Middle East markets: regional players prevail in mobile licence auctions

At last month's GSM>3G Middle East conference in Dubai, at which I had the pleasure of moderating a number of the sessions, the panel of speakers included Farid Lekhal, Chief Commercial Officer at Vodafone's Partner Markets business unit. I hope his comments on mobile broadband added a useful perspective for an audience largely representing telcos headquartered in the MENA region. MENA operations in which the Newbury, UK-based giant cellco has equity currently only number two. Vodafone Egypt is an established outpost of the company's global empire. Much newer is the operation in oil and gas-rich Qatar, where I believe services are expected to be launched in March this year.

Notwithstanding Vodafone's recent foray into Qatar, My guess is that across the Middle East the entry of a group with European roots to any market selling further licenses will be comparatively rare going forward. It looks far more likely that MENA-based groups will continue to grow their footprints in the region. One recent example: Saudi Telecom acquiring Bahrain's third mobile licence for USD 230 million, according to yesterday's report from Gulf News. The story indicates that three other firms had registered interest in the auction, something which Global Mobile Daily told me only eleven days ago in a piece which led me to infer that the Bahraini regulator was planning to launch a lengthier tender process. However, yesterday's Gulf News piece suggested that STC's bid was the only one received. The story also reveals the previously unknown prospective bidders, indicating that Mohammed al-Amer, Chairman of the Telecommunications Regulatory Authority of Bahrain, had said these named Bahrain's TwoConnect and Mena Telecom as well as a consortium including France Telecom subsidiaries Orange and Jordan Telecom.

Another major intra-regional move was the recent win in Iran by the Etisalat, where the UAE-based telco has snapped up the country's third national mobile licence. My colleague Matthew Reed, Editor of our Middle East and Africa Wireless Analyst publication, feels the deal was a bargain, noting that the license fee was only US$399 million, of which Etisalat is paying 49%, in line with its 49% stake in the consortium that won the license. Etisalat’s local partner is Tameen Telecom, an Iranian public-sector investment fund. Matt notes that the new operator will reportedly pay 23.6% of revenues to the Iranian government, though MCCI and MTN Irancell pay 28%.

Matt feels that Etisalat's new operation will enjoy - and exploit - the significant competitive advantage conferred by its licence, which confers the right to be the only 3G operator in Iran for two years. Matt notes that "perhaps more than any of its peers, Etisalat has put new technology at the heart of its strategy, saying that in this way it can future-proof itself because it will be able to offer the most up-to-date services and because the latest systems are cheaper in the long run."

Matt points to the example of Egypt, where Etisalat launched a 3.5G network on its debut in the country in May 2006, becoming the country’s first 3G operator. In Egypt, Etisalat had the 3G market to itself only briefly, since Vodafone launched its own 3G network within a couple of weeks, and Egyptian market leader Mobinil launched a 3G network in September. In Iran, Etisalat will look to make the most of a much longer period of 3G exclusivity.

Matt notes that "when Etisalat launches services - in six to nine months, according to company executives - it will most likely offer HSDPA services from the outset, as it did in Egypt." Matt feels this will enable Etisalat to offer data services such as mobile broadband and target Iran’s largely untapped broadband market, without any meaningful competition.

Orange to enter Armenian market?

While conducting our research into developments across the Caspian Sea and Central Asia regions, we've dug out some interesting nuggets of information and opinion from a number of the individual markets concerned. Expect to see all of this reflected in the theme of the discussions at our annual Eurasia Com conference in Istanbul, 31st March & 1st April 2009.

One country we've found particularly fruitful in terms of research respondents is Armenia. One respondent there seems quite confident that the country's mobile market will be joined by a new player in the near future and that the new entrant will be Orange. The France Telecom cellular brand is not a total stranger to former Soviet territory, having established a foothold in Moldova, via the 2007 rebranding of Voxtel. Our friend in Armenia also felt that the entrant is likely to deploy WiMAX in additon to a GSM/W-CDMA network.

Armenia, home to fewer than 3.5 million people, is not a huge market to split between three mobile operators. In the context of the region around it, the country has also been quite well penetrated by the existing two MNOs, one of which is a part of the MTS empire. The other, Armentel (now branded Beeline) is the incumbent fixed-line operator as well as offering mobile services. Beeline, a well-known name across CIS markets, is the brand of the company's new owners, Vimpelcom of Russia.

I wonder, therefore, what any new entrant will be planning in terms of ways to grab market share from these two established players.