The Kingdom’s telecommunications sector is looking to boost revenues this year as competition intensifies between service providers. Bahrain’s telecommunications market provides a strong base for the nation’s three firms, but fierce competition is driving efforts to increase value and enhance services. The forthcoming invitation for tenders on the Kingdom’s 4G long-term evolution (LTE) should increase growth prospects.
As Bahrain’s flagship telecoms company and owner of much of the country’s fixed infrastructure, Batelco remains integral to the sector. In 2011 the company saw 20% growth of its subscriber base, raising its numbers to 11m users across its regional network; expansion of its mobile and broadband users accounted for 21% and 8% of this rise, respectively.
On April 27, Batelco, which is majority government-owned, announced a net profit of BD16.1m ($42.45m) for the first quarter of 2012 on revenues of $206.9m. These results were down slightly on the same period in 2011, by 8% and 4%, respectively.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the first quarter of 2012 were $75.1m, delivering a margin of 36%. Sheikh Hamad Bin Abdulla Al Khalifa, the chairman of Batelco, told the press that the firm’s balance sheet is strong, with low debt and a substantial cash pool.
Increasing competition among Batelco and the two other telecoms providers – Kuwaiti-owned Zain, and Viva, which is owned by Saudi Telecom Company – in the past several years has had the predictable effect of driving down pricing and encouraging the development of alternative tariff plans among sector players.
For example, to gain market share at its debut, Viva offered low prices and a number of services, such as free calls within its network. Free intra-network calls have now become standard as the other operators have adopted more competitive pricing in a bid to maintain their market share.
According to Sheikh Mohammed Bin Isa Al Khalifa, the group CEO of Batelco, “Bahrain has one of the most advanced telecoms infrastructures in the region, with very high penetration on both mobile and fixed services. We believe that in such a competitive and mature market, the future of the industry will depend on the availability of very fast broadband access and applications to support our customers’ access to everything from any device.”
With penetration well over 100%, the scope for increasing subscriber numbers substantially is limited. Thus, operators must focus on offering better services at good prices to win customers over from their rivals, and, increasingly, encouraging their existing subscribers to move up the value chain and increase the take-up and usage of high-margin services.
“In 2012, customers will continue to benefit from a greater variety of service providers and new offerings in the market place,” Sheikh Mohamed told OBG. “Industry revenue growth will be subdued due to high levels of penetration and price competition. Innovation and quality of service, however, will continue to lead competitive differentiation between operators.”
Indeed, Mohammed Zainalabedin, general manager of Zain, said, “All mobile operators in the country are focused on the growth and development of broadband. Consumer habits have changed completely over the last few years. Data is the name of the game and consumers are thirsty for greater bandwidth. In one year the country’s demand for bandwidth has grown eight-fold."
To help meet this growing demand, the Kingdom will be inviting tenders for a 4G LTE spectrum on October 12, the technical and operations director for the Telecommunications Regulatory Authority told local media in May. Mohammad Mahmoud said the country is preparing to move beyond 3G services to deliver ultra high-speed broadband communications over mobile networks. The first of two tranches will see 40 MHz added to the spectrum by the end of this year and another 30 MHz available by the end of 2014.
The next year should thus see intensifying growth and expansion for Bahrain’s telecommunications sector as operators gear up to boost offerings and services that will take advantage of increasing broadband speed.
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