The launch of Vodafone's new network in Qatar this month will provide competition for the first time to incumbent Qatar Telecommunications (Qtel), which has already surpassed 100% mobile penetration.
It was announced this week that both interconnection and site-sharing agreements have been reached between the two operators. The site sharing deal is believed to be the first of its kind in the Middle East.
Vodafone and its local partner, the state-backed Qatar Foundation, will own a dominant 45% share of the new operator (following completion of an IPO of 40% of the company), and is set to compete with Qtel on three fronts: mobile, fixed line and WiMAX.
Vodafone secured Qatar's second mobile licence in December 2007, reportedly beating off competition from the likes of AT&T, MTC and Etisalat in the process. The network is Vodafone's first self-run operation in the Middle East, having previously adopted a partner strategy in countries such as Kuwait and Bahrain. Vodafone and the other investors in the Qatari operator will pay $1 billion for the licence; Vodafone Qatar has also secured Qatar's second fixed line licence, which will allow it to offer WiMAX services.
Qatar may only represent 1% of cellular connections in the Middle East, but it is a highly profitable market. Revenues generated from voice and data roaming must be quite substantial in a market where 80% of the population is non-Qatari and the GDP per capita stands at US$55,415.
The Qatar economy is expected to remain robust this year with predictions of 11.6% GDP growth. Following Vodafone's entry into the market, Qtel will face strong competition in the enterprise segment and in mobile data services. Vodafone has a range of HSPA-enabled devices available, and more and more affordable devices are being developed by Vodafone's ODM partners.
Vodafone can target high-value consumer segments through its Vodafone Live! portal, and could also focus on consumer loyalty programmes and migrating customers from prepay to contract. Qtel has been preparing to face such challenges, most significantly via the launch of its unlimited mobile broadband data plan. We can expect more bundled deals to emerge as both operators are able to offer converged services, which will lead to a faster decline in effective price-per-minute. Pressure on margins will be intense and the network sharing agreement is no big surprise.
As the former monopoly, Qtel already offers a range of mobile, fixed line and internet services, though mobile now accounts for the majority of its business. By the end of last year, Qtel had 1.7 million mobile customers compared to 263,363 in fixed-line.
This mobile base is small in relation to the wider Qtel group, accounting for just 3.4% of its total worldwide customers, but the domestic market remains vital for the group's bottom line; Qatar generated 26.8% of group revenues and 34.6% of group EBITDA in fourth-quarter 2008. Qtel's ARPU of $52.9 (4Q08) in Qatar is among the highest in the world.
The incumbent launched a number of initiatives last year in advance of its new competitor, including the launch of new postpaid tariffs ('Shahry') and BlackBerry services for consumer and small business customers.
Qtel has invested in mobile broadband and deployed WCDMA-HSPA nationwide.
By the end of the year, WCDMA-HSPA connections in Qatar accounted for less than 1% of the total. However, Qtel's introduction in February of an unlimited mobile broadband package has reportedly led to a spike in mobile broadband customers in the current quarter. The operator said that more customers signed up to the service in the first week of availability of the unlimited mobile broadband offer than in the entire month of February 2008 (the year earlier period).
Vodafone's rival network is currently only available to a few customers with the commercial launch expected this summer. Vodafone has set no public targets for growth or future market share, but Wireless Intelligence forecasts that the operator will achieve a 25% share of the market by the end of 2012, or around 720,000 mobile connections.
According to Qtel's figures, the population of Qatar stood at 1.6 million by the end of 2008, while mobile connections reached 1.68 million, suggesting that penetration has now surpassed 100%. However, Qatar's large expatriate community - estimated to be as high as 80% of the population - makes mobile penetration in the country hard to define. Wireless Intelligence has recently revised its Qatar population data and calculates the country's current mobile penetration rate to be 122 percent.
Joss Gillet, Senior Analyst, Wireless Intelligence