By George Bevir
A third mobile operator is about to enter the fray in Bahrain, and with one of the highest mobile penetration rates in the region, operators in the country are focusing on broadband in a bid to boost revenue.
A third mobile operator is about to enter the fray in Bahrain, and with one of the highest mobile penetration rates in the region, operators in the country are focusing on broadband in a bid to boost revenue.The entry of STC-backed Viva into the mobile market in Bahrain will mark a new chapter in the history of the telecom sector in the island Kingdom.
Saudi Telecom (STC), the biggest Arab operator by market value, was the only bidder for Bahrain's third mobile licence, for which it paid US$230 million at the start of 2009. Since then it has been building its network and preparing for launch, which is expected to happen early this month.
Viva has been pre-registering customers and building up its marketing campaign in anticipation of doing battle with established telcos Batelco and Zain, and Bahrain's Telecom Regulatory Authority (TRA) has also been preparing for Viva's entry.
Last month, it announced that Batelco would now be able to set tariffs without seeking prior approval from the TRA, a change that the incumbent has been lobbying for for the past year and a half.
The TRA's chairman and acting director general, Dr Mohamed Al Amer, confirmed that the change was a result of the imminent arrival of Viva. "With the level of competition increasing in the mobile sector and other market segments it is important that Batelco has adequate flexibility to compete on a level playing field with Zain and also with Viva," he said.
Between them, Batelco and Zain have managed to amass enough subscribers to push Bahrain's mobile penetration to among the highest in the Middle East. By the end of September 2009, Bahrain's mobile penetration rate had risen to 149.4%, up from 141.5% at the end of June. According to research firm Business Monitor International (BMI), the jump in the number of mobiles per head of population reflects continued subscriber growth together with a declining population, which the research firm attributed to the departure of foreign workers from the Kingdom.
By the end of 2009, BMI estimates that Bahrain had just over 1.5 million mobile customers and a penetration rate of nearly 157%. The management of Viva no doubt believe that there is room for further growth, and they will only have to look south, to the UAE, where the penetration rate continues to grow beyond the 200% mark, for evidence that the mobile market can continue to grow in size.
When the third mobile licence was awarded, Fahad bin Mushayt, director of mergers and acquisitions at STC, confirmed that the geographical proximity and close trade and tourism ties between the two countries were behind the decision to snap up the licence. Every year, several million people cross the King Fahd causeway that links Bahrain to Saudi Arabia, and analysts have said the licence, together with some favourable roaming deals, would help STC guard against losing customers to rival Zain, which operates in both countries. Bin Mushayt told Reuters that STC wants to acquire a 20% market share over the next ten years from the two existing operators.
The CEO of Batelco, Gert Rieder, accepts that his customers will probably want to try out the new network. "A lot of customers will buy a third Sim card, and they will compare that to the quality and coverage they get with Batelco, but I don't expect a lot of our customers to completely skip our service and go for the new entrant," he says.
A key differentiator, according to Rieder, will be Batelco's well-established fixed line and internet offering. "We are the only full service provider in Bahrain, having both a fixed and mobile network, and you will see us in 2010 focusing on those assets," he says.
Last month's decision by the TRA to allow Batelco to set and adjust tariffs without first seeking approval from the regulator will give the operator greater manoeuvrability when it comes to countering deals on mobile offered by its rivals, but Rieder wants more flexibility.
He says Batelco is not yet combining fixed and mobile in one product because it has not got the information it needs from the TRA to bundle across mobile and fixed.
"We definitely believe that's the future and that customers want combined bundles," he says. "The next step is even more converged solutions, combining intelligently the network of the fixed and the network of the mobile. That is the future and it is definitely one of our focus areas for the next year to come because that's one area that we can deliver to our customers."
Battles between Bahrain's regulator and Batelco have been widespread and well-publicised. But now that the heads of both organisations have moved on, relations between the regulator and operator could be more conciliatory.
The man widely credited with leading reform of Bahrain's telecom sector, former head of the telecom regulator, Alan Horne, stepped down from his role at the end of last year, but not before hitting Batelco with its biggest-ever fine for allegedly preventing other operators from accessing the country's international submarine cable, a charge that Batelco described as "baseless".
Horne went head-to-head with Batelco group CEO Peter Kaliaropoulos on a range of issues, including the thorny subject of local loop unbundling, which could end the incumbent's dominance of the fixed line market, but which Batelco insists is unnecessary and uncalled for.
