Pyramid Research: Middle East Will Surpass Europe in LTE Early Adoption

Introduction

Despite the early LTE lead of Telia-Sonera in Sweden, Pyramid Research predicts that the Persian Gulf countries of Saudi Arabia, Bahrain, and UAE will pioneer Long Term Evolution (LTE) adoption and surpass European LTE deployments.  The LTE penetration rate for those countries is expected to reach 11.8 percent, which is more than the projected Western European average of 7.7 percent, according to a new report from Pyramid Research (www.pyr.com).  This conclusion could be somewhat misleading, as these three wealthy, but small Arabic countries may not be representative of the entire Middle East.  What about Lebanon, Jordon, Egypt- which are much poorer?  And Israel?  Nonetheless, here is what Pyramid has to say about this subject:

In its Insider report LTE in the Middle East: Early Lessons From the Gulf Pioneers, Pyramid Research Analyst Kerem Arsal examines the market criteria that will drive the early LTE deployments in the Middle East. By relating the driving factors to our forecasts for LTE adoption, it shows why certain markets are better positioned for growth than others in the region. Arsal also investigates the obstacles that some Middle Eastern markets may face despite sharing some commonalities with the early adopters. To provide a closer look at the active dynamics, this report presents three case studies from Saudi Arabia, UAE, and Turkey, which collectively comprise more than half of the total mobile service revenues in the region.

While the Middle East is a smaller market, it makes up the difference in its potential for growth. The Middle East's mobile data revenue growth of 34 percent for 2009 compares with only 7 percent for the same period in Western Europe, Arsal notes.  "We expect LTE adoption in the region to reach 6.1 percent of all mobile subscriptions by 2014, due to strong growth of demand for data services, reliance on mobile rather than fixed access technologies, and the increasingly competitive approaches of the telecom regulators," he says. "Among the region's LTE pioneers – specifically Saudi Arabia, UAE, and Bahrain – we project LTE adoption to reach 11.1 percent of all subscriptions by 2014, which surpasses our forecast of a 7.7 percent LTE adoption rate in Western Europe."

Mobile data revenue growth is a result of the absence of strong fixed broadband infrastructure and/or sufficient fixed competition, giving favorable signals to the network operators that are considering LTE deployments in the region. "Throughout the wealthier Gulf region, the absence of widespread fixed broadband infrastructure forced most subscribers to rely on mobile technologies for their Internet needs; as a result, some markets in the Middle East, particularly the Gulf area, have experienced huge leaps in mobile broadband demand,"  Arsal explains.  "These are the most suitable settings for LTE, which is likely to begin its life cycle with data cards and connectivity modems. In addition, wealthy Gulf nations have already developed much expertise in upgraded 3G networks; this will lead to a smoother transition to LTE."

Telecom Insider report overview

Early LTE deployments in the Middle East will be pivotal, both in shaping the future competitive dynamics in the region and in benchmarking expectations for similar markets. LTE carries particular relevance for the Middle East due to the region’s overall weakness in fixed broadband infrastructure and lack of competition in the fixed sector: Competing for mobile broadband access may equate to competing for broadband services in general. This opportunity is the region’s main difference from the developed markets in the West. On the other hand, some Middle Eastern countries parallel the developed regions when it comes to mobile market indicators such as subscription rates and the existence of UMTS/HSPA networks. Moreover, there are multiple markets of considerable size and purchasing power, such as Saudi Arabia and UAE, with mobile data revenues of roughly $1bn each in 2009.
The wealthier Gulf region has already displayed a great appetite for data services, and the absence of widespread fixed broadband infrastructure forced most subscribers to rely on mobile technologies for their Internet needs. Consequently, mobile operators in these markets have experienced quick returns on their network investments while accumulating valuable expertise in 3G technologies. We expect LTE adoption in the region to reach 6.1% of all mobile subscriptions by 2014, due to strong growth of demand for data services, the region’s existing reliance on mobile rather than fixed access technologies and the increasingly competitive approaches of the telecom regulators. Among the region’s LTE pioneers — specifically Saudi Arabia, UAE and Bahrain — we project LTE adoption to reach 11.1% of all subscriptions by 2014, which surpasses our forecast of a 7.7% LTE adoption rate in Western Europe.

