Global Insight Perspective | |
Significance | STC has paid a reasonable price for the licence and will benefit from the strategic proximity of the country. The award is for one of the last mobile licence opportunities in the Middle East. |
Implications | Zain and Qtel's Wataniya, the two existing operators, are currently providing advanced 3G services in the country and have a relatively equal market share. Mobile penetration in Kuwait was 107% at the end of 2006. |
Outlook | Whilst entering the Kuwaiti market may have associated difficulties, STC will benefit from the high ARPU levels and the high number of business users, although the dominance of the two existing players will pose a threat unless the new operator provides significant offerings. |
Whilst the price of the licence is lower than most others in the region, it is for a 26% stake rather than full ownership of the operator. Half of the company will be floated on the Kuwait stock market—enabling Kuwaiti nationals to invest in the country's second-largest industry—and 24% will be retained by the government. Today's official announcement is significantly higher than the initial announcement made yesterday (see Kuwait: 26 November 2007: STC Places Highest Bid for Kuwait’s Third Mobile Licence), of US$437.9 million.
The Gulf Cooperation Council (GCC) countries have amongst the highest mobile penetration levels in the Middle East and North African (MENA) region, and whilst Kuwait certainly does not have the highest—at 107%—and only two existing operators, STC will have to provide some innovative low-cost mobile services to attract new customers. Wataniya lost its mobile monopoly to MTC (now called Zain) in 2003 and, within four years, Zain has acquired a 48% market share, leaving Wataniya—which has recently been taken over by Qtel—with the remaining 52%. Given that market shares within the country are relatively similar, both operators now provide relatively high-quality services at relatively similar prices.
Of the original nine bidders, only STC, Etisalat and Batelco had the highest probability of winning due to their financing and track record for deploying innovative mobile data services. Of the three, Etisalat was thought to have the highest chance of winning; however, the operator is very keen on the final mobile monopoly-breaking licence in the Middle East in Qatar and is thought to be manoeuvring financial resources for that licence. In STC's domestic market, Saudi Arabia, the operator will receive competition from a third mobile operator in 2008, and thus needs to expand outside its domestic environment. Whilst Kuwait may not have been the obvious choice, it has a few advantages, including its proximity, very high ARPU levels and high number of business users.
Outlook and Implications
- Market Entry: With three mobile operators in a country with a population of just over three million, and a penetration level of over 100%, STC will find Kuwait a fairly tough market to break into. The current mobile operators have a relatively equal market share, which means both companies provide a relatively similar service; it remains uncertain which operator STC is more likely to acquire its customers. Although mobile penetration is considered high at 107%, actual penetration levels could be significantly higher within a few years, and could reach the 150% mark; the United Arab Emirates has a spectacularly high 170% penetration rate due to its high number of business users and tourists (see United Arab Emirates: 20 November 2007: Etisalat Claims Mobile Penetration in U.A.E. Now Stands at 170%). Kuwait benefits from high ARPU levels that will not suddenly drop with the introduction of a new player, a young and rapidly growing population and strong economic growth.
- Competition amongst Services: In Kuwait, Wataniya has already deployed high-speed mobile data services in the country, as has MTC (see Kuwait: 21 February 2007: Wataniya Announce HSDPA Capabilities in Kuwait, 23 May 2007: Wataniya Launches Live Mobile TV in Kuwait and 10 August 2007: MTC Kuwait Awards Motorola with HSUPA Deployment Contract). These services are targeted at the high number of business customers that need to stay connected wherever they are. In other such developed mobile markets, such as the United Arab Emirates, the operators have competed by offering like-for-like services; du and Etisalat both offer a range of innovative services, such as video surveillance via mobile phone, location-based services and money transfer via mobile, all of which have helped du acquire a reasonable market share in its limited period of operation.