Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

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RESEARCH FORECAST REPORT

MOBILE SERVICES IN THE MIDDLE EAST AND NORTH AFRICA: TRENDS AND FORECASTS 2015–2020 JULIA MARTUSEWICZ-KULINSKA, KARIM YAICI and KEREM ARSAL

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

About this report This report provides commentary and trend analysis to support our 5-year forecast for the Middle East and North Africa (MENA). It includes worldwide context and commentary on four key countries: Oman, Qatar, Saudi Arabia and UAE.

GEOGR APH IC AL COVER AG E Regions modelled:  Middle East and North Africa (MENA)

In addition to our robust set of historical data, our forecasts are informed by a unique, in-house modelling tool, which applies a rigorous methodology (including the reconciliation of different sources, standard definitions, top-down and bottom-up modelling).

Countries modelled individually  Algeria  Egypt  Iraq  Israel  Kuwait  Morocco  Oman  Qatar  Saudi Arabia  Tunisia  United Arab Emirates (UAE)

For the complete data set for the region, please see the accompanying Excel file at www.analysysmason.com/mobile-MENA.

WHO N EEDS T O R EAD T HIS R EPOR T  Market intelligence, strategy and project managers at mobile operators in MENA.  Regulatory bodies in MENA.

Detailed country commentary  Oman  Qatar  Saudi Arabia  United Arab Emirates (UAE)

 Financial institutions that directly invest in the telecoms sector in the region, or advise others that do so.  Press and media bodies that need a foundation of knowledge of the MENA mobile telecoms market.

KEY METR ICS Mobile connections:  Handset, mobile broadband1, M2M2  Prepaid, contract  2G, 3G, 4G (LTE)  Smartphone, non-smartphone Mobile revenue:  Service3, retail  Prepaid, contract  Handset, mobile broadband1, M2M2  Handset voice, messaging, data Mobile ARPU:  SIMs, handset  Prepaid, contract  Handset voice, data Voice traffic: •

Outgoing minutes, MoU

Includes USB modem, and mid- and large-screen, though not handset-based data. connections and revenue figures include mobile services only. 3 Service revenue is the sum of retail and wholesale revenue. 1

2 M2M

© Analysys Mason Limited 2015

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

Contents 5. Executive summary

19. MENA: Mobile handset data revenue will grow by USD5.6 billion between 2014 and 2020 at a 8.7% CAGR

6. Executive summary

20. Country-level trends

7. Worldwide trends

21. Oman: MVNOs are addressing demand for low-cost international calling and expanding their portfolios with affordable mobile data

8. Worldwide: Developing regions will have highest revenue growth, but NA will be largest retail revenue contributor by 2020

22. Qatar: Demand from migrants will sustain connections growth, while contract and 4G segments will support value growth

9. Worldwide: SIM penetration will increase to 108% by 2020, driven by service take-up in SSA, EMAP and DVAP

23. Saudi Arabia: Regulatory measures, MVNOs and Mobily’s performance are suppressing market growth prospects

10. Worldwide: LTE’s share of connections will be the highest in NA (92%) and DVAP (84%), while SSA will trail behind (5%)

24. UAE: Smartphone penetration and data usage will drive mobile revenue growth, helping to slow ARPU erosion through 2020

11. Worldwide: OTT services and converged bundle services will have a downward pressure on ARPU

25. Forecast methodology and assumptions

12. Regional trends

26. We have a disciplined process of forecasting; our on-the-ground analysts and consultants collaborate closely to assess market dynamics

13. MENA: The total mobile service revenue will grow at the CAGR 1.6% to USD64 billion in 2020

27. We use a vast variety of primary and secondary research for data collection

14. MENA: Maturing markets and diminishing multiple-SIM ownership will lead to slower growth in number of connections

28. A robust and comparable set of historical data is the starting point for our forecasts; this involves three main activities

15. MENA: More than half of all connections will be 3G by 2020, while LTE will account for 21.5% of mobile SIMS (excluding M2M)

