Running head: TELECOM SECTOR IN KUWAIT 1 Overview of Telecom Sector in Kuwait Name Institution
Overview of Telecom Sector in KuwaitCultivating competitionsKuwaitis’ mobile internet continues to grow at a higher rate as in other markets in the regionwhere future revenue lies. Increased competition and global economic deceleration made theKuwait’s telecommunications companies have a tough year. Kuwait’s telecoms sector has a relatively low rate of fixed line operations which is regardedas a phenomenon across the region. A high rate of mobile penetration which stands at over 100%and is widely available in fixed and mobile broadband has seen good improvements in the pastyear. The average revenue per user (ARPU) remains the highest in the Gulf, despite Kuwait’ssmall size of market with a total of 3.69m subscribers. Kuwait’s has two leading regionaltelecom players known as the Zain and the Wataniya. Zain was started in 1983 as a mobile telecommunication company. It has successful rose toa global player operating in 24countries in the Middle East and Africa with 70m subscribers. Thecompany signed a deal in April 2010 to sell majority of African operations to Bharti Airtel for$10.7bn so as to focus more on the Middle Eastern operations.Financials Figures from Global Investments House (GIH) Zain recorded $6.29bn during the first ninemonths of 2009 which had an increase of 23.7% over $4.89bn recorded over the same period in2008. Net profit declined 16.8% from $8.22m in the first three quarters of 2008 to $684m for thefirst quarters of 2009. The initial public offering (IPO) of Zain Zambia raised $93m. A 4.1%increase was achieved by the company in the third quarter of 2009.Competition Wataniya Telecom which operates in Kuwait, Algeria, Saudi Arabia, the Maldives, Tunisia
3TELECOM SECTOR IN KUWAITand Palestine Territories is majorly owned by Qatar’s Qtel since 2007. It has more than 11msubscribers and it is the only other listed telecoms provider in Kuwait that saw revenues flatten in2009 standing at $1.66bn against $1.66bn in 2008. In December 2008 Kuwait welcomed Viva asthe third mobile operator which is 24% owned by Kuwait government and Saudi TelecomCompany owns 26% of it. In 2009 it succeeded in taking 15%market share. It took an IPO in2008 despite not being listed. According to Paul Polishuk (pg 13) The Telecom industry inKuwait is set to increase with entry of new player. Viva’s entry was not the only competition in the market because in early 2009 calls fromfixed lines became free promoting shift from mobile to mobile calls cutting mobile companiesrevenue. Viva’s entry also prompted the abolition of charges in receiving calls, the result was adecline in ARPU levels and increased competition. Fixed lines are in line with internationaltrends but remain a monopoly of the ministry of Communications. Internal calls from fixed lines are free while international calls are charged. Telecomscompanies name access to their own international gateway as a top priority. Zain Kuwait lacksits own international gateway and that is why it has not been able to join Zain Groups OneNetwork. This group allows Zain subscribers free roaming and calls at local rates when theyenter a country with a Zain network.Regulatory environment Mobile operators enjoy a relatively free regulatory environment. According to PaulPolishuk (pg 13) the first GCC country to introduce a second mobile operator in 1999 wasKuwait still remains the only country in the region that has not established independent telecomsregulator. The lack of the regulator has not damaged the growth sector; the regulator helps themarket by providing clarity in a number of issues like setting interconnection charges between
operators, monitoring subscribers’ numbers and regulating access to the international gateway.Competition intensifies The lack of a regulator has benefited operators since the current competition is friendly;this is because the ARPU levels in Kuwait remain extremely high. Kuwait remains importantrevenue earner for both Zain and Wataniya, accounting for the 43% Wataniyas revenue. Themobile Penetration rate remains low compared to other regional markets such as Bahrain’s 199%penetration rate that suggests potential for further growth in subscriptions.Zains deal with the Indian company Bharti Airtel was to sell off African operations, exceptSudan and Morocco for $10.7bn, the deal was inked on March 30th in 2010.Outlook Kuwait telecoms market is relatively mature and sophisticated and companies are goingto face more pressure on pricing. This will likely continue to be a major source of revenue for allplayers concerned. Firms’ likely concentrate on value added services to offset declines in voicerevenues; this continues emphasis on broadband and mobile internet. With broadband andmobile penetrations rates rising while fixed-line rates remain static or decline somewhat. References
5TELECOM SECTOR IN KUWAIT Paul, P. (2007). Africa & Middle East Telecom. Salt Lake City: Information gatekeepers Inc.