Economic Update
This week, Qatar’s telecommunications regulatory body, ictQATAR, announced that Vodafone had won the bid for the second mobile operating licence in the country through a consortium with Qatar Foundation, beating out bids by Argos (Verizon) and Etisalat.

The formal selection process began in April of this year with stipulations that the new operator be an established facilities-based service provider with a Global System for Mobile Communications (GSM) network covering a minimum of 500,000 subscribers and green field experience in launching a facilities-based GSM network.

The Vodafone win came as a surprise to some, who expected a Gulf Cooperation Council (GCC) based mobile operator to win. The announcement of the winning bidder even surprised Qatar Telecom Company, which is the country’s only mobile operator, which had also expected a GCC contender to win.

The Vodafone consortium will form a management agreement with ictQatar for the first five years of operation and will be run as a Qatari joint stock company, which will be listed on the Qatar stock exchange. Vodafone will hold a 45% equity stake, required for the first two years with retention of majority holding for three more years. Despite the winner being a foreign operator, a controlling interest will remain in Qatari hands since 40% of the shares are allocated for Qatari citizens and 15% to be held by Qatari institutional investors or the Qatari government.

“This is the culmination of many months of hard work by the applicants and the ictQATAR team,” said Hessa Al Jaber, secretary general of ictQatar. “We look forward to the roll-out of new products and services in 2008.”

For a mobile network operator to enter a country the process normally begins by acquiring a radio spectrum licence from the government of the respective country. The specific spectrum obtained depends fully on the type of mobile phone technology the operator will be using. In Qatar the stipulations in opening the market to a second mobile operator were that the new company utilise a GSM network, which uses a GSM frequency range.

International governments may allocate spectrum usage in whichever method they decide, although the most common mode is an auction, as was chosen in Qatar.

Legislation paving the way for a second entrant in Qatar’s mobile telecommunications market was issued in November 2006. This will also open the door for future liberalisation of the fixed-line telecommunications market.

Qtel is in the final stages of preparing for the arrival of competition in its market, a process that began two years ago. With mobile penetration at over 120%, it is obvious that with competition there will be some customer migration.

However, Naser Marafih, CEO of Qtel, told OBG, “Our experience in other markets has shown that liberalisation has been a major driver of mobile growth. […] The new regulatory market environment will be an exciting and challenging one, but we are confident that Qtel is in great shape because of the preparations and organisational re-structuring we have put in place.”

Al Jaber told media, “This is an important milestone in the liberalisation of the telecommunications market in Qatar. The introduction of competition will benefit the people and economy of Qatar. We congratulate the successful applicant and we thank all those who participated in the process.”

The Middle East telecommunications market is becoming increasingly competitive with the top ten telecommunications companies in the region seeing net profits rise 6% to $4.23bn in the first half of the year, with similar growth expected for the second half, according to an international consultancy company. The Arab mobile market is particularly strong at present with anticipated significant growth in mobile telecommunications across the region. This has not gone unnoticed and major international telecoms from North America to Europe have been looking at entering these lucrative markets.

The telecommunications market in Qatar, while small compared to other countries, is exceptionally robust and plays an important role in the country’s overall economy; accounting for 5% of non-oil GDP.