Bahrain's open regulatory environment in ICT promises ongoing GCC competitiveness

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Bahrain has a history of involvement with telecoms that dates back to 1864, when the island became a way station for the telegraph cable link between India and Europe. It was the first country in the Middle East to install a mainframe computer (at the Bahrain Petroleum Company, BAPCO, in 1962), to install a satellite station (1969) and to launch an internet service (1995). In more recent years, the country has embraced the digital revolution with zeal. Bahrain ranks among the most open economies in the Middle East, and the ICT industry is no exception. The government has identified the ICT sector as a priority, given the key role of communications in developing other areas of the economy. With strong investment in new network capacity, and public procurement underpinning the industry, Bahrain looks set for a period of sustained growth in the ICT services segment.


In the World Economic Forum’s latest “Global Network Readiness” report, Bahrain was ranked 30th out of 143 countries in terms of overall network readiness in 2015, down one place on 29th in both 2014 and 2013. In the individual usage sub-ranking, the country was rated in 14th place, and eighth worldwide for individual use of the internet, with 90% of individuals connecting and 93% owning a home computer. In the government usage index, Bahrain came in fourth place worldwide, and 7th in terms of provision of government services online. In terms of mobile subscriptions per head of population, it ranked fifth worldwide.

According to the latest figures available from the Telecoms Regulatory Authority (TRA), the government agency charged with oversight of the sector, broadband penetration stood at 129% in 2013, up from 102% in 2012 and just 7% in 2007. Total broadband subscriptions (including fixed-line, mobile and WiMAX) stood at 1.84m at the end of the third quarter of 2014, which was up 12% from 1.64m in 2013.

Mobile broadband has continued to be the driver of growth in total subscriptions, with 1.44m at the end of the third quarter of 2014, up 58% from 907,000 in 2012. Some 53% of those subscriptions, or 760,000 in absolute numbers, were pay-per-use, and 680,000 were add-ons, bundles, etc. At the end of the third quarter of 2014, mobile constituted 91% of all broadband subscriptions, followed by fixed wireless (6%) and fixed wired (3%).

Total broadband traffic was 74m GB in 2013, of which fixed wireless generated 26%, fixed wired 38% and mobile 36%. Around 56% of fixed subscribers had access to speeds in excess of 2 Mbps in 2013, compared to just 14% in 2010. Including stand-alone mobile broadband subscribers, the proportion of users accessing those speeds increased to 81% in 2013, compared to 32% in 2010. The year 2014 saw a slight upturn in fixed wired subscriptions, after the domestic broadband market was deregulated, and operators introduced more competitive pricing.

According to the TRA, average revenue per user (ARPU) has fallen across all modes of broadband access in recent years. ARPU for fixed broadband users stood at BD14 ($36.88) per month in 2013, compared to BD14.70 ($38.73) in 2012 and BD23.20 ($61.12) in 2009. For business users, the fall in ARPU has been even more dramatic, standing at BD48.80 ($128.56) per month in 2013, BD49.20 ($129.62) in 2012 and BD86.40 ($227.62) in 2009. For residential users, the respective figures were BD11.50 ($30.30), BD12.10 ($31.88) and BD18.4 ($48.47). The research from the TRA shows that high-speed fixed broadband is more costly than the OECD average, but that the price of mobile broadband compares favourably.

In June 2014 the International Telecommunication Union (ITU), the UN’s specialised ICT agency, put Bahrain in the category of countries that had met its affordability target of a broadband connection costing less than 5% of gross national income (GNI); the average cost of a broadband connection in the country amounted to 2% of GNI, placing Bahrain 34th in the world in terms of affordability.


A report from the International Data Corporation in April 2015 forecast the value of the IT services market in Qatar, Oman, Kuwait and Bahrain combined to grow at a compound annual growth rate of 12.5% to reach $1.82bn by 2018. The report predicted that the major drivers of this growth would be government-led procurement in fields such as transport and infrastructure projects, e-government and financial services. “The government does a very good job at paying on time for major projects, which makes investment reliable and supports the ongoing growth in the private sector,” Rashid Al Snan, CEO of Etisalcom Bahrain, told OBG.

Some of the biggest opportunities are in health and education, where the government has been investing heavily to improve the quality of output and improve service delivery. In 2014 government figures show that the Ministry of Health and the Ministry of Education spent BD27.75m ($73.1m) and BD17.47m ($46m), respectively, on IT projects. In the same year, the eGovernment Authority enjoyed a budget of BD5.57m ($14.7m).

The corporate sector is also investing; among the largest projects are the Bahrain Bay and Durrat Al Khaleej real estate developments. Both are master-planned, mixed-use developments, which have budgets of $2.5bn ($6.6bn) and $6bn ($15.8bn), respectively, and will involve a number of IT components in the complexes.

