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Five countries in the Middle East will see average annual growth rates of 10% or more. Each of these Middle Eastern countries is poor by local standards, with GDP per capita well below the regional average and low penetration rates for telecommunications services. At the other end of the scale, the six richest countries in the Middle East will see little revenue growth and only one of them, the UAE, will grow at rates in excess of the regional average. In between the two extremes, are the two large markets which dominate the region and currently account for 45% of the market, Turkey and Saudi Arabia. Despite having relatively well developed markets, both will continue to report robust growth and will contribute an additional USD6 billion of service revenues to the regional total by 2013.

“Despite political turmoil in the region we continue to see very solid quarterly growth in subscribers and we predict that this will continue over the coming years” said Tig Harvey, Research Director for TeleGeography’s GlobalComms products. “By 2013, the number of wireless subscribers in the Middle East will have increased by 50% while broadband connections will have more than doubled”.

Likewise, the African telecommunications market is expected to continue at a growth rate faster than any other region, over the next three to five years, despite the current economic downturn, according to auditing and business advisory firm Ernst & Young. At a release of the company’s first telecommunications study, focused on the African continent, Co-Leader of Ernst & Young’s Global Telecommunications Centre in Africa, Julia Lamberth, said that it was likely that there have been more telecoms transactions in Africa, over the last two years, than any other sector anywhere in the world. Past growth has been driven by the increasing numbers of subscribers, all of whom were using basic voice services, while future expansion was expected through a variety of services.

The study, titled “Africa Connected, A Telecommunications Growth Story”, stated that voice services were likely to remain the largest contributor to operator revenues in the medium-term, but that data could start playing a much more important role. “The catalyst of this change should be the arrival of the new submarine cable systems.”

Operators were mainly focusing on two areas to continue revenue growth on the continent, the study reported. “The first is delivering services to people that have not had access to mobile services before. Profitably addressing this low average revenue per user market is a challenge for most operators across the continent. Some have dedicated programmes to offer communications in underserviced rural areas, while others are relying on their standard offerings to target this market.” The second focus area was the introduction of value-added services, with mobile banking at the forefront of these applications.

With an increase in revenue and the proliferation of more service providers, the telecommunications market in Africa was becoming more competitive, and despite the global slowdown, the number of new licences issued, and the number of mergers and acquisitions completed have continued apace in Africa over the past year. The study stated that as competition increased, operational efficiency should take on added importance for telecommunications operators. “Multinational operators are on the lookout for acquisition targets to enable geographic expansion. Consolidation seems inevitable, with moves into new segments being a key defensive strategy for many players.”

Despite revenue growth, Ernst & Young noted that significant challenges still needed to be overcome by operators. Lamberth stated that some of these challenges included logistical issues, regulatory environments, and specialised tax specifically aimed at the telecommunications industry. “Operators continue to be challenged by infrastructure problems, including unreliable electricity supply. Also, the reluctance of some governments to relinquish their hold on international gateways has made it difficult for non-State-owned entities to get equal access to bandwidth in certain countries.” The study added that operators were struggling to find and retain talent, but added that this was not a challenge unique to the African operators, as operators across the globe were struggling to attract talent to fill key technical and management positions.

The study also found that African markets were at differing stages of evolution in telecommunications. “In telecommunications, the pace of development has been varied. In 2008, Libya became the first African country to pass the 100% mobile penetration mark, with South Africa not far behind at 98%.” However, only six African countries had penetration levels higher than 80%, while 24 fell below the 20% penetration mark, and 17 have mobile penetration levels of less than 10%.

During 2008, Nigeria overtook South Africa as the largest mobile market on the continent, and the region was expected to continue to be the fastest-growing region, with Nigeria and Ghana showing the strongest subscriber growth. The study found, however, that growth in South Africa was beginning to slow as the South African market started to reach saturation point. “The more liberalised markets in both Southern and Eastern Africa have made these regions attractive to investors, and both have experienced high levels of foreign direct investment.”

With 70% of the population of sub-Saharan Africa still living in rural areas, the challenge to operators was to reach remote pockets of potential consumers, in a cost-effective way. “While North Africa or countries like South Africa are approaching 100% population coverage, the average across sub-Saharan Africa is just over 50%. This figure has only increased by 10% in the last four years, at a time while penetration levels have more than doubled,” the study found. It added that until now, operators have been able to concentrate their efforts on urban areas, but as growth from these areas started to slow, there was likely to be a need to look further afield.

Telecommunications Market Growth Rates: Africa #1, Middle East #2; Well Above Global Average
see also Ernst & Young report — Africa Connected: A Telecommunications Growth Story (registration necessary)