29. About the authors and Analysys Mason

16. MENA: We model eleven telecoms markets, which will account for about 68% of MENA’s telecoms service revenue in 2020

30. About the authors

31. About Analysys Mason

17. MENA: Israel will have the highest smartphone penetration, but the UAE will lead LTE take-up rates

32. Research from Analysys Mason 33. Consulting from Analysys Mason

18. MENA: Intensified competition will drive down ARPU, but spending on nonvoice services will increase

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

List of figures Figure 1: Telecoms retail revenue by service type and total service revenue (retail and wholesale), MENA, 2010–2020

Figure 13: Mobile ARPU by country, Middle East and North Africa, 2010–2020

Figure 2: CAGRs for fixed and mobile retail revenue (2014–2020) and market size by total retail revenue (2020), by region, worldwide

Figure 15: Mobile ARPU by type, and mobile ARPU, MENA, 2010–2020

Figure 3: Active mobile SIM penetration by country (excluding M2M), worldwide, 2010–2020

Figure 17: Total service revenue, data revenue and CAGR, Oman, 2014–2020

Figure 14: Mobile, smartphone and 4G penetration rates, MENA, 2010–2020

Figure 16: Summary of key mobile market drivers and assumptions, MENA

Figure 18: Total service revenue, data revenue and CAGR, Qatar, 2014–2020

Figure 4: Smartphones as a percentage of handsets, and LTE’s share of total connections (excluding M2M), worldwide, 2014 and 2020

Figure 19: Total service revenue, data revenue and CAGR, Saudi Arabia, 2014– 2020

Figure 5: Mobile ARPU by region and worldwide, 2010–2020

Figure 20: Total service revenue, data revenue and CAGR, UAE, 2014–2020

Figure 6: Telecoms retail mobile revenue by service type and mobile ARPU, Middle East and North Africa, 2010–2020

Figure 21: Data, research principles and external factors that inform our forecasting methodology

Figure 7: Telecoms retail revenue by service type, total service revenue and growth rates, Middle East and North Africa, 2014–2020 Figure 8: Connections by type, and growth rates, Middle East and North Africa, 2014–2020 Figure 9: Active mobile SIM penetration by country (excluding M2M), Middle East and North Africa, 2010–2020 Figure 10: Mobile connections by technology generation (excluding M2M), and 3G and 4G’s share of connections, Middle East and North Africa, 2010–2020 Figure 11: Mobile connections by technology generation and fixed broadband household penetration, by country, Middle East and North Africa, 2020 Figure 12: Smartphones as a percentage of handsets, and LTE’s share of total connections (excluding M2M), Middle East and North Africa, 2014 and 2020

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

Worldwide: Developing regions will have highest revenue growth, but NA will be largest retail revenue contributor by 2020 Figure 2: CAGRs for fixed and mobile retail revenue (2014–2020) and market size by total retail revenue (2020), by region, worldwide

Fixed retail revenue growth (CAGR 2014–2020)

Retail revenue will grow in all regions by 2020 apart from Central and Eastern Europe (CEE) and Western Europe (WE) where markets are highly competitive and regulated. North America’s (NA’s) telecoms retail revenue will continue to be the highest worldwide (USD387 billion in 2020) with the USA contributing 90% (USD351 billion), followed by emerging Asia– Pacific (EMAP) (USD330 billion) and WE (USD264 billion). NA’s revenue will be almost flat, and EMAP will have the highest growth in fixed revenue and high mobile revenue growth. NA, WE, EMAP and developed Asia–Pacific (DVAP) together will contribute USD1182 billion in retail revenue in 2020, accounting for 77% of the worldwide total and 66% of the world’s population. The number of in-market consolidations in Europe will slightly alleviate price competition, but handset data revenue growth and fixed broadband revenue will not fully offset voice (fixed and mobile) and mobile messaging revenue losses, resulting in fixed and mobile revenue decline in WE and CEE.

