Dubai, UAE — The telecom sector in the Gulf region is in a mature stage of the industry cycle, with more than 100 percent penetration in terms of mobile subscriptions.
This indicates that organic growth is not feasible, and growth in average revenue per user (ARPU) through data and value-added services will be the key growth driver.
Globally, telecommunication companies have witnessed a shift in revenue streams from traditional revenue sources such as voice and messaging revenue to more data-driven web-based revenue streams.
The GCC telecommunication market has witnessed tremendous evolution over the past decades and is expected to continue, providing more opportunities than ever. The UAE and Saudi Arabia are home to the leading telecom service providers in the Gulf region.
According to IDC’s Worldwide Telecom Services Tracker, the GCC mobile market is forecast to grow meagerly at a CAGR of 1.9 percent during 2021-26.
A decline in mobile voice services is weighing down upon the growth of the GCC mobile market. On the other hand, a forecasted growth (CAGR) of 6.3 percent from mobile data services will help operators maintain overall positive growth.
Speaking to TRENDS, Krishna Chinta, Senior Program Manager – Telecom & IoT (META), IDC, said, “The increased usage of smartphones and mobile data services for infotainment, remote work, and collaboration, remote learning, telehealth purposes has outpaced the usage of mobile voice services.”
“Consequently, the share of mobile data service revenues will continue to expand, and it is expected to cross 60 percent of the total GCC mobile service revenues by 2026,” he added.
To arrest a further decline in voice revenues, mobile operators have been selling mobile voice and data service bundles, Chinta said.
The 5G mobile telephony services, currently available across the GCC region, offer enhanced broadband speeds and support low latency applications improving the chances of further adoption of mobile data services in the years to come, he said.
Data consumption to surge steeply
He said that the year 2022 has been characterized by an improved economic outlook and business sentiment for the GCC region.
“Despite the global socio-economic conditions, the ongoing public and private investments and stronger oil prices have helped the GCC economy to stay resilient, a trend that is also witnessed in the GCC telecom market,” he added.
Sanmeet Singh Kochhar, Vice President for HMD Global MENA & India, said that GCC states are home to the highest concentration of mobile internet users.
“Increasing user engagement with bandwidth-hungry applications such as video is expected to lead to a surge in data consumption across the region by 430 percent between 2021 and 2027,” he said.
Across the GCC, 5G networks are now being rolled out, and 5G phones will continue to be an important part of product portfolios from smartphone manufacturers, Kochhar said and added that the ongoing 5G revolution will continue to transform not just the smartphone industry but the media and entertainment landscape as well in tandem.
Also, Kochhar said, 5G’s faster connectivity (10 to 20 times faster than currently available 4G networks) and low latency that ensures almost no lag while playing will further stimulate the growth of sectors such as e-sports. “Low latency and video streaming will also enable high-quality immersive content to be produced and consumed,” he said.
In an increasingly technology-dependent society, spending on telecommunication infrastructure is vital to meet the evolving demands of various consumer bases. In the Middle East and North Africa region, the spending on communication services was expected to reach around $121 billion by 2022.
UAE regional leader in infrastructure
The UAE is a regional leader when it comes to telecommunication infrastructure, in addition to being a top player in the global telecommunication sector.
The number of etisalat by e& subscribers in the UAE reached 13.3 million in Q3 2022, representing an increase of 11 percent over the same period last year, while aggregate group subscribers reached 162 million, a 4 percent increase, the UAE’s leading telecom operator revealed in its third-quarter results.
Hatem Dowidar, the Group CEO of e&, said, “e &’s performance in Q3 2022 reflects our unwavering commitment to accomplishing more for the benefit of our customers, shareholders, and the communities we serve. We are focusing our efforts on adopting flexible and agile business models that fuel our growth through innovation and creating new value propositions.”
Dowidar said, “We will continue our efforts to seize new growth opportunities and pursue strong partnerships that will ultimately maximize the potential of a holistic digital transformation for our customers and the societies we serve.”
The mobile phone subscribers of Emirates Integrated Telecommunications Company (EITC), also known as du, grew 14.7 percent to 7.4 million by the end of September 2022.
Fahad Al Hassawi, CEO of du, said in a statement, “Our service revenues are recovering and growing at an encouraging pace: we generated service revenues above Dh2 billion for a fifth consecutive quarter (Q3 of 2022).”
UAE telecom sector at advanced stage
The telecom sector in the UAE is at an advanced stage with the adoption of 5G, plans to launch 6G, and the introduction of new products.
Until 2006, the sector was a monopoly of Etisalat. This changed with the formation of du, another telecom company. Du commenced providing ICT services in free zone areas, in turn making the sector a duopoly. However, since the areas in which the companies operated were different, the companies did not compete and were, in effect, monopolies in their areas.
The country is among the fastest in 5G and fixed broadband download speeds. 5G penetration is increasing in the country. Additionally, the high speed is due to increasing investment in fiber instead of legacy copper networks. The increase in the number of people working from home, as well as higher time spent online for entertainment and other purposes during lockdowns, has increased the demand for faster internet speeds. In response to this, companies are investing more in capex and infrastructure.
Etisalat announced transitioning plans to 6G in July 2021. The company expects 6G to be 100 times faster than 5G and can be a growth driver for the sector. A key feature of this growth is the focus on capital investments by the companies, with capex exceeding 15 percent of revenues.
Saudi Arabia: 5G opens new growth avenue
Telephone services were introduced in KSA as early as 1934. Since then, it has had many landmark moments, such as the launch of the first fiber optic network in 1984, the commencement of mobile phone services in 1995, and the liberalization of the telecom market in 2003, which allowed private players to enter the sector. ICT was the first sector to be privatized in Saudi Arabia.
The sector’s evolution is ongoing, and with the arrival of 5G, a new growth avenue has opened for the operators.
The telecom industry in Saudi Arabia is saturated in mobile penetration, reaching 115 percent for the year 2021, with a total of 41.2 million mobile users.
The telecom industry is dominated by four players, namely Etihad Etisalat Company (Mobily), Saudi Telecom Company (STC), Mobile Telecommunication Company Saudi Arabia (Zain) and Etihad Atheeb Telecommunication Company.
Saudi Arabia was amongst the first countries in the GCC region to launch the 5G network in 2019. STC was the first company to launch 5G services in the kingdom through its broadband network. Saudi Arabia has increased the number of areas covered by the 5G network at a robust pace in 2021. The top companies in the kingdom have focused largely on investing and growing its 5G business.