June 15, 2007 Mobile phone market penetration is an excellent measure of technology uptake in different regions around the world and according to new analysis from Wireless Intelligence the Middle East has surged to become the second-fastest growing mobile phone market in the world. With penetration set to cross the 50% mark, over 150 million handsets in circulation and a 30% growth rate in 2006, the Middle East is now only trailing Africa as the fastest-growing market.
At the end of 2006, the Middle East passed the 130 million cellular connections mark and is expected to add around 20 million connections by Q2 2007. Growth of 30% in 2006 positions the Middle East as the second fastest-growing region in the global cellular market, behind Africa with 45% growth in 2006. In mature markets such as Western Europe and the US, market growth is softening, with penetration rates above 100%. However, in the Middle East, market growth is set to grow by around 25% this year, passing the 50% penetration rate by Q2 2007.
Turkey, Iran and Saudi Arabia
Turkey, Iran and Saudi Arabia represent almost 70% of total connections in the Middle East. In these markets, the average market penetration is around 67%, which is above the average market penetration rate for the region (50%).
Turkey is expected to reach almost 60 million cellular connections by the end of this year, growing by 14% year-on-year. The market is growing fast and competition is expected to increase as the government is in the process of issuing four new WCDMA licences, as well as implementing number portability. Turkcell, Vodafone and Avea have all shown an interest in the licences. The launch of WCDMA services later this year will change the dynamics of the market with more emphasis on growing ARPU. In the opening quarter of this year, Turkcell's blended ARPU was $12.1.
Saudi Arabia is the second biggest market in the Middle East; it represents about 15% of total connections in the region. At the end of 2006, Saudi Arabia passed the 20 million connections mark, and the market is expected to grow by almost 20% this year. EAE Mobily has been the fastest growing operator with 38% growth of its installed base between Q1 2006 and Q1 2007. It is the second biggest operator in the country with a market share of 29% this quarter.
In contrast, Iran has a lower market penetration (30%) this quarter but is growing more rapidly than Saudi Arabia and Turkey. The market had 20 million cellular connections last quarter and is expected to grow by around 63% this year, adding almost 10 million connections. MCI is the leading operator, with a market share of around 84%, and is the second biggest GSM provider in the region.
Afghanistan, Iraq and Syria
In 2006, Afghanistan was the fastest growing market in the Middle East with growth of 90.7%, followed by Iraq (85.6%). Syria has been growing rapidly as well with almost 40% growth year-on-year in 2006. See Figure 3. The average market penetration in these countries was 26% in Q4 last year - much lower than the more mature markets such as Kuwait (98%), Israel (115%) and Qatar (145%). In Afghanistan, Iraq and Syria, the contract market is also increasing, moving towards a 70% prepay vs 30% contract split, compared to last year's 80% vs 20% split.
Following investment in infrastructure, Afghanistan's customer base passed the 2 million cellular connections mark at the end of last year. The market is expected to grow by 32% in 2007, adding around 1.4 million connections. Market penetration reached 10% this quarter. The MTN Group states that Afghanistan, as an under-penetrated market, has strong potential for growth. MTN has been rolling out its operations in the country at an aggressive pace. Areeba Afghanistan is a new launch for MTN and the operator is expected to pass 20% market share by Q4 2007.
Iraq passed the 10 million cellular connections mark this quarter, adding 3.6 million connections between Q2 2006 to Q2 2007. Iraq is showing signs of strong competition amongst operators with global footprints such as MTC, Orascom and Wataniya. With a low market penetration (set to reach 40% next quarter), Iraq has good potential for growth. Wataniya is covering the country from the northern border to the south and is expected to grow its market share to 34% by the end of the year, in contrast to MTC and Orascom whose market shares are more stable, with 34% and 31% respectively at the end of 2006.
In Syria, market penetration reached 25% this quarter following strong market growth of 40% between Q1 2006 and Q1 2007. The market is expected to pass the 5 million cellular connections mark next quarter. Areeba and Syriatel are competing with market shares of 51% and 49% respectively at the end of last year. Areeba is growing faster than Syriatel with a 47% increase in its installed base between Q1 2006 and Q1 2007, compared to 26% for its main competitor.
High-speed technology rollout
In the Middle East, GSM connections account for 97% of total connections in the region. High-speed networks are being launched by operators, with eight WCDMA networks in service, five in deployment and two planned. However, WCDMA connections are following a slow adoption cycle mainly due to coverage issues, cost of deployment and the affordability of handsets. WCDMA is expected to represent 1% of total connections in the Middle East by the end of the year. WCDMA HSPA services will follow a much faster adoption cycle than their parent technology: HSPA services are being deployed in more mature markets such as Bahrain, Israel, Kuwait, Saudi Arabia and UAE. Wireless Intelligence's preliminary forecasts indicate that WCDMA HSPA will represent 30% of total WCDMA connections in the Middle East by the end of 2010.