IHS Global Insight Perspective | |
Significance | The regulator, ictQATAR, has made a u-turn on its original decision to allow Virgin Mobile to operate, and officially requested that Qtel shut down the Virgin Mobile service. |
Implications | The decision is clearly welcomed by its sole competitor, Vodafone, which opposed the entrance at its launch last year. |
Outlook | Vodafone will be able to continue to make its mark in the country, its innovative services and price point will enable it to build on its tremendous market share acquisition. |
The Qatari telecoms regulator, ictQATAR, has forced the incumbent operator Qatar Telecom (Qtel) to shut down its services through Virgin Mobile, Cellular News reports. The regulator claimed that Qtel's marketing of the operator was misleading, and also found evidence that the incumbent engaged in anticompetitive behavior, abused its dominant position in the market, and had failed to comply with previous regulatory demands. Earlier this year, the company was ordered to stop signing up new customers until it brought its policies back into line with the regulator's demands, but the regulator later found that it was still in breach of its requirements (see Qatar: 23 February 2011: ictQATAR Suspends Virgin Mobile Services). Qtel said it will comply fully with the order to close Virgin Mobile and customers will retain their existing balances and phone numbers, but will require a new Qtel SIM card. Virgin accounts must be deactivated by 4 August 2011 and distributors and agents returning unused recharge cards will receive refunds on unused credit for customers who do not to switch to Qtel.
The entrance of Virgin mobile has caused much confusion to both the regulator, which initially gave the go ahead, and Vodafone, who opposed the entrance from the start. When originally launched in May 2010, the regulator claimed it was operating in alliance with Qtel and is primarily based on Virgin Mobile's branding. However at the time, ictQATAR stated that Virgin has not been offered any type of licence and should not be considered an MVNO, and that Qatar still only has two mobile operators. The decision raised serious concerns from Qtel's sole mobile competitor, which claimed that Virgin Mobile was acting as an MVNO, which was against the terms of its own licence, and that the regulator had not issued an MVNO licence.
Outlook and Implications
The shut down of Virgin mobile services closes a year long spat between the two highly competitive operators. A Vodafone Qatar spokes person stated, "Vodafone Qatar welcomes the news of ictQATAR's decision," which it claimed was anti-competitive as soon as services were launched.
- Vodafone Remains Competitive Despite MVNO Impact: Virgin Mobile has not reported how much market share it acquired for itself or contributed to Qtel's in its short existence, but the operator was clearly targeted at the low end user and youth market and charged QAR0.55 (USD0.15) per minute for the first five minutes used in each day, and QAR0.30 per minute after that, while mobile internet access costs QAR1 per 1MB. It also offered the longest airtime validity—180 days—fun brand image, and simple pricing, resulting in popularity with the target market. Vodafone, meanwhile, has performed very well in Qatar since its entrance in July 2009: at the end of 2010, it reported 711,000 mobile customers, representing 18% growth quarter-on-quarter (q/q), and a growth of 108% year-on-year (y/y), and now commands a market share of 43% market share after achieving a 16% market share within the first 6 months of service. This made it one of the most aggressively competitive operators in the MENA region, especially considering mobile penetration was 166.5% at the end of 2010. Qatar is one of only three countries in the MENA region where a duopoly remains; the United Arab Emirates and Syria are the other two.
- Service War to Begin: Qtel will have to rethink its mobile strategy, as since the entrance of Vodafone there has been an ongoing price war which has seen ARPU levels decline by about 50% since its monopoly position was broken. Ultimately, prices will have to reach a support level closest to cost, and at this point Qtel will have to increase its service offering and evaluate which value added services will significantly contribute to revenues. More recently, Vodafone Qatar accused Qtel of being anti-competitive in its pricing of long distance calls, which it claimed was too low and below cost; last week the regulator rejected Vodafone's claims (see Qatar: 31 May 2011: ictQATAR Rejects Claims of Anti-Competitive Pricing for Qtel). Vodafone is considering new value added services in the country and recently announced more intelligent services on its network such as machine to machine communications on top of already high value content (see Qatar: 2 June 2011:Vodafone Launches M2M Services in Qatar).