With a relatively small but sophisticated market, Bahrain’s ICT sector is an important driver of export growth in the country, thanks to the scalability of software and services, and supportive government policy. As the kingdom looks to capitalise on the digitisation gains made before and during the Covid-19 pandemic, economic recovery plans centre around further ICT development and cybersecurity preparedness. The authorities are seeking to attract regional and international investment not only in the sector itself, but also in other industries with sizeable IT requirements that Bahrain is well placed to serve. The combination of a large, tech-savvy youth cohort and a digitally capable national workforce stand the kingdom in good stead to leverage its core competencies to compete in the region and beyond.
Oversight
The kingdom’s ICT sector is overseen by the Ministry of Transportation and Telecommunications, with the underlying Telecommunications Directorate responsible for sector-specific policy development and implementation. The Telecommunications Regulatory Authority (TRA), for its part, is charged with regulating the industry, and was established by the Telecommunications Law of 2002. This legislation liberalised the sector and helped to usher in new mobile providers.
The National Telecommunications Plan – the governing development strategy for the sector that is prepared and executed by the Telecommunications Directorate – is currently in its fifth iteration, spanning 2020 to 2023. The sector is also being guided by the Telecommunications, ICT and Digital Economy Sector Strategy 2022-26, which is closely tied to the country’s overarching Economic Recovery Plan, a post-pandemic strategy to reinvigorate growth through some $30bn worth of major strategic projects across key sectors, including telecommunications (see Economy chapter). Under the 2022-26 roadmap, Bahrain aims to increase the number of ICT start-ups by 20%, digitalise an additional 200 government services, boost the employment of Bahraini nationals in the ICT sector by 35%, train some 20,000 citizens in cybersecurity and obtain 100% national broadband network coverage.
Market Structure
The kingdom’s legacy telecoms operator, Batelco, was founded in 1981. As part of the fourth National Telecommunications Plan, the company was split into two entities in mid-2019: a wholesale-only company called BN et, which was charged with supervising the National Broadband Network; and Batelco Bahrain, which retained the original company’s retail and enterprise operations. Batelco recorded BD399.6m ($1.1bn) in gross revenue in 2021, up 3.2% from 2020, for an operating profit of BD89.2m ($236.6m) and a net profit of BD74.5m ($197.6m), representing respective increases of 9.9% and 16.7%.
Wholly owned by Saudi Telecom, stc Bahrain entered the commercial market in 2010, having previously operated under the brand name VIVA. Its parent company had yet to disclose subsidiary-specific financial data for 2021 as of March 2022, but the group as a whole posted SR63.4m ($16.9m) in revenue that year, up 7.6% from 2020, for an operating profit of SR13.1m ($3.5m), compared to SR12.7m ($3.4m) the previous year. Net profit stood at SR11.6m ($3.1m), up 3.7%. However, Saudi Arabia accounted for the vast majority of the group’s revenue, at 92%, meaning that stc Bahrain represents a small portion of these consolidated figures.
Zain Bahrain, the eponymous subsidiary of its Kuwait-headquartered parent company, entered the market in 2003 following the Bahraini government’s efforts to liberalise the sector. In 2021 Zain Bahrain posted BD64.8m ($171.9m) in revenue, an increase of 4.5% from the previous year. This led to an operating profit of BD6.5m ($17.2m) and a net profit of BD5.6m ($14.8m), up 1.7% and 3.1%, respectively.
Sector Performance
With a population of 1.77m and an urbanisation rate of 89.9%, Bahrain has a small but mature ICT market with near-universal mobile penetration. The kingdom had 1.78m mobile connections as of February 2022, equivalent to 101% of the population, and 1.75m internet users, or 99% penetration, according to the “Global Digital Report 2022” published by Canada’s social media management platform Hootsuite and the UK’s digital marketing agency We Are Social. Social media usage is also high, at 87.8% of the population, equating to 1.55m users as of January 2022.
Despite the market’s saturation, most categories continue to post moderate growth. Mobile connections were up 1.6% year-on-year (y-o-y) in February 2022, with 29,000 new accounts. In addition, the country recorded 41,000 new internet users over that period, up 2.4% y-o-y. Likewise, social media users rose by 3.3% y-o-y, for a gain of some 50,000 users. The kingdom’s sizeable and tech-savvy youth cohort is an important driver of ICT adoption: 55.7% of the population is under the age of 25, with another third in the 35- to 54-year-old range.
