Boosting growth in Kuwait will require competition

With operators recording growth once again after a period of decline, now is the time for Kuwait to improve competition with the introduction of an independent regulatory body, according to new reports from BMI.

After two consecutive quarterly losses in H210, market leader Zain recorded positive growth in Q111, albeit muted with net additions of just 17,000 subscribers. Second-ranked Wataniya recorded its first ever quarterly subscriber net loss during Q111. Wataniya lost 21,000 subscribers or 1.2% of its subscriber base. The slow growth of Kuwait’s two biggest mobile operators since mid-2010 suggests that increasing saturation in the mobile market is resulting in slower growth. In future, mobile operators are likely to focus on revenue growth using higher value services. This will largely depend on the roll-out of mobile data networks and the migration of subscribers onto postpaid contracts.

Kuwait's three mobile operators are investing significantly in the roll-out of advanced data networks. However, only Zain seems to have succeeded in building a relatively large postpaid subscriber base. Wataniya's postpaid subscriber base contracted considerably between June 2010 and March 2011. Based on its value-led strategy, it is likely that third-ranked Viva's subscriber base is mainly prepaid.

Zain's superior subscriber mix is reflected in its high ARPU, which was US$51 at the end of Q111, one of the highest in the region. While competition between the three mobile operators and the saturating market are likely to increase downward pressure on ARPU, operators are expected to achieve ARPU stability through premium offerings and value-added services.

In June 2011 Kuwait's Ministry of Communications (MoC) urged local internet service providers (ISPs) to reduce their tariffs to boost competition in the sector. Further, the ministry's undersecretary, Abdulmuhsen al-Mazidi, said the MoC intends to resolve internet tariff-related issues soon.

However, greater competition is required in the internet and broadband sectors. The government revealed in November 2010 that it had suspended the issue of licences for new internet service providers (ISPs) until a separate telecoms regulator from the MoC could be established in the country. Currently, the interests of the MoC are in conflict as it is the sole provider of fixed line services. An independent regulatory body could be charged with granting licences and setting the relevant standards and conditions required to encourage greater competition.

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