5% 330

4% 3% 2%

85

134

1% 201

387

0% –1%

71

–2%

264

55

–3% –3% –2% –1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Mobile retail revenue growth (CAGR 2014–2020)

Regions with relatively low mobile penetration and mobile network infrastructure development will have the most revenue growth: EMAP (CAGR 3.2% for mobile; CAGR 4.3% for fixed); Sub-Saharan Africa (SSA) (6.6% and 0.4%); and Latin America (LATAM) (3.2% and 2.0%). MENA’s 1.7% CAGR for mobile revenue and 1.8% for fixed will be driven by smartphone take-up and 4G roll-out, mainly in GCC countries, and by fixed broadband market revenue growth.

© Analysys Mason Limited 2015

6%

CEE

DVAP

EMAP

LATAM

MENA

NA

SSA

WE

Bubble size and number = retail revenue (USD billion) in 2020 Source: Analysys Mason

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

MENA: We model eleven telecoms markets, which will account for about 68% of MENA’s telecoms service revenue in 2020 Figure 11: Mobile connections by technology generation and fixed broadband household penetration, by country, Middle East and North Africa, 2020 ALGE RIA 2016

TUNISIA 34%

2016

E GYPT 14%

2016

ISRAE L 23%

IRAQ 87%

2014

2013

17%

KUWAIT

MOROCCO 2011

20%

20%

2015

OMAN KEY Mobile connections by technology generation

2012

Fixed broadband household penetration

46%

2G 3G

2014

4G

67%

SAUDI ARABIA

QATAR

UAE

Year of LTE launch

2011

39%

2013

82%

2011

60%

Countries modelled individually Countries modelled as part of the region

Source: Analysys Mason 1

For a full list of countries modelled as part of the Middle East and North Africa region, please see the accompanying data annex. Mobile connections exclude M2M connections. Fixed broadband household penetration is calculated as total fixed broadband connections (residential and business) divided by the number of households.

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

CONTENTS EXECUTIVE SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS OMAN QATAR SAUDI ARABIA UAE FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

About the authors Julia Martusewicz-Kulinska (Senior Analyst) is a member of the regional markets research team, contributing mainly to the European Core Forecasts, Telecoms Market Matrix and European Country Reports programmes. She has more than 14 years of research and telecoms industry regulations experience. Prior to joining Analysys Mason, she worked for the Polish national regulatory authority as the head of the Research Division, where she was responsible for telecoms market research, and as the leader of the Telecommunications Market Analysis Department, which was accountable for co-operation between the regulatory authority and the Information Society and Media DG of the European Commission.

Karim Yaici (Senior Analyst) leads Analysys Mason’s The Middle East and Africa regional research programme. His primary areas of specialisation include operator strategies, telecoms market developments and consumer trends in growth markets. Prior to joining Analysys Mason, Karim was an associate analyst at Informa Telecoms & Media, where he authored reports on mobile accessories and mobile applications. Prior to that, he worked as a research engineer in the Centre for Communication Systems Research (CCSR) and Vodafone. Karim holds an MSc in Information Systems Management from the University of Southampton and a PhD in human–computer interaction from the University of Surrey.

Kerem Arsal (Senior Analyst) is a key contributor to Analysys Mason’s Mobile Services research programme, which helps operators to understand, and monetise to maximum efficiency, the interplay between voice, messaging and data services. His work involves in-depth coverage of issues such as customer retention, mobile data pricing, MVNO strategies, and the impact of regulation and roaming. Previously, Kerem was a research manager at Pyramid Research, where he was responsible for setting the thematic research agenda across multiple tracks and regions. He also headed numerous projects around operator strategies, as well as commercialisation of, and demand assessment for, new products in the consumer and enterprise segments.

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

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Mobile services in the Middle East and North Africa: trends and forecasts 2015–2020

PUBLISHED BY ANALYSYS MASON LIMITED IN NOVEMBER 2015 Bush House • North West Wing • Aldwych • London • WC2B 4PJ • UK Tel: +44 (0)20 7395 9000 • Fax: +44 (0)20 7395 9001 • Email: [email protected] • www.analysysmason.com/research • Registered in England No. 5177472 © Analysys Mason Limited 2015. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark.

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