The telecoms sector in Qatar has grown at a tremendous rate over the last decade. Mobile phones are now virtually ubiquitous across the country, while the use of other communications technologies such as smartphones, tablet computers and broadband internet connections continues to increase in popularity. Significant public sector investments have helped establish Qatar as one of the most “network ready” countries in the world with an advanced ICT infrastructure backbone that supports the country’s telecoms industry. Despite the high penetration rates, the market’s prospects remain strong thanks to a booming population and increase in demand for data and broadband services. Ooredoo and Vodafone, the two major telecoms companies, have posted positive financial results in recent years despite the tough competition. The country is currently rolling out a broadband strategy that should help further drive this progress. Moreover, public and private investments in major new real estate developments, such as Msheireb Downtown, Lusail City and The Pearl-Qatar, and infrastructure projects, such as the new seaport and Hamad International Airport, should also serve as a market driver going forward.
ROOTS: Qatar’s telecommunications industry has its roots as a state-owned company established in 1987. While the country had a small telephone exchange prior to Qatar Telecom, or Qtel as it came to be known, the new firm helped bring a strategic focus to the sector. The economic reforms in 1995 ushered in a new era for the company, enabling it to raise capital by listing shares on a number of global stock exchanges. In 1998, Qtel listed on the Qatar Stock Exchange, and proceeded to list on London in 1999, Abu Dhabi in 2001 and Bahrain in 2002. The government has maintained majority ownership of Qtel, holding 52% of the company as of early 2014. Other state entities currently hold 17% of Qtel, while the Abu Dhabi Investment Authority and other investors own a total of 31%. The corporatisation of Qtel has enabled the company to take a number of steps to expand its footprint and to grow into a leading telecoms operator globally. The firm has made strategic investments in a number of other entities, with operations in 13 countries in the Middle East, Africa and Asia. Foreign operations generate more than 80% of the company’s revenue.
Qtel embarked upon a major global rebranding exercise in 2013, changing the brand name to Ooredoo, and is currently rolling out this new corporate image across its international operations.
SECOND OPERATOR: Qatar’s second major telecoms operator entered the market in 2008 following extensive government reforms in the sector. The state’s first telecoms regulator, the Ministry of Information & Communications Technology (ictQATAR), was created in 2004 with a mandate to nurture innovative technologies and regulate the sector to ensure a fair and competitive market. Law No. 34 of 2006 essentially broke Qtel’s monopoly by enabling private sector participation in the industry. Vodafone Qatar was licensed in June 2008 as the country’s second mobile operator and started operations in March 2009. The licence was granted to Vodafone Qatar under a joint application between Qatar Foundation and the Vodafone Group. Vodafone Qatar is now partially owned by Qatar Foundation and the Vodafone Group with 55% of the entity’s shares listed on the Qatar Stock Exchange.
SECTOR PERFORMANCE: ictQATAR’s “ICT Landscape 2014” report highlights significant advances in the development of the country’s ICT sector. A number of international rankings rate ICT access and quality in Qatar as among the best globally. The levels of access and usage of ICT, for example, is ranked at 32 and 26, respectively, out of 157 countries in the International Telecommunication Union’s ICT Development Index 2013. The World Economic Forum also supports these results with similar rankings in its “Global Information Technology Report” of 2014, which ranks Qatar in 23rd place in its Networked Readiness Index. This is a particularly significant result because the ranking takes into account a wide range of data, including the political and regulatory environment, the business and innovation environment, infrastructure and digital content, affordability of services, skills available in the sector, usage by individuals, businesses and the government, and the economic and social impact of the sector.
MARKET PENETRATION: It is estimated that 100% of the population in Qatar has a mobile subscription. According to data from the World Economic Forum there are 127 mobile phone subscriptions per 100 people in Qatar, implying that at least a third of population has more than one connection. Use of Internet and broadband services are growing as well. According to ictQATAR’s 2013 survey results for “households” and “individuals”, 85% of the overall population in Qatar now has access to the internet compared to only 38% as recently as 2008. The World Economic Forum’s report also measures usage, showing it even higher at 88%.
The ownership of communications devices such as mobile phones and laptops has also grown rapidly. The average Qatari household owned nine mobile phones in 2013 compared with only four in 2012, according to the “ICT Landscape 2014” report. Similarly, the average Qatari household owned more than three laptops in 2013 compared with only two in 2012. The overall penetration of laptops has increased from 83% in 2012 to 93% in 2013. The penetration of tablet devices has also been rapid, tripling from 10% of the population in 2012 to 29% in 2013. The penetration of smartphones now stands at 65% of the population.
The portability of these devices is clearly a major incentive for consumers in Qatar. While desktop sales have been flat in recent years, 85% of internet users in Qatar used a laptop to access the web. Similarly, the number of Qataris using tablets to connect to the internet rose from 32% in 2012 to over 52% in 2013. Mobile broadband is increasingly popular, with 71% of the population using a smartphone to get online. Household internet access is nearing 100%. Of connected households, approximately 80% access the internet via fixed broadband connections. Fibre-to-the- home (FTTH) is only accessed in 24% of all households, though the government is looking to invest in upgrading this network. All of these statistics appear set to improve over the next few years as devices and services become affordable for other segments of the population and as the country rolls out new services and technologies, such as the proposed broadband network.
