Boasting high mobile penetration, low tariffs and a mature regulatory authority that has overseen a decade of successful liberalisation, the telecommunications sector in Bahrain is one of the most vibrant in the Gulf. Mobile penetration continues to expand as fixed-line subscriptions decline; however, skyrocketing data demand has led to new challenges in service delivery, especially for smaller operators.

The advent of 4G long-term evolution (LTE) services has brought pressing concerns about spectrum allocation back into the spotlight, while an increasingly crowded market has resulted in a number of inactive licensees. The telecoms industry is now slated for a period of consolidation, as an ever more competitive environment and ongoing price wars drive tariffs and profits downwards. This environment has benefitted the consumer, however, and Bahrain’s telecoms market is recognised today as one of the most advanced, open and free in the GCC.

Road To Regulation

Telecoms policy in Bahrain is overseen by the Telecommunications Regulatory Authority (TRA), which was established in 2002 under the Telecommunications Law No. 48. The TRA is mandated to liberalise the sector and protect subscriber and consumer interests, while also improving transparency and quality assurance. This legislation has seen Bahrain’s telecoms industry evolve to become one of the most liberal in the Middle East.

The law sets out a mandatory arbitration process for licensees wishing to challenge a decision, order or action from the regulator. In 2009 the TRA became the first telecoms authority in the GCC to rule against an incumbent operator when it fined Batelco for limiting access to a submarine cable system.

In 2012 the government released its third National Telecommunications Plan, which aims to advance economic and social progress. It builds on the previous national plan, published in 2008, and includes several goals, such as developing a national broadband network, providing the regulatory framework for a nationwide 4G LTE rollout, and improving both digital security and market competition.

Market Giants

There are three major GSM operators in the market: national incumbent Batelco, Zain Bahrain and VIVA Bahrain. Established in 1981 as a public joint stock company, Batelco’s major shareholders are mainly government entities such as the Mumtalakat Holding Company and Amber Holding, as well as the Social Insurance Organisation. Batelco retained a monopoly for more than two decades after its inception, reaching 100,000 mobile subscribers by 1999, before pressure from international bodies prompted the government to pass the telecommunications law in 2002.

The Batelco monopoly officially ended in 2003 with the entrance of Mobile Telecommunications Company (MTC) Vodafone, 60% owned by MTC and 40% by Bahraini investors and later rebranded as Zain. The TRA had received 10 applications for the licence from various international and regional applicants, indicating high demand to enter Bahrain’s then-untapped market.

In 2009 VIVA, the kingdom’s third major operator and a subsidiary of the Saudi Telecommunications Company (STC), was granted the third operator licence. VIVA Bahrain is 100% owned by STC, with the company reporting in 2012 that its Bahraini subsidiary was the market’s leading operator by number of customers. Menatelecom, now one of Bahrain’s largest providers of WiMAX services, was awarded a national fixed-wireless licence in 2007 and later made an unsuccessful bid for the kingdom’s third GSM licence in 2009.

Added Competition

The TRA’s approach to market regulation has also seen a host of alternative operators receive telecommunications licences in recent years. According to a 2013 report from the TRA, there are 20 active telecoms companies currently operating in Bahrain, including 10 operators for national fixed lines, 15 companies licensed to transmit international calls, 12 leased line providers and 14 internet service providers (ISPs).

The World Trade Organisation (WTO) praised Bahrain’s telecoms industry in a March 2014 trade policy review, highlighting that the sector had emerged as one of the most dynamic in the kingdom’s economy mainly thanks to successful privatisation and liberalisation initiatives. The WTO also reported that telecommunications accounted for around 4% of the country’s GDP in 2012. Meanwhile, total jobs in the sector rose to 3141 in 2012 – a 50% increase since liberalisation was initiated in 2003. Bahrainisation in the sector stood at 80% in 2012, the highest rate in the kingdom’s economy, which the WTO attributes to the sector’s high productivity and reliance on skilled employment.

