Mobile operators in Kuwait are expanding domestic 4G LTE mobile broadband services in a bid to shore up profits and subscriber numbers, against a backdrop of falling international revenues.
Several companies have already rolled out advanced 4G and LTE networks in recent months and are now launching innovative products such as voice-over-LTE (VoLTE). This is set to keep the industry on a growth trajectory this year, as the country’s main operators – Qatar’s Ooreedoo, Kuwait-based Zain Group and Kuwait Telecom Company (VIVA) – respond to growing demand for data services.
Falling international revenues
Profits in Kuwaiti’s telecoms sector shrank by 31.8% year-on-year (y-o-y) in the first half of 2015 to KD117m ($387m), according to a report by the National Bank of Kuwait (NBK), driving down average profit growth of firms listed on the Kuwait Stock Exchange. While earnings of all listed companies rose by 5.6% y-o-y, this figure rose to 15.5% when the telecoms sector was excluded. The industry’s weaker performance was due in large part to currency fluctuations and weaker performance in some foreign markets.
For Kuwait-based Zain Group, revenues were down 10% y-o-y to KD562m ($1.9bn) due instability in Iraq and the appreciation of the US dollar, which caused a $57m dip in revenues. Group net profits were down 30% y-o-y at KD80m ($264.6m).
Currency fluctuations and instability in North Africa similarly affected Ooredoo’s earnings. Consolidated revenues were down 3% y-o-y in the first six months of the year at QR16bn ($4.4bn), while group net profits fell 41%, due in large part to a 90% y-o-y decline in Ooredoo’s Iraqi operations’ net profits.
VIVA has been the sole bright spot in the telecoms market. After reporting a 66% increase in net profits to KD40.3m ($133.2m) last year, the company posted KD134m ($443m) in revenues in the first six months of 2015, up 24% y-o-y, while net profits rose 14% to reach KD21.6m ($71.4m).
Next-generation investment
With international volatility affecting most operations, companies are increasingly aligning their Kuwaiti business strategies with a consumer-driven shift from voice and SMS to data services. This could help operators maintain profitability, as well as finance network upgrades for next-generation services.
Data revenues are rapidly becoming a staple of telco revenues. According to the firms’ half-year financials, data accounted for 20% and 34% of Zain and Ooredoo’s respective group revenues this year, posting y-o-y growth of 10% and 64%.
Part of the growth in data services is being driven by ongoing investment in new broadband networks. Since launching the country’s first 4G LTE network in November 2012, Zain Kuwait has been active in developing next-generation mobile broadband services across the country, including plans for an LTE-Advanced (LTE-A) network announced in late 2013.
In March Zain signed an agreement with Chinese equipment vendor Huawei Technologies. According to the deal, Huawei will test and implement 4.5G services on the Zain Kuwait network over the next three years, offering higher speeds than existing 4G LTE services.
In addition, Zain Kuwait has awarded a business support systems transformation project to Swedish telecoms giant Ericsson, which is expected to develop a strategy emphasising convergence and integration, in a bid to reduce the time-to-market for new service offerings.
Innovation in next-generation mobile broadband
Innovation will continue to play a key role in the development of new mobile broadband offerings, with greater uptake of new technology in the years ahead.
In June VIVA announced the launch of VoLTE services to its nearly 2.5m customers, offering simultaneous HD-quality video and voice calling while using LTE broadband services.
The announcement came just days after Ooredoo Kuwait rolled out two different network and service upgrades. The company switched its 4G LTE network to what it calls “4G+ SPEED” and launched an LTE-A network. According to Ooredoo, existing subscribers will not be required to purchase new hardware in order to access data speeds of up to 150 Mbps on the 4G+ network, nor will there be any additional connectivity charges.
Ooredoo’s LTE-A network, meanwhile, integrates spectrum on the 800-MHz and 1800-MHz bands to provide users with peak data speeds of more than 185 Mbps, making the telco’s new network one of the fastest in the world.
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