The financial services sector in Bahrain is the largest employer, and the industry is a major customer of IT services. The small and medium-size enterprise (SME) segment is also showing a big appetite for investing in ICT, especially the middle segment, though the contracts are smaller overall.


In the third quarter of 2014, some 14 companies held internet service provider (ISP) licences in Bahrain, according to the TRA. The country’s big three mobile providers dominate the market: Batelco, Zain and VIVA (a subsidiary of Saudi Telecom). Other players include Etisalcom, Menatelecom and Kalaam Telecom.

Etisalcom is an internet and ICT solutions provider primarily for the corporate and public sector markets. It commenced operations in 2005. Menatelecom was established in 2003 and is a subsidiary of Kuwait Finance House Bahrain, a local investment fund, and counts 80,000 subscribers. It provides residential and business customers with IP telephony, high-speed internet and long-term evolution (LTE) data services. Kalaam Telecom launched in 2005 and provides residential, wholesale and business data, voice and value-added services, with a focus on SMEs. In 2014 it acquired Lightspeed Telecom, a former competitor, owned by Jordan Telecommunication. The move positioned Kalaam as the country’s second business broadband service provider.

Several locally-grown SMEs have grown in recent years, including Amthal Group and Gulf Future Business (GFB Group). Amthal Group leverages its international partnerships such as its Gold Certification from Microsoft to provide solutions to companies across the Gulf, showcasing Bahrain’s capacity to perform as a hub for its neighbour’s larger markets, with offices in Saudi Arabia, Qatar, and Oman. GFB Group works to assist international companies in setting up a presence in Bahrain and its IT division is a key component of its services.

The Bahrain Internet Exchange (BIX), created in 2003, comes under the remit of the Ministry of Transport, and provides the infrastructure for traffic between ISPs in Bahrain. The TRA’s responsibilities encompass issuing licences, setting prices, promoting competition and supporting the social and commercial welfare of Bahrain.


To cement this, the third National Telecommunications Plan (NTP), which runs from 2012 to 2015, makes the development of a National Broadband Network (NBN) a priority. Demand for data has been growing strongly over the past few years. At the same time, the plan identifies the development of ultra-fast broadband speeds as critical to Bahrain’s economic development. The NTP notes that while Bahrain’s small area should make it easy to roll out such a network quickly, the difficulty lies in upgrading new fibre without causing disruptions to previous investments by existing licence holders. For historic reasons, access to certain narrow-band services have been supplied at less than the cost of provision. As such, rationalisation of access pricing will need to be introduced simultaneously with the ultra-fast broadband network. The objectives of the NBN are to enhance the existing telecoms infrastructure, increase the quality and speed of connections, and reduce connectivity rates for customers. The government has charged the BIX with developing the network, which will be available to all operators on an open-access basis, with prices to be kept at levels deemed fair and reasonable. The authorities plan to use Cisco’s IPoSWDM technology for the network. The aim is to have the NBN up and running by 2018, with speeds of up to 300 Mbps.

In February 2014 the Ministry of Communications signed a memorandum of understanding with Batelco to build the network, and to look into the possibility of using Batelco’s fibre network as a basis, although this would involve greater open access for competitors and more efficient use of dark fibre. At the time of writing, no firm decision had been taken or cost estimates released.

The government has allocated funds of BD26m ($68.5m) between 2013 and 2017 for the development of the network. Recently, Bahrain has seen upgrades in international capacity: in 2012 Batelco signed an agreement with Gulf Bridge International for a self-healing fibre connecting the Gulf states to Iran and Iraq, with speeds up to 2.56 Tbps. In 2013 the BIX agreed to pay India’s Tata Corporation $30m for access to the company’s Gulf Cable Network, which offers speeds of up to 12.4 Gbps and a design capacity of up to 1.2 Tbps.

ICT Centre

Over the longer term, the introduction of ultra-fast broadband speeds will secure Bahrain’s place as an ICT centre for the region. Bahrain already acts as a financial centre for the Gulf, and offers good transport links: it is connected to Saudi Arabia by a 25-km causeway, and national carrier Gulf Air serves destinations across Asia, Africa, Europe and North America. The opening of the GCC-wide railway, which will connect Bahrain to Qatar with a road and rail causeway, will further enhance connectivity. At the same time, Bahrain offers lower operating costs than other markets in the region, with rents and the general cost of living below the Gulf average. Across the region, numerous governments are investing in the development of their industry and services; as a result, Bahrain lies at the centre of a market that is rapidly growing.