Mobile services comprise roughly 42% of industry revenues, followed by international calls at 27%, leased lines (15%), internet services (12%) and fixed-line services (4%), according to the TRA. While the majority of new licences were granted to operators in the pre-paid calling market (where international tariffs were still relatively expensive), the market’s maturation has seen some smaller players drop out.

Activity Check

“The TRA has been quite liberal; it has granted between 25 and 30 licences, and many of these were inexperienced speculative operators. These operators came in, wanted to make a quick buck on international calling, and then just ran away. We have five or six major players in telecoms and three major ISPs, and among those we feel consolidation is the way forward,” Veer Passi, the CEO of Kalaam Telecom Bahrain, told OBG.

As the market becomes increasingly crowded and competitive and uptake of new technology expands exponentially, the TRA has moved to undertake a strategic industry review. In April 2014 the authority revealed plans to examine current ex-ante regulations, later announcing in May that it was also in the process of investigating whether currently licensed providers were in fact operating within the market, with plans to revoke licences for companies that were no longer active. “A telecommunications licence is not a commodity, but a privilege [that] in turn grants rights and imposes obligations. It is important to ensure that an entity does not hold on to that privilege without exercising it,” the TRA’s acting director of technical and operations, Mohammed Alnoaimi, told local media.

Pick Up The Line

As in many mature telecoms markets, the number of fixed lines has dwindled in recent years. The TRA reported that as of the third quarter of 2014, there were 246,000 fixed-line telephone subscriptions in the kingdom, a 2% year-to-date decline from the 251,000 reported at end-2013.

Menatelecom and Zain currently provide WiMAX services, which were first introduced in Bahrain in 2007. Menatelecom was one of several companies in the running for the market’s third mobile telecoms licence in 2009, and after losing to STC, which later launched VIVA Bahrain, the company focused on expanding WiMAX services.

Today WiMAX coverage extends to over 95% of the kingdom, driven by speedy service, bundling of broadband and fixed telephone packages, and low prices. Both pre-paid and post-paid WiMAX services are available in the local market, and as of the end of the first quarter of 2014, WiMAX accounted for 36% of fixed lines in the kingdom, according to the TRA.

The 2013 introduction of an unlimited calls option for residential users resulted in a significant cost reduction within the fixed-line segment, which remains one of the most affordable in the market. Bahrain ranks 34th in the International Telecommunication Union’s (ITU) information and communications technology price basket, with fixed-line tariffs offering the lowest rates across all categories, priced at just 0.4% of gross national income per capita, followed by mobile prices, at 1.1%.

Even More Mobile

At the end of the third quarter of 2014, there were 2.41m mobile subscriptions in Bahrain, up 9% year to date. The TRA reported that pre-paid subscriptions, which accounted for 79% of the total, increased by 8% while post-paid rose by 15%. Mobile penetration stood at 166% in 2013 – well above the average of 110% in other Arab countries and the global rate of 96%, according to the ITU. However, the mobile market is becoming increasingly constrained by high data usage, which has expanded strongly and necessitated significant investments in network upgrades (see analysis).

The TRA’s decision to reduce roaming charges by up to 75% in 2012 in line with new GCC policy, coupled with ongoing price wars and tariff reductions among the big three operators, has also contributed to the sector’s challenging retail environment. Consumers have certainly benefitted from pro-competition policies, such as the introduction of mobile number portability (MNP) in July 2011. TeleGeography’s GlobalComms Database reported that 126,000 MNP requests had been processed as of April 2014, with over 100,000 successful ports by the end of the second quarter. The TRA also moved to reduce the processing time for number portability services, requiring operators to complete a MNP request within eight business hours, rather than the previous 48.

As the retail market continues to be highly saturated, enterprise services have been identified as holding significant potential for investment and expansion. Kalaam Telecom’s April 2014 acquisition of Lightspeed Communications marked what is expected to be the beginning of a period of consolidation within the industry. The acquisition brought the company’s client base to 4000, with the segment’s average revenue per user (ARPU) offering significantly higher returns than increasingly lean retail revenues. “What we did was focus on the enterprise segment, which has a very high ARPU. Residential ARPU hovers at around $50 per month, whereas in the enterprise segment, it is $3000-plus per month. The enterprise segment is not as price-sensitive, and there is not as much churn. As long as you offer good value, clients stick with you, so there is still a lot of meat in the corporate business,” said Passi.

