New services are coming to the market

The recent surge in data usage is reshaping Jordan’s telecoms sector. Zain Jordan, the country’s largest mobile provider, is expected to introduce 4G long-term evolution (LTE) services that enable data transfer rates of up to 150 Mbps by the end of 2014. In 2013, Zain secured new 4G and additional 3G frequencies for $270.2m. The purchase has set off a race to provide the first LTE service, and other providers are now announcing similar plans.

Setting The Benchmark

“Zain Jordan has about eight to nine months to launch the service commercially in the kingdom,” Azzam Sleit, the minister of information and communications technology, told the press as the firm received final approval to acquire the necessary frequencies. Initially, the kingdom’s three major mobile providers firmly opposed the LTE bidding process in reaction to stiff tax hikes: taxes on voice and traditional value-added services rose from 12% to 24% in July 2013, though those on data remained at 8%. As Zain realigns its position, the door is still open for both Umniah and Orange to apply for a licence. The Telecommunications Regulatory Commission (TRC) disqualified separate bids from Kulacom Jordan and US-based Ameriphone, which would have allowed the entry of a fourth mobile provider in the kingdom. “There will be no exclusivity for Zain Jordan. Any other operator can acquire frequencies to introduce the services at any time,” Mohammad Al Taani, chief commissioner of the TRC, told media after the Zain announcement. If the race to launch LTE goes anything like that of 3G, all three providers will be offering the service by 2017.

Ripple Effect

LTE is the most advanced broadband internet for mobile devices, allowing data to be exchanged at extremely high speeds – roughly 130 Mbps for download and 43 Mbps for upload. It also reduces network access delays by one-quarter. The network’s capability for high-speed transfer and processing of data is of particular significance for the Jordanian telecoms market, which is in a period of data growth, in terms of both new customers and the sale of smartphones (see overview).

The introduction of LTE is also expected to boost video consumption. Estimates from Zain suggest that the service will increase mobile video usage by 300%. That the process of acquiring LTE frequencies was so challenging, and faced such strong opposition from current operators, underlines the complex relationship between regulators and local mobile providers. However, having faster data speeds will be central to growth in the industry. “Data is the primary focus over the next couple of years,” Ahmed Darwazeh, senior manager for market research at Umniah, told OBG. “While voice remains strong in Jordan, especially among refugees and new immigrants to the kingdom, we are seeing a shift away from voice and towards data.”

Alignment Needed

While the government is working to ensure that the LTE infrastructure is in place and available in the kingdom, increasing the prevalence of LTE-enabled smartphones remains a challenge. Despite the tax hike on mobile subscriptions, Jordan has experimented with tax relief for smartphones. In August 2011 such products were exempted from sales tax, resulting in savings of between $124 and $140 on high-end handsets, and boosting demand for 3G-equipped handsets.

Underlining the demand for LTE expansion in Jordan is the growth of mobile data subscribers (see overview) and the entrance of small providers such as FRiENDi Mobile, which operates as a mobile virtual network operator and will continue to open up niche markets in the kingdom as internet access develops. Ultra-premium services and the devices that enable them will help the high-earning data market develop and keep in lockstep with Jordan’s rapidly developing technology start-up sector. As happened with 3G in the kingdom, LTE may not take root quickly. Once it does, however, demand is expected to rise, opening up new channels for revenue.