In 2015 Bahrain ranked 18th in the Heritage Foundation’s Index of Economic Freedom and 53rd on the World Bank’s 2015 Ease of Doing Business Index, ahead of regional competitors such as Oman (66) and Kuwait (86), as well as more developed economies such as Italy (56). The country places few restrictions on foreign investment, allowing for 100% ownership, full repatriation of profits and capital, and a low tax regime, which at 3.5% of overall profits is one of the lowest rates in the world. Moreover, the country is the only Gulf state to allow unrestricted access to voice over internet protocol (VoIP) services such as Skype. Bahrain’s Economic Development Board (EDB) has identified ICT as a target for support, because of both its role as a jobs generator and its value in facilitating other industries, such as financial services, one of Bahrain’s traditional strengths, which accounts for 17% of GDP in 2014, according to Central Bank of Bahrain figures. EDB measures to support ICT include a facilitation service for new investors, as well as support to existing ones. Already, there are over 200 ICT firms in Bahrain, ranging from multinational giants such as Cisco, Zain, HP, Microsoft and Tata Consultancy Services to boutique service providers and start-ups.

The UK’s BT Group and VIVA signed an agreement in April 2014 to set up a global internet protocol exchange interoperability hub (GIPX), which launched in May 2015. A GIPX allows for separate mobile and fixed networks to exchange traffic, using an IP-based network-to-network interface. The installation is expected to be of interest to mobile and fixed providers across the region looking to offer international VoIP calls, and should lead to significantly lower prices for 4G services. VIVA provides the hosting and connectivity, while BT extends its footprint in the Middle East. Also in 2014 Kalaam Telecom formed a strategic alliance with Indian telecoms giant Bharti Airtel, establishing a direct interconnection with Airtel’s point-of-presence in the UK and access to its network. In turn, this will secure Kalaam against cable cuts between the Gulf and the wider world and allow it to expand its data services over low-latency routes. In February 2012 US tech group Thinspace and local firm Mantech formed a partnership to deploy cloud-computing technology targeting business clients in the region.


In the Gulf, many fields have developed so rapidly that there has been no alternative but to import skilled labour from abroad, and ICT in Bahrain is no exception. However, the government is keen to see Bahrainis take up private sector jobs across a number of sectors, including ICT. To realise this aim the authorities have implemented a series of quotas for Bahraini employees, alongside a focus on education and training to ready the local workforce. ICT courses are popular with Bahraini university students. Additionally, since 2006, the Tamkeen fund has paid for Bahrainis to attend on-the-job training schemes in the ICT industry.


Bahrain has been spending heavily on e-government platforms and services. In 2014 Bahrain came in at 18th place on the UN’s E-government Development Index, up from 36th in 2012, and 14th in terms of E-participation, up from 19th in 2012. Bahrain’s e-government programme is aimed at streamlining services, cutting costs and improving the experience for end users.

Since 2007, the eGovernment Authority has overseen the programme, launching a dedicated interface – – in 2007 (see analysis). However, some SMEs in Bahrain have mixed views on the successes of the e-government’s programme. While it has increased awareness of the utility of technology for government bodies and increased the interest Bahraini consumers have for faster services, especially on their mobile devices, it has also taken away business from private-sector companies by becoming the first and sometimes the only service provider sought by government organisations and bodies.


In the latest e-friction report by Boston Consulting Group, Bahrain was identified as the Gulf state least hampered by “e-friction”, that is, restrictions, whether regulatory, financial or technical, that impede the ability of internet users to engage in online transactions. Bahrain was ranked 27th out of 65 countries measured, ahead of countries such as Malaysia or Spain. A 2015 UN Conference on Trade and Development report noted that the Arab world continues to lag behind Western economies and China in terms of the penetration of e-commerce, for example with just 17% of consumers in Qatar using the internet to buy goods and services, compared to over 70% in the UK. However, the report noted that Bahrain led the Arab world for business-to-consumer e-commerce.

At a conference in February 2015, legal firm Frost and Sullivan forecast that e-commerce in the GCC will experience growth of over 40% by 2020, to reach an estimated value in excess of $40bn. In the MENA region as a whole, the value of e-commerce is expected to increase from some $95bn in 2013 to over $200bn in 2020, a rise in relative terms from around 2% of GDP to about 5% of GDP.

In a sign of growing confidence in the potential of this market, Eat, a restaurant-booking app developed locally, announced in January 2015 that it had successfully raised $300,000 in a second funding round. Residual reluctance on the part of the public remains, but measures to improve e-security, along with greater familiarity, and the range and price advantages internet shopping confers are likely to help to overcome this over the longer term.


The IT market in Bahrain is set for a period of continued expansion. Government investment in capacity and a favourable investment and macroeconomic climate are proving attractive to multinational tech firms, who currently still have to rely upon imported skills. The country is now on its way to emerging as a tech hub for the region.

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The Report: Bahrain 2016

Telecoms & IT chapter from The Report: Bahrain 2016

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