Phones Running Hot

Qatar

Economic News

22 Jul 2010
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The lines are running hot in the Qatar telecommunications sector, with the industry fully engaged in a massive burst of expansion at home and abroad.



Both the fixed line and wireless segments of the industry are gearing up for a feverish few months, with Qatar due to get a second mobile phone operator by the end of the year and looking to end to the monopoly of Qatar Telecommunications (Qtel) on land line services.



On August 29, the Supreme Council of Information and Communication Technology (ictQatar), the sultanate's telecommunications regulatory body, announced it was extending by two weeks the deadline for submissions from the twelve companies that had been short-listed to bid for Qatar's second mobile phone licence.



The bidders will now have until September 16 to lodge their offers, with the extension being announced by ictQatar to allow the candidates in the run off to firm up their bids, the regulator said in a statement.



The shift in deadline will probably put back the final evaluation of bids and the subsequent auction, with the winner of the tender now expected to be announced after October.



Even though Qatar is currently one of the most saturated mobile phone markets in the world, with penetration above 100%, with its present population of 840,000 expected to increase by more than 50% in the next seven years, there is still potential for a new operator to dial in to the lucrative market.



Qataris will also have the chance to benefit from the launch of the new network, with one of the requirements of the bid being that a 40% stake in the venture must be offered to the public.



Meanwhile, Qtel has been working hard to consolidate its position at home and to broaden the base of its operations overseas, having indulged in a flurry of acquisitions this year. Though faced with losing its monopoly status by the end of this year or the beginning of next in both the fixed and mobile phone segments, the company has been preparing for the future.



In 2007 alone Qtel has gained a 51% stake in Kuwait's Wataniya Group which has operations in Kuwait, Tunisia, the Maldives, Algeria and Saudi Arabia, with Palestine due to come on line next year; entered the Pakistani and Jordanian market having acquired a 78% holding in ATCO Clearwire Telecom and taken a 25% stake in Asia Mobile Holdings (AMH), which will allow it to expand into the Asia-Pacific region.



Qtel's most recent acquisition came as part of the Asiacell consortium, which on August 17 was granted one of three new mobile phone licences in Iraq. The licence, for a term of 15 years, cost the consortium $1.25bn.



Nasser Marafih, Qtel's chief executive officer, said though there may be risks involved in investing in Iraq, the company felt the market's strong potential warranted taking the chance.



"For any investment, one has to look at risks and returns," he told a press conference on August 22. "We believe the returns will be high. We need to continue to invest as we have a permanent licence. The returns we get will compensate and finance the expansion in Iraq."



The Iraqi venture took Qtel's outlays on overseas operations in the past year to $4.5bn, part of what Marafih said was the company's strategic priority to lift profitability and fulfil its vision of becoming one of the world's top 20 telecom operators by 2020.



Marafih flagged further expansion plans, saying Qtel was looking to focus on the corporate and enterprise data sector in Egypt and Morocco and boost its broadband data services in Algeria, Oman and Kuwait.



"We will focus on the region," he said. "There is growth potential and we know the profile of the region. We will also go to North Africa in a big way."



In Qatar itself, Qtel has reduced some of its charges ahead of the opening up of the domestic market to competition, seeking to reinforce subscriber loyalty before new options come on line.



However, there are some concerns that Qtel, in its rush to strengthen its position, may overreach itself. On August 30, Qtel announced it was refinancing the $2.5bn loan it had taken out to fund part of its $3.7bn acquisition of Wataniya, a move aimed at reducing its payments.



The measure was in part prompted by Wataniya's contribution to Qtel's second quarter results, announced on August 7, serving to cover only half of its $76.5m debt financing costs for the loan used to buy the Kuwait-based company. Overall, Qtel's profits for the period fell by 6.2%, down on most expectations.



While there may be some concerns, Qtel is clearly looking to make long distance calls to ensure future growth.

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