Published: Sep 16, 2014
Source: Saudi Gazette


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Gulf telcos firms eye new growth markets

Gulf telecom operators are investing in infrastructure to cater to more sophisticated consumers, but, as penetration rates near saturation in traditional businesses, some firms are eyeing markets abroad for growth.

Ooredoo (Qatar Telecom), which has a 66 percent share of the Qatari market in terms of subscribers, recently launched its service in Myanmar and garnered more than 1 million subscribers within three weeks of the launch. With a population of 58.2 million, the Southeast Asian country offers tremendous growth opportunities.

In the small state of Qatar, the total number of new mobile subscribers grew by only 89,000 in the second quarter of 2014, after hitting more than 100,000 users over the previous four quarters, according to Global Investment House.

The United Arab Emirates subscriber base remained relatively flat, growing 0.1 percent in the second quarter from the previous quarter and 12.5 percent year-on-year, the weakest growth since 2011, Global Investment House said.

Etisalat, whose share of the UAE market rose to 56.5 percent in the second quarter, is considering more telecom buys in the Middle East and North Africa, including in Egypt where Etisalat Misr is considering an initial public offering.

"One source said that other Western players such as Orange are making similar exits to that of Vivendi in MENA which they could take advantage of," Global Investment House said in a research report. Etisalat also consolidated its Maroc Telecom subsidiary in May. The North African market is now Etisalat's largest contributor to international revenue business at 41 percent, followed by Pakistan at 25 percent and Egypt at 23 percent. Revenues from international operations now make up around 46 percent of the group's top line.

In Saudi Arabia, mobile subscriber additions fell by 100,000 in the fourth quarter of 2013 and by another 1.1 million in the first quarter of 2014, according to Saudi Communications and Information Technology (SCIT).

According to the Economist Intelligence Unit (EIU), the reversal was mostly due to new rules by the SCIT requiring telecoms companies to deactivate many unidentified phone cards in addition to ending free international roaming and the departure of around 1 million expatriates as a result of a visa crackdown.

Listed GCC telecom companies had posted a combined net profit growth of 25 percent in the first half of 2014, compared to the same period last year. However, growth slowed to 2 percent compared to the last six months of 2013.

Oman Telecommunications' profits managed to grow 9 percent in the first half largely owing to a fall in expenses by 3 percent, while Qatar Telecom declined 2 percent largely due to the Iraq conflict and capital expenditure on its Myanmar unit, according to a research report by Kuwait Financial Centre ( Markaz ). Saudi Telecom (STC) registered a 74 percent increase in earnings in the first half of 2014 compared with a year earlier, but the increase came largely from its international subsidiaries, whose revenues grew 22 percent, Markaz said.

Saudi Arabia's No.2 telecom provider, Etihad Etisalat (Mobily), had a rougher ride this year. For the first half of the year, data revenue contributed 39 percent of the operator's total revenue.

"Mobily's muted revenue growth signals a slowdown in the overall market and rising competition, particularly given Zain KSA's recent 7 percent year-on-year decline during the same period," said NBK Capital's Shrouk Diab. "Moreover, we are also concerned that STC might be able to outdo Mobily on the data front (a stronghold for Mobily), especially with its recent win of the deal with Etihad Atheeb, instead of Mobily."

Zain Saudi, which began operations in 2008, reported a narrowed loss in the second quarter of 2014. The firm, which is fighting to break the dominance of its two rivals, has said it aims to break even within five years, according to Reuters.

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