Doubling The Data

With its 2013 acquisition of the Monaco & Islands division of the UK’s Cable and Wireless Communications, and its purchase of a majority stake in Kuwaiti internet operator Quality Net in 2014, Batelco now has operations across 14 countries. The group’s gross revenues increased by 22% in 2013 to reach BD370.6m ($982.1m), though net profits slid by 28%, to BD43.6m ($115.5m), due to one-off expenses like the acquisition. Although 57% of company revenues are generated outside Bahrain, Batelco Bahrain performed well in early 2014, with mobile subscriptions up 25% y-o-y to reach 905,000, or a 40.2% market share (using TRA estimates of mobile subscribers). Growth was driven by the company’s launch of 4G LTE services in February 2013, and Batelco was the first to launch 4G LTE mobile broadband for home use, offering speeds of up to 150 Mbps.

Zain Bahrain announced that revenues grew by 5.45% in 2013 to end the year at $213m, while net profits declined by 17.65% to $14m. It also performed well in subscriber terms, reporting 25% growth in its customer base, again driven by a launch of 4G LTE services. The company reported an “almost instantaneous increase” in the amount of data usage, resulting in a 20% rise in data revenues in the kingdom over the year. “I would not say data growth has been doubling or tripling; it is way more than that. The growth in 2012, for example, was ridiculous; in one year we experienced maybe 700% or 800% growth in data services,” Hamad Al Romaihi, network director at Zain Bahrain, told OBG.

In 2013 VIVA Bahrain recorded some $322.59m in operating revenues, while STC reported that as the end of 2013, the group’s share in VIVA Bahrain’s loans amounted to $309,256. Although VIVA Bahrain was the last of the big three operators to launch 4G LTE services, in January 2014, it has made a significant impact on the market since its 2010 entrance. The company has reported a number of major milestones over the previous four years, including the introduction of Bahrain’s first HSPA+ network, a mobile wireless broadband technology that allows for data speeds of up to 42 Mbps, as well as the launch of devices such as the Windows Phone 7 and the iPhone 4, which had previously been incompatible with services provided in Bahrain.

The company has also reported achieving an unprecedented, though unspecified, share of the market, with TeleGeography’s GlobalComms Database reporting VIVA Bahrain’s market share stood at 32.5% at the end of 2012. Highly beneficial to consumers, VIVA’s activities have created an intensely competitive environment. “The retail segment is very competitive, with three GSMs and one WiMAX operator all competing for just 1.2m customers. If you look at the telecoms statistics, the topline revenue is very static, because there is not much growth in retail. It is driven largely by handset sales. Data consumption is rising, but all operators are reducing prices, and average ARPU is going down while the subscriber base stays the same,” said Passi.

Going Public

Zain’s Bahraini licence was renewed for an additional 15 years in 2013. The company also signed a four-year managed services agreement with Ericsson in October 2013 to handle dayto-day operations of its network in the country, which will allow Zain Bahrain to allocate additional resources for higher-end services. As of the end of June 2014, the company reported 787,000 subscribers, representing 34.9% market share.

Zain Bahrain’s long-awaited initial public offering (IPO) finally came to fruition in 2014. Following years of delays, the operator was instructed to offer 15% of its shares on the Bahraini exchange by the end of December 2013 to comply with its licence terms, though the firm eventually carried out the IPO in September 2014. Zain Bahrain had planned to launch the IPO in 2008, but this was later suspended in the wake of the financial crisis. The company announced it had received approval for the IPO in April 2013, although the government also announced at the same time that it had ordered Zain to float the shares.

