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Getting bigger: Du, under CEO Osman Sultan has already attained a million subscriber base.

If 2007 is a memorable year for the Middle East ICT industry for any single reason, it will be because of the sheer amount of activity in the telecoms sector. From the launch of competition in traditional monopoly markets, to the seemingly non-stop round of licence auctions and the major players increasing tendency to look outside of the region for opportunities, the sector has made headlines all year, and its growth looks set to have a fundamental impact on the Middle East in the year ahead.

The Middle East telecoms markets may have slumbered for a while, but there can be no doubt that increased competition has shaken up the market. The GSM Association announced that mobile subscriptions grew by 8.5 million subscribers in the first quarter of 2007 alone.

In the United Arab Emirates, new entrant du claimed a subscriber base of one million by the end of November after launching services in February, accounting for 15% of the market. The competition between du and incumbent Etisalat, which has manifested clearly in areas like promotional pricing for special occasions and deals on pre-paid cards, shows the potential benefits to subscribers in terms of value for money.

Upping competition further will be the entrance of Mobile Virtual Network Operators (MVNOs) - telecoms operators that use other operator's infrastructure and spectrum allocation to deliver services - to the region. i2 is set to be the first MVNO in the region, serving Jordan, with the total MVNO market for the Middle East estimated at a possible US$5bn by analyst company Delta Partners.

The MVNO model has the potential to drive competition in the region, because it can allow new operators to rapidly gain market share in markets that are already saturated, as has happened in Europe, if the MVNO offers innovative services targeted at distinct markets. Rogier van Driessche of Delta Partners said: "The introduction of MVNOs would fundamentally change the industry landscape. It is a truly disruptive model."

Internet roadblock

This growing wave of telecoms competition should have one fundamental benefit for IT users, corporate or otherwise - faster, cheaper, more reliable data and voice connections. Mobile penetration rates might be high in the region, but internet access, and in particular all important high speed broadband access lag far behind the developed economies of the west. According to InternetWorldStats (IWS), internet penetration in the Middle East stood at 17.3% as of Sept 2007, compared to 41.7% in Europe and 70.2% in North America. No Middle East country ranked in the top twenty for broadband penetration.

The lack of bandwidth in the region creates a roadblock for many different types of services, from mobile applications for business and consumers, to e-commerce, to interactive home entertainment to software as a service and remote management of businesses. While there are other hurdles to the adoption of various services, bandwidth is essential to ICT growth.

It is a situation that is recognised in the region. Bahrain's Telecoms Regulatory Authority reported on a study it had commissioned in August which showed that Bahrain needs further competition on internet availability, or risk hindering economic development.

Operators too are rapidly moving in the right direction. Along with new licence signings, 2007 seemed to bring a constant stream of announcements about investment in broadband and wireless services. In October, Batelco announced US$16m investment to expand its broadband reach; Mobily bought broadband services provider Bayanat Al-Oula for US$800m to expand its data capacity in Saudi; and Jordan's Umniah launched WiMAX services, widely predicted as the new standard for wireless broadband access, in the region. Both Batelco and Mena Telecom also made soft launches of WiMAX, and there are numerous other trials of the technology going on around the region.

WiMAX is promoted as having particular potential for the region, in that it is a wireless technology which can provide services to either fixed or roaming end users and can be deployed much more easily than having to lay cables for connectivity. The system also has the flexibility and range to quickly add capacity to metropolitan areas, when operators need to enhance service, or to provide a cost-effective way of connecting remote areas.

Diversifying services

Ahead of the predicted broadband boom, players in the region and from outside are looking to position themselves to deliver a very wide range of services targeted at different segments.

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