ICT SPENDING & USAGE: The average household spending on accessing ICT services is one indicator of the strength of the sector. According to the “ICT Landscape 2014”, the average Qatari household spends more than QR3500 ($959) on ICT services each month. Non-Qatari households spend significantly less, averaging QR1190 ($326). However, the larger number of non-Qatari households still makes this a lucrative market segment for ICT providers. Mobile services form the largest portion of this spending within both segments, though Qatari households spend an average of almost QR3000 ($822) on these services, which is almost four times as much as expatriate households, which spend an average of QR828 ($227) in comparison. This may be partly due to the fact that Qatari households are generally larger, but the numbers are also indicative of core differences in the two market segments.
While the penetration of and access to ICT devices and infrastructure is high in Qatar, there is a tendency for customers to use these technologies for basic services such as telephone calls, text messaging, accessing social media, downloading movies and shows, and basic browsing. The “ICT Landscape 2014” reports that downloading movies and music is the most popular use of the internet. Accessing information such as the news or consumer reports comes next. However, less than 25% of the population connected to the internet uses it to conduct online transactions through e-commerce sites or e-government sites, or for basic internet banking services. This reflects, in part, the lack of services tailored to the local population and a generally negative perception of online privacy and security.
THE INCUMBENT: Qtel has rapidly grown into a global player over the last decade. The company has been one of the fastest growing telecoms operators by revenue globally since 2006. Revenues in 2013 totalled almost QR44bn ($12bn) while the number of customers globally rose to 96m in the same year. That year marked a critical point for the company as Qtel officially unified its global footprint under a new brand name. The launch of Ooredoo, which means “I want” in Arabic, was announced in Barcelona with Qtel’s services in Qatar being the first to launch under the new brand with football star Lionel Messi as the brand ambassador worldwide. This was followed by a rollout in other markets including Tunisia, Algeria, Kuwait, Oman, Myanmar and the Maldives. Each of the Ooredoo launches was matched by a parallel investment in service enhancements to emphasise the brand’s value.
The vast majority of Ooredoo’s revenues are now generated outside the home market of Qatar, and its international footprint is growing. The company won its bid for a commercial licence to operate in Myanmar, which has been marked as one of the biggest untapped markets for ICT services because of low access rates. Company reports show that fewer than 8m people in Myanmar had access to telecoms services. This represents only 12% of the country’s 65m people. Internet access was even lower, at only 400,000 people.
Ooredoo will be competing with Norway’s Telenor group, which was awarded Myanmar’s second licence, issued in 2013. Winning this bid was a major success for the company because tapping into this market is likely to become a major revenue driver going forward. According to the International Finance Corporation, the entry of Ooredoo and Telenor will spur growth in the mobile subscriber base to 22m people, or about 40% of the population, by 2017.
CHALLENGES: However, there are still significant obstacles to tapping into this market. Infrastructure issues such as electricity supply, for example, adversely affect the growth in service provision as only 29% of the population is connected to the grid. Despite these challenges, Ooredoo reported it had established a base of more than 1m customers within three weeks of launching its services in the country. The company’s operations in Myanmar are being managed with over 1000 staff including 800 local employees.
In addition to expanding rapidly overseas, Ooredoo has also focused on developing its operations within Qatar itself. As of the end of 2014, the provider had 3.2m customers, an increase of 10% from the previous year. The company’s financial performance has been positive, with revenues growing by 8% to QR7.1bn ($2bn) in 2014 compared with QR6.6bn ($1.8bn) the previous year, according to its 2014 annual report. In parallel with its rebranding in 2013, Ooredoo Qatar moved into new headquarters in Doha in the same year, as well as launching new 4G+ services in December 2014.
NEWCOMER: The liberalisation of Qatar’s ICT sector paved the way for Vodafone Qatar’s entry in 2008. The multinational telecommunications company has successfully challenged Ooredoo’s monopoly over mobile services in the market and had captured more than 33% of local market share as of April 2014. Vodafone Qatar reported increasing the number of subscribers to its mobile services from 0.9m customers in September 2012 to over 1.4m customers in December 2014.
Vodafone Qatar posted total revenues reaching QR1.7bn ($475.6bn) in the first three quarters of their 2014/15 fiscal year – from April through December – representing 21% growth over the same period in the previous year. Meanwhile, the customer base has expanded, while average revenue per customer remained at QR125 ($34) from April through December 2014, identical to the same period over 2013.
The company attributes a lot of this growth to the increasing population size in Qatar. However, new services have also been key to the operator’s success. Vodafone launched post-paid mobile services in 2011. The “Red” post-paid plans, which were launched in 2013, have witnessed a successful online and social media campaign. As a result, all post-paid services have gained between 16% and 18% of the market share. Other major initiatives included upgrading the 3G network within Qatar and investing in expanding the coverage within Doha and across the country. The expansion of 4G coverage is also ongoing, with new 4G services available in various parts of Doha. Fibre services for fixed-line consumer and enterprise solutions are also a growing segment for the company, with plans of expanding these services going forward.
