Broadband or Cellular Service Growth (GCC)

Dubai: With the rapid growth in mobile telephony coming to an end, the next phase of revenue generating for telecom providers will be broadband services.
This is one of the results of a study by Global Investment House, based in Kuwait, that was presented last week.

The analysts looked at the entire GCC market and found that companies were focusing their attention on the broadband segment as one of the core drivers, as cellular and fixed line markets reach saturation.
For the future, the analysts recommended etisalat and its partly owned subsidiary in Saudi Arabia, Mobily or Etihad Etisalat.

"In the GCC telecom space etisalat and Mobily are our top picks," said Faisal Hasan, head of research at Global Investment House.
The study said the rapid growth in mobile subscribers in recent years had been boosted by price competition and more companies stepping into the market as part of liberalisation measures. The growth would slow down, it said.

The compound annual growth rate seen at 29.9 per cent between 2005 and 2009, would drop to 8.5 per cent in the period from 2010 to 2012, the analysts said.

On the other hand, the study anticipates that the mobile penetration rate would rise from 171.9 per cent in 2009 to 184 per cent in 2010 and to 195 per cent in 2012, meaning that at that time almost each resident in those countries on average would possess two SIM cards.

"For incumbents, we are of the opinion that going forward in home markets growth is likely to be limited and careful diversification in other markets is the only way forward for further growth," the study said.
"We believe that operators need to be more diligent in their strategy because diversification in other unfamiliar markets beyond the GCC can prove to be difficult."

The performance of incumbent operators in the GCC had increasingly become dependent on overseas operations.

"They have invested in overseas markets to hedge against the decline in revenues and market share in the domestic market," the analysts said.
To offset the saturated markets, Global Investment House said operators needed to concentrate on the broadband market.

"The next phase of growth in the GCC will be led by increased broadband penetration which has lagged behind due to both demand-side and supply-side factors," the study states.
"However, advances in technology, an increase in awareness, availability and affordability have played a key role in influencing broadband growth which is likely to accelerate in the next three to four years."
Broadband penetration was not just increasing but also replacing the dial-up connections in these countries as subscribers migrated to these higher speed connections.

The broadband connections as percentage of total internet connections in the GCC were around 38 per cent a few years ago. In 2009 it was around 50 per cent and likely to grow.
•    67.8m the number of subscribers to mobile phone accounts in the GCC
•    50% number of internet connections which are broadband
•    7.07m the number of fixed-line phone account subscribers across the GCC
•    16.96m the total number of internet users across the GCC as of 2009