetration growth in the recent past, whilst fixed penetration has stagnated at 20% and 4% levels in the Middle East and Africa respectively.

This lack of fixed infrastructure coupled with high costs of service provisioning has severely hampered the development of broadband, particularly in Africa. Owing to coverage restrictions and lack of bandwidth, large parts of the region still witness connectivity delivered via satellites.

Going forward, two key developments are expected to change the existing landscape.

Firstly, the arrival of improved international connectivity via new submarine cables will enhance bandwidth and lower prices.

Secondly, mobile operators aggressively developing their 3G networks to go beyond their core voice offerings will result in enhanced availability of high speed networks.

Broadband is increasingly seen as the growth driver for mobile operators and the mechanism towards creating the stickiness factor particularly for retaining high value customers.

"We believe that nearly 70% of the broadband subscribers in MEA will in fact be delivered over wireless networks by 2011 up from about 38% today," says Joao Sousa, Partner at Delta Partners.

"This will translate into a significant growth potential for mobile broadband in MEA, with subscribers expected to grow from 2.5m today to about 40m in 2011.

At a strong ARPU of $10-15 this will represent a market worth around $6bn in 2011 versus $1bn today," he adds.

However, key risks exist especially due to high CAPEX investments required. This is particularly true for late entrants who struggle to capture minimum scale in order to recover their investments. To be able to drive success, the late entrant broadband player would need to adopt a clear set of initiatives.

"There are a few success factors operators should consider, such as gaining access to international connectivity at competitive prices, an efficient network operation and developing an effective go-to-market approach," says Sosa.

"Operators can invest in undersea cable projects to ensure competitiveness, make informed urban/rural rollout decisions and even consider 3G network sharing in some regions. Setting up a dedicated customer care channel and targeted value proposition can also go a long way in ensuring customer development and retention. This is especially important as high value customers in MEA tend to constitute only 10-20% of the subscribers but 50-60% of the revenues," he further adds.