Until May 2014, Zain Group had held a 56.25% stake in Zain Bahrain, while Zain Bahrain’s chairman, Sheikh Ahmed bin Ali Abdulla Al Khalifa, held 16.3%, Vodafone Group owned 6.1%, and a government pension fund had 4.7%. In May 2014, however, Zain Group moved to acquire an additional 6.25% stake in the company, which will allow it to remain a majority stakeholder following the IPO.

Market Competition

The TRA has been praised for its progressive approach to regulation while simultaneously enacting measures aimed at improving market competitiveness, setting regional precedents in the process. TRA regulations have frequently focused on Batelco, which has come under some criticism for perceived market dominance. In 2009 the authority ruled that Batelco had prohibited access to its submarine cable landing station, issuing what would eventually become a BD750,000 ($1.99m) fine. That same year, the TRA also moved to set the cost of capital for the telecommunications sector at 9.5%, indicating expected returns from investors on funds allocated to capital invested in services and capping returns to the largest operators.

Writing about the decision to fine Batelco, Eamon Holley, a senior legal consultant for DLA Piper, highlighted that the decision set an extremely positive precedent in the Gulf telecoms industry. “As a decision it is significant, not just for the specific parties involved, but for the industry in Bahrain, and the Gulf region generally, as it is… the first challenge in the Gulf region of a telecommunication regulator’s decision or order to result in an award or judicial decision. It also covers a very significant topic of access to submarine cable landing stations by third parties,” wrote Holley in a 2013 analysis.

The TRA has also put limits on the amount that Batelco can charge to other telecoms operators for field studies, although recent TRA decisions limiting operator access to its fibre-optic network – while at the same time restricting additional construction of new underground lines – have led to criticism within the industry (see analysis).

Market Shuffle

Despite the traditional emphasis placed on Batelco, in recent years the TRA’s focus has shifted towards other operators. In May 2013, for example, the authority determined that VIVA had a dominant position with respect to termination services on VIVA’s mobile network – meaning it should be subject to the same obligations as Batelco and Zain, both of which were previously classified as dominant operators.

In February 2013 the TRA ruled that Batelco was no longer the dominant international wholesale provider, removing ex-ante regulatory obligations with respect to wholesale international leased line and outbound call conveyance services – in a move that is widely expected to push a number of smaller operators out of the market. Additionally, in March 2014 the TRA determined that the supply of “mass-market” broadband services (to residential and to small and medium-sized business end-users) was competitive, and removed Batelco’s regulatory obligations for both retail and wholesale.

As its market share has grown, VIVA has fallen under increasing TRA scrutiny in recent years, with the authority issuing a decision in August 2013 that found the company non-compliant with various conditions of its frequency, mobile services and national fixed services licences. The TRA ruled that VIVA was not authorised to upgrade 165 fixed point-to-point microwave links as it had exceeded the bandwidth limitations set out in its frequency licence, fining the company a combined BD222,330 ($589,175) for unauthorised use of spectrum. VIVA was ordered to pay the outstanding spectrum licence fees owed with regard to the unauthorised upgraded links, and the TRA likewise ordered the company to downgrade all non-compliant links within 90 days of the ruling. Moving forward, the issue of spectrum allocation is expected to become increasingly pressing as all of Bahrain’s operators move to meet unprecedented new data demand on the back of 4G LTE network rollouts (see analysis).


Over a decade of liberalisation has transformed Bahrain’s telecoms sector into the most mature and well developed in the GCC, boasting high mobile penetration, wide availability of 4G LTE services and comparatively low tariffs. While fixed-line services are expected to continue gradually declining, uptake in new mobile broadband technology, alongside measured regulation, should help strengthen the revenue base and improve market competition over the medium term. While operators are scrambling to meet growing data demand, the possibility of new spectrum allocation has raised hopes for higher profitability. The relatively untapped corporate and enterprise segment also continues to offer high returns. Recent acquisitions and regulatory decisions have set the industry on a path towards more consolidation, which could improve competition considerably, allowing the market to play a more prominent role in economic diversification, in line with the Vision 2030 economic development plan.