Kaliaropoulos was replaced in his role as CEO of Batelco's Bahrain operation by Rieder, who is now looking after day-to-day operations in Bahrain, while Kaliaropoulos focuses on group issues. Rieder thinks the reshuffle will have a positive effect.
"With me being new and the regulator having new people on board, I think we will find a way of increased and better dialogue," he says. "We have communicated this to the TRA and said that we are really interested in having dialogue and they have confirmed they want the same."
However, the issue of the US$13 million fine has not gone away. The TRA insists that Batelco has refused to allow other licensed operators access to Reliance Globalcom (formerly FLAG Telecom)'s submarine landing station in their building, which the TRA says is unacceptable.The issue was raised by WiMAX operator Mena Telecom, whose CEO, Laith Sadiq, says he wants a direct connection with the submarine cable.
"[Batelco] want other people to connect to FLAG through a Batelco commercial offer," says Sadiq. "That is not what we want; we want a direct connection, and we do not want Batelco in the middle adding charges which we see as unnecessary. FLAG links directly into Batelco's building, so we need to co-locate and that is where the dispute is with Batelco."
Rieder says talks are taking place with the TRA, and he hopes a solution will be found soon, but he insists "there is nothing like exclusivity there".
"What we have done with international capacity everybody can do," he says. "We have a commercial agreement with Reliance on the landing station and it's really a matter of a commercial decision and agreement between the operators and nothing more than that."
Sadiq says that although Bahrain has more choice and a greater range of services than anywhere else in the GCC, it needs more international links.
"And I think that applies to the whole of the GCC, and not just Bahrain," he says. "Otherwise, internet and broadband services will remain expensive and limited. Greater choice will mean there is more flexibility in the business and that broadband services can be improved. We will be able to offer much better services to our customers and we will be much more flexible because we can respond to increases in requirements more quickly and we can offer a better range of services."
Mena Telecom racked up 30,000 users in its first year in one of the region's most competitive ISP markets, where multiple resellers use Batelco's fixed infrastructure. Despite the competition, there is still plenty of room for further growth in the coming years, and BMI predicts that around 34% of Bahrain's population will be regular internet users by the end of 2014.
"Bahrain has a low internet penetration rate, and we are definitely trying to penetrate the market into a higher rate on data services," says Nokia Siemens Networks' country director for Bahrain, Rami Shatat. "The main target is broadband," he confirms.
Need for speed
BMI says there has been an increase in competition in the ISP market over the past few months, which has contributed to lower prices and a greater range of service options for consumers.
It cites the example, in July last year, of alternative operator Lightspeed Communications that launched faster residential ADSL internet packages, with downstream speed limits of 4Mbps, 8Mbps and 10Mbps. It followed the move by Batelco in mid-June to remove a cap on ADSL speeds to make 10Mbps services available to end-users where consumer DSL access was previously limited to 2Mbps.
Despite the numerous ISPs, Sadiq is confident that Mena Telecom will continue to add subscribers, and although he won't say exactly what his targets are, he says within a year he wants to push towards a share of "30% plus", from a base of 25%.
"From the Mena Telecom perspective, we have an NGN network, and with the same NGN network we can tackle all these market segments with one network.
"And of course, from our perspective, mobility will be enabled by the end of the year, and we will be looking at using mobile WiMAX to enhance our services from 2011. We haven't decided definitely, but it is one of the areas that we are looking at." He anticipates regulatory approval will be given by the end of the year.
"The advantage we have in spectrum and 4G technology will remain. We have a huge amount of spectrum and a 4G network based on IP, whereas our competitors are still on 3G circuit switch architecture with limited spectrum."
Viva's broadband offering
New entrant Viva clearly intends to tap into the growth area of mobile broadband from the very start. As well as pre-registering customers for mobile numbers, its marketing focus has been on mobile broadband, and it is promising to offer "the fastest unlimited broadband".
Bahrainis that register for a Viva number will be given a USB modem, up to 21.1 Mbps download speeds - "the fastest in Bahrain" - with free unlimited data downloads.
And Batelco will focus on mobile data this year as it sets about maintaining its position at the head of the market.
Says Rieder: "We will keep utilising our network to give our customers high speeds, and we are going to focus on content as well.
"On the mobile side, we have introduced 14.4Mbps mobile data and we are looking in 2010 at increasing the speeds on the mobile data network."
As it waits for the green light from the regulator to bundle fixed and mobile, Batelco has combined mobile broadband with mobile voice, with last month's launch of ‘Super 34', a bundle of one phone account, one O-Net mobile broadband device, together with 2000 minutes, 100 SMS and 1GB of internet usage.