Beyond Voice: Fixed Market Opportunities in MENA

1. World Markets Analysis Beyond Voice: Fixed Market Opportunities in MENA Lucy Norton lucy.norton@wmrc.com June 2004

2. Outline • Voice – Fixed losing out to mobile – subscriber growth, competition, licensing. • Beyond Voice -Issues and opportunities for the fixed sector inbroadband access, internet and datacomms markets. • Outlook – Future fixed market trends.

3. Voice – Mobile dominates subscriber growth • More mobile subscribers than fixed • Bahrain • Jordan • Kuwait • Lebanon • Morocco • Oman • Qatar • Saudi Arabia • Tunisia • UAE • Algeria by YE 2004 • Iraq by YE 2004 1999 2000 2001 2002 2003

4. Maghreb – Mobile controls largest share of subscriber market Subscriber shift to mobile driven by; • Competition-fuelled price cuts and network roll-outs in the mobile market. • The introduction of pre-paid services in the mobile market. • Frustrated demand caused by limited fixed incumbent infrastructure Maghreb -Total telephony subscribers(‘000)

5. Voice – Mobile has dominated liberalisation 9 de-monopolised voice markets – all mobile competitors 9 monopoly markets broken and 10 operating licences issued, with a further two to be awarded in 2004. Meanwhile, no alternative fixed telephony operators areestablished in the region, although liberalisation is being implemented in the Gulf – Bahrain and Oman. Furthermore, the Maghreb has seen 2 fixed licence auctions fail.

6. Beyond Voice • Broadband Access • Internet • Datacomms

7. Broadband Access – Teledensity issues Morocco Morocco Prospects for DSL growth are negatively affected by teledensity trends. Enlarged EU Average 2003 Data Source: ITU, WMRC estimates

8. Broadband Access – Wireless alternatives • Fixed wireless networks are becoming more common globally • Sub-Saharan Africa – Incumbents and OLOs compensating for poor quality/limited copper loop. • India – Allowing aggressive OLOs to provide end-user services quickly. • Far-East – Wi-Fi deployments to capture demand from high-end users on the move. • Fixed wireless is emerging in MENA • BWA trials in Morocco • Wi-Fi deployments in the Gulf

9. Internet Markets – Lack-lustre demand Internet growth variables; • PC penetration rates • Literacy rates • Amount of local language web content • Service availability • Service quality • Service price Bahrain Lebanon UAE Jordan Figures for 2003. Source: ITU, Global Insight

10. Internet Markets– Bandwidth services and internet quality/price • Limited alternative national backbone networks. • High tariffs for international leased lines (according to World Bank research 2003), arguably caused by the monopoly status of the leased line market. • The monopoly status of international gateways exacerbates bandwidth costs for ISPs. Consider current trends in India-private operators promising to slash chargesby 70%. • Limited regional internet peering/exchangefacilities makes routing locally-bound traffic expensive. 4288 1686 1363 868 Source: ‘Telecommunications For Export-led Growth’ The World Bank Group 2003

11. Leased lines Data networking VSAT Algeria Bahrain Egypt Jordan Kuwait Lebanon Morocco Oman Qatar Saudi Arabia Syria Tunisia UAE Yemen Source: World Markets Telecoms, ITU Datacomms – Liberalisationstatus at June 2004 Monopoly De-monopolised

12. Datacomms - Further liberalisation and foreign interest • Regional incumbent Batelco has already entered the Egyptian and Jordanian data markets with international partner Cable and Wireless, which is refocusing on international expansion. • Reliance Infocomm and Flag Telecom could seek to leverage their ownership of regional submarine networks, in the Gulf especially, to offer enterprise/bandwidth services. • VSNL’s interest in one of two data licences in Saudi Arabia could be the start of increased interest from Asian operators wishing to develop a pan-Asian corporate presence.

13. Outlook • Voice • Mobile will continue to dominate subscriber growth. • Mobile-based networks will become more common in the public telephony sector – GSM payphones. • Cellular (CDMA) WLL will also become more central to meeting teledensity targets. • Datacomms • Further liberalisation, coupled with operator expansion drives within the region and internationally, will lead to increased competition in the data market, aiding internet market growth. • Broadband Internet • A multi-standard market will develop, driven by current copper loop and cable limitations and the emergence of cost-effective wireless solutions.

14. THANK YOU