FOCUSING ON DATA: Both companies have pointed to data as underpinning revenue growth over recent years. Vodafone, for example, reports an explosion in demand for data, which has grown by 10% month-on-month and by over 50% over the last quarter of 2014. This has been driven largely by new tariffs, by the growth in the penetration of smartphones, and the introduction of new smartphone models with 4G capabilities. Both companies have recently launched 4G services and are vying to expand this capacity.
Ooredoo’s 2013 annual report highlights this trend: “We have known for a long time that traditional voice and SMS services are likely to come under pressure from alternatives in the market, and that data will play an increasingly important role… In 2013, this focus on data is showing positive returns for the company.”
BROADBAND: The state-owned Qatar National Broadband Network (Qnbn) has the mandate of expanding broadband capacity and has been investing in installing fibre networks across the country. The programme of investments forms a part of ictQATAR’s broadband development strategy and included a target of covering 95% of households by 2015. According to ictQATAR’s plans, the network is required to have the capacity for at least three service providers. Furthermore, end users should have a choice of service provider. Qnbn was established to serve as the asset developer and owner, with operators including Ooredoo and Vodafone.
The deadline looks increasingly unlikely, however, as there are currently only a few areas in Doha that have coverage, including the West Bay area, the Msheireb Downtown Doha project, Barwa City and Barwa Commercial Avenue. Ooredoo has also been laying fibre infrastructure for several years and has connected an estimated 175,000 homes and businesses.
This has resulted in some debate on asset ownership, network sharing and coordination to avoid duplication of investments in the network. Vodafone Qatar had entered into a non-binding agreement to buy 100% of Qnbn’s 21m shares in October 2014. However, the deal was scrapped one month later for undisclosed reasons, bringing further uncertainty for the country’s broadband strategy in the short term.
CONSUMER PROTECTION: Given the rapidly evolving market, Qatar’s telecoms regulator is still adjusting to new developments in the market. In addition to enabling better competition in the sector, regulation to protect consumers has been a major area of focus in recent years. ictQATAR has rolled out a number of initiatives to ensure better competition in the delivery of telecoms services. The regulator announced a policy for mobile number portability in 2013, reducing the barriers of choice for consumers, and inhibiting providers’ ability to lock clients into their services. This policy has not had a significant impact on either of the two mobile operators as of yet because many users already have a number from each. It does, however, lay the groundwork to protect consumers going forward. ictQATAR also released a Telecommunications Consumer Protection Policy in 2014, which clarifies the rights and obligations of operators and customers. Improved monitoring and compliance mechanisms and the provision for independent dispute resolutions further strengthen consumer rights within the sector.
The Communications Regulatory Authority, an independent regulatory arm of ictQATAR, also issued an advertising code as part of a consumer protection policy to ensure fair advertising practices. The move came in the wake of several incidents of advertising that was deemed to be misleading and confusing for consumers. In a related move, in March 2015 the Cabinet approved a draft decision to improve the security of personal details held online by preventing their use for marketing purposes without prior consent.
INNOVATIVE SERVICES: In a bid to increase their revenue bases, Ooredoo and Vodafone are launching new and innovative services. Ooredoo, for example, has introduced mobile finance services in collaboration with US-based MoneyGram, which will enable money transfers abroad. The service targets Qatar’s expatriate population, though foreign transactions are just the tip of the broader market for mobile finance services. The global trend towards enabling consumers to use mobile cash for transactions through their phones is gradually gaining momentum in Qatar. Ooredoo announced it had enrolled some 100,000 customers for such services as of 2013. Vodafone is also eyeing opportunities in developing enterprise services to support its clients’ commercial operations in Qatar, providing a range of innovative services designed to meet the needs of businesses and other consumers. Ooredoo also offers services like high-speed fibre lines and cloud services for its business customers.
OUTLOOK: Qatar’s ICT sector is thus a challenging market for service providers. A fairly small consumer base and a very high penetration of mobile and internet services make the competition for consumer spending very tight. The two-player market structure makes it especially challenging for newer entrants. ictQATAR has taken a number of major steps to level the playing field for private sector participation in the sector, but it is unlikely that the market will support more than two service providers in the near future. Even so, the wealthy consumer base as well as a large expatriate population will open a lot of opportunities. Data-driven services remain in the nascent stages of development, with significant potential for growth. With one of the fastest-growing smartphone penetration rates globally, mobile finance and e-commerce opportunities are also likely to emerge as key drivers for the sector.
The state also plays an important role, and is actively supporting the sector through strategic investments that ensure Qatar has the infrastructure it requires to build a robust ICT market. While fibre-to-the-home and broadband are yet to reach their full potential, there are clear signals that the government will provide the necessary support to achieve the ambitious coverage targets. In line with the national strategy, the government-owned broadband network will eventually offer high-speed connectivity to over 95% of homes as well as to all businesses in the country. This objective places the telecoms sector on a strong footing going forward.
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