“I note there is a disproportionate emphasis on the quality of the networks being deployed, in comparison with the discussion on how they can actually be monetized. The regional apps and content market is far from mature and – away from the glitz of the large regional incumbents’ physical networks – there is a danger of a large number of operators becoming dumb pipes; fattening these pipes up with FTTH and LTE will not guarantee any significant increase in ROI.”
This statement was made 12 months ago, soon after Broadband MEA 2012. And how cruelly true has it turned out to be. Here are some of the main themes of this year’s conference summarized.
Return on NGA investments is a tough job no matter where you are
Assessing the opportunities and threats to broadband in the MEA region was put into the limelight at Broadband MEA 2013. There was no significant buzz surrounding LTE as there was 12 months ago. Nor was FTTH – which was the theme at the same occasion two years back– fondly looked at as the protector of broadband growth and ROI.
I noticed that, in the context of the Middle East specifically, as promising next-generation access deployments age into the distance of the past, discussions on the prospects and realities of broadband in the region become starker, more sober and more mature. The feeling was that operators with the latest NGAs in fixed and mobile have been subject to a fast-track reality check and are letting go of any lingering hopes of fast returns.
The consensus is on data being the savior of revenue, rather than NGAs per se
Broadband MEA 2013 came at a critical time when incumbents’ local markets are dwindling in traditional voice and SMS revenues. They are increasingly looking towards mobile data – not for maintaining growth, but just to break even and protect themselves from competition.
There was a tacit realization that fattening the physical and wireless pipes via deploying NGA will barely assist operators. The best of FTTH speeds and 4G LTE are beyond the reach of most customers, and even those who can afford them do not simply adopt these tariffs. Nobody was heard boasting of 100Mbps, 200Mbps or 300Mbps over fiber (which has been deployed in the region). FTTH subscriptions are mainly in proportion to households that actually want the service, yet 80% are in the <20Mbps bracket.
In 4G mobile, the issue of spectrum fragmentation was revisited. The high entry-price barrier in 4G smartphones and their scarcity was touched upon and the issue of compatibility in the latest devices with current regional 4G operating frequencies was raised.
The challenges facing Q.NBN
Moving to a more specific case, an industry insider in Qatar who wished not to be named told me that he would be surprised if there is real competition over fiber in 12 months time. For all the talk of the government-appointed institution steering the two operators to real competition (which means customers are able to choose which operator they would want to take for fixed services), the fact that Ooredoo – no business cards yet – owns, operates and is still migrating its legacy copper network to fiber is proving to be a sticking point.
Getting an incumbent to divest control over its own infrastructure is not an easy job, and it might require intense negotiations and even legislation for Vodafone Qatar to ever operate fixed broadband off what is currently Ooredoo network territory. As it stands, Vodafone Qatar is providing services in Barwa City, south of Doha, where the Q.NBN did deploy FTTH; the problem is the same though as customers there cannot choose Ooredoo services, simply because it has not signed up to providing services there. Network sharing will remain a challenge until it actually arrives.
The UAE is also witnessing incessant technical issues in the realization of fiber bitstream, which was touted for launch way back in 2011.
The emerging Middle Eastern and African countries
The four ME countries of Afghanistan, Iran, Iraq and Palestine were well represented at the event while African players also had the chance to showcase their latest developments.
Roshan and Wasel, as well as the Afghan regulator, gave presentations in what promises to be one of the fastest-growing major telecoms market globally. Afghanistan has almost completed shoring up international connectivity and deploying a national fiber ring, and 3G is expected to boost the mobile sector even further. Physical infrastructure remains weak, but three fixed Wimax licenses and a satellite operator are set to enter the fixed broadband market.
Iran spelled out its FTTH/B plans for the next decade – to connect 10,000,000 homes to fiber by 2020 in an ambitious NBN project. In fact, it is so ambitious that those present looked on in polite amusement. With a burgeoning population, bandwidth remains an issue in Iran. Yet with demand always ahead of supply, Iran promises to be one of the most promising telecoms markets in the world, which is quite a feat given the ongoing externally-influenced economic problems.
Conclusion
Despite their challenges, there is great hope in emerging MEA markets. Conversely, there is a degree of fear on the part of the regional major incumbents in developed markets about revenues drying up. Many are now looking beyond their borders for new licenses and M&A opportunities.
The group looking at M&A is showing signs of stimulation in innovations for end users, but nowhere near the levels of their Western European or North American counterparts. They will have to work to forge meaningful partnerships and dig out services that are relevant to their customers’ respective markets and that the customers would want to pay for.
But for now, in local markets, broadband or, more precisely, mobile content and data are turning out to be the savior of revenues for the foreseeable future. Whether LTE will have a significant and influential role to play in it or not (in the way that 3G and HSPA were in relation to 2G and 2G+) is the million-dollar question.
Exploiting assets, both old and new, will have an influence on how the data field is mined, but it’s going to take much more than simply deploying a fat pipe for operators to make any consequential return on investment. It will be interesting to see how developments in mobile data and digital media are coming along in the African and Middle Eastern regions at Broadband MEA 2014.
Ismail Patel is a research analyst for MEA at Informa Telecoms and Media. For more information, visit www.informatandm.com/