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Thu 13 Aug 2009 11:00 AM

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Gaining first mover advantage

Zain Bahrain’s recently announced plan to upgrade its network to LTE came as a surprising development for the region’s telecoms sector

Zain Bahrain’s recently announced plan to upgrade its network to LTE came as a surprising development for the region’s telecoms sector.

So far, only a few international heavyweights such as TelioSonera of Sweden, Verizon Wireless of the US, and Japan’s NTT DoCoMo have entered the LTE fray, with all three operators planning to go live with their 4G networks some time in 2010.

While Zain Bahrain gave few details about the upgrade, with no mention of a timeframe for starting operations, it is likely that the company will face a simpler task than some of its counterparts in other parts of the world, such as Verizon Wireless.

Indeed, Zain Bahrain has a track record for being an early adopter of new technologies. It was the first operator to roll out a 3.5G service in the country in mid-2006, and was also the first to deploy WiMAX.

These initiatives have given the company valuable experience of monetising high speed data networks, and by already having a robust 3.5G network, it is possible that Zain Bahrain’s upgrade to LTE will mainly involve a software upgrade, rather than the costly replacement of hardware.

While being the first operator to make a decision on upgrading to LTE does bring some risks, it also looks certain to bring some big advantages for Zain Bahrain. The initial capex will ultimately lead to lower operating expenditure for the company, with LTE promising to offer greater efficiency than existing networks.

But while a continued surge in demand for data services suggests a solid case for mobile operators to push towards LTE, there are a number of question marks that hang over the business case for deploying the technology, in the short term at least.

For example, in many markets LTE will be competing with various other high speed broadband networks, including FTTH and WiMAX. For many consumers who already have a decent broadband connection, whether fixed or mobile, LTE might not be a priority.

Meanwhile, other customers who are attracted by the convenience of mobile broadband may decide to forgo their fixed connection and rely exclusively on LTE, which could simply lead to a shifting of revenues for operators.

Furthermore, much of the hype surrounding LTE has focused on the type of services that the technology could make possible, rather than the services that are available, or will be available soon. Without new services that really make use of LTE’s capacity, it could be argued that in the short term the technology offers little more than faster downloads compared with 3.5G.

Another concern for LTE deployments in more competitive markets is pricing. In countries such as Austria and Portugal, which have been particularly aggressive at rolling out broadband networks, mobile broadband can sometimes work out cheaper for the end user than fixed, which again raises the spectre of diminishing returns on investment for operators.

But all of this can not detract from the fact that mobile operators will eventually have to invest in LTE networks. Zain Bahrain is most likely to be more than familiar with these challenges, and is excited by the prospect of embracing a new technology in one of the Middle East’s most competitive markets. While the business case for deploying LTE in Bahrain might be tough in the short term, the experience is likely to give Zain Group a real advantage across the region.

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Mike Newlands 11 years ago

In your comment piece on Zain's decision to roll out LTE you say: "it is possible that Zain Bahrain’s upgrade to LTE will mainly involve a software upgrade, rather than the costly replacement of hardware." This is wrong. There is no software upgrade from UMTS to LTE. It is a new and different technology and a new network with new hardware is needed.

arahmank 11 years ago

"and by already having a robust 3.5G network" No my friend, Zain's 3G network is nothing close to robust, not even remotely. When you use their 3G network you will experience the usual dropped calls, weak coverage and slow 3G download rates. When you complain to them about that they tell you to switch your phone settings to 2G instead of 3G. Sorry but you need more than their press release to prove that its 'robust'. And by the way, they might be the first to deploy WiMAX but their WiMAX service is a complete failure, I don't want to even go into the details of it. The only reason they make money out of it is due to the people signing contracts and the cancellation fee being 200BD+. Basically, from Zain's history, I'm not looking forward for LTE with Zain, and I suggest others to read reviews about their network before signing up if they deploy this service anytime soon.