This report examines the market criteria that will drive the early LTE deployments in the Middle East. By relating the driving factors to our forecasts for LTE adoption, it shows why certain markets are better positioned for growth than others in the region. The report also investigates the obstacles that some Middle Eastern markets may face despite sharing some commonalities with the early adopters. To provide a closer look at the active dynamics, this report presents three case studies from Saudi Arabia, UAE, and Turkey, which collectively comprise more than half of the total mobile service revenues in the region.

Key findings of the Report 

Some markets in the Middle East, particularly the Gulf area, have experienced huge leaps in mobile broadband demand, as a result of poor fixed infrastructure and changing consumer preferences. These are the most suitable settings for LTE, which is likely to begin its life cycle with data cards and connectivity modems.

o In Saudi Arabia, mobile data revenue grew by 70.9%, accompanied by a changing mobile user profile. Between 2004 and 2009, infotainment and connectivity revenues grew to become half of total mobile data revenue, which rose from $78m to $1.5bn in those five years.

o Operators in Bahrain already rely on data revenue to grow; their dependence will increase to 42% of mobile ARPS generated through data in 2014.

o Conversely, the importance of churn is much lower in lower-value segments where acquisition costs are low.

Rich Gulf nations have already developed much expertise in upgraded 3G networks. This will make the transition to LTE easier.

Despite criticisms of lacking liberalization, regulators in the Middle East are increasingly becoming adept at managing competition.

o In the cases of Saudi Arabia and Bahrain, we find regulators that have successfully created fully competitive settings without price wars.

o Economic incentives now overlap with a culture of innovation.

LTE in the Middle East: Early Lessons from the Gulf Pioneers is part of Pyramid Research's Africa & Middle East Telecom Insider report series.  This report can be purchased by contacting info@pyr.com
 

Disclaimer:  This journalist has no business relationship with Pyramid Research or their parent company- Light Reading.

0 thoughts on “Pyramid Research: Middle East Will Surpass Europe in LTE Early Adoption

  1. Latest on mobile broadband in Africa and Middle East from Pyramid Research:

    Due to poor wireline services and innovative branding and packaging from mobile operators, the future growth of broadband in Africa and the Middle East will be driven by mobile broadband, with the subscriber total increasing at a CAGR of 34 percent to reach around 38 million by 2014, slightly faster than the global average, according to a new report from Pyramid Research (http://www.pyr.com). 

    3G and WiMax to Drive Broadband Services Growth Through 2014 examines the current and forecast broadband landscape in AME in terms of subscribers and revenue, and the report then looks more closely at the technologies that will enable this evolution on the mobile and fixed sides. Finally, we look at three key markets in more detail: the UAE, which exemplifies the most-developed parts of AME; Nigeria, which illustrates the underdeveloped, sub-Saharan region; and Turkey, which represents the region’s middle-income markets.

    We expect broadband penetration in AME to grow at a CAGR of 20.4 percent from 2009 to 2014, despite the region's current financial, educational, and regulatory obstacles, notes Hussam Barhoush, analyst at Pyramid Research.  Furthermore, AME is outpacing all developed regions in terms of growth in adoption of wireless technologies. "In higher-
       

      
      income countries, such as the UAE, we believe that growth will be driven by both mobile and fixed broadband. As for poorer countries with weak fixed-line infrastructure, wireless technologies will power future growth," he says.

    "Fixed broadband providers in AME face the particular challenge of weak and limited coverage, especially in rural areas," says Barhoush. "This allows competition from other technologies, such as 3G and WiMax.  ADSL is currently the main fixed broadband connection method used in the region." However, we believe that other technologies, such as FTTx and WiMax, will take as much as 17 percent of subscriptions by 2014.

    3G and WiMax to Drive Broadband Services Growth Through 2014 is part of Pyramid Research's Africa/Middle East Telecom Insider report series
     
     

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