Sector-wide telecommunications revenue totalled BD460m ($1.2bn) in 2020, the most recent year for which the TRA has shared full-year data. This represents an increase of 3.1% from the previous year and 13.3% since 2011. As a share of GDP, the sector accounted for 3.5% of the total that year, and directly employed more than 2900 workers. Bahraini nationals accounted for 71% of the sector workforce, indicating a relatively high degree of Bahrainisation, and women comprised one-third of the total.
Mobile
Mobile phones are an important conduit for internet connectivity in Bahrain, with 99.4% of social media users accessing platforms via mobile devices. As of November 2021 the median download speed for mobile internet was 46.8 Mbps, up 30.7% y-o-y, for a gain of some 11 Mbps, according to Hootsuite and We Are Social. This compares favourably with the global median of 29.06 Mbps. As a share of total web pages accessed via web browser, mobile devices comprised a sizeable 58.4%, followed by laptop and desktop computers at 40.1%, tablets (1.5%) and other devices (0.01%).
Some 92.7% of mobile connections in the kingdom are broadband, indicating the near ubiquity of smartphones in the market. This uptake has been facilitated by the growing affordability of both handsets and data packages: the cheapest smartphone on the market as of early 2022 was priced at around $119, while 1 GB of mobile data cost an average of $2.12, representing 6.5% and 0.1% of mean monthly income, respectively. In 2020, as the Covid-19 pandemic drove Bahraini users online, average data usage per mobile broadband subscription reached 12.8 GB, according to the TRA’s most recent annual report. By the end of 2021, this had risen to 13.2 GB.
Batelco has historically been the market leader in mobile subscriptions, but following close competition in recent years, stc Bahrain narrowly captured the largest share of residential mobile subscriptions for the first time in 2021, at 37% of the total in the fourth quarter of the year. Batelco was a not-toodistant second, comprising 35.2%, while Zain Bahrain accounted for 27.8%, according to raw data from the TRA. As a share of the total mobile broadband subscriptions – both pre-paid and post-paid – stc Bahrain accounted for 40.5%, followed by Batelco (33.5%) and Zain Bahrain (26%).
5G Coverage
Bahrain has been a regional and global pioneer in the rollout of 5G, becoming the first country in the Middle East and one of the earliest in the world to achieve nationwide coverage of the network as of early 2021. This effort was led by stc Bahrain and Batelco, which partnered with China’s Huawei and Sweden’s Ericsson, respectively, on the underlying infrastructure.
“Operators are keen to tap into 5G capabilities to enable financial technology (fintech) tools; e-government services; e-commerce; consumer solutions such as enhanced mobile broadband; 4K streaming on the go and cloud gaming; and business-to-business solutions such as immersive education, the internet of things (IoT) and industrial IoT, augmented reality and virtual reality, and robotics,” Krishna Chinta, programme manager for telecoms and IoT for the Middle East and Africa at the International Data Corporation, told media. “Additionally, the nationwide coverage of 5G is expected to speed up ongoing national digital transformation plans as part of Bahrain’s Economic Vision 2030.”
Internet
At more than 99%, Bahrain has one of the highest internet penetration rates in the world, tied with the likes of Denmark, Norway and the UAE. Thanks to high investment in network expansion in recent years, Bahrain’s fixed internet has recorded sizeable improvements in speed. The median download speed of fixed internet connections was measured at 47.1 Mbps in November 2021, up 68.8%, or 19.2 Mbps, from one year earlier, per figures from the Hootsuite and We Are Social report. By comparison, the global median download speed stood at 58 Mbps, reflecting the relative strength of the country’s fixed internet network.
In terms of operator market share, Batelco is the clear frontrunner, accounting for 83.5% of total fixed broadband subscriptions, including fixed wired and fixed wireless, as of the fourth quarter of 2021. Zain Bahrain held the next-largest share, with 6.6%, followed by stc Bahrain at 5.2%. Other licensed operators accounted for the remaining 4.7% of subscriptions, according to the latest TRA figures.
Investment & Growth Potential
Bahrain’s telecoms industry received an estimated $2bn in investment in the years from 2009 to 2019, driven by attractive investment incentives and a highly skilled pool of local labour. The Bahrain Economic Development Board (EDB) permits foreign investors in the ICT sector to own up to 100% of Bahraini businesses, and these investors are exempt from both corporate and personal taxation.
For start-ups, the semi-autonomous government agency Tamkeen offers a variety of support programmes, including a business development co-finance scheme for IT infrastructure, subsidies for start-ups’ employee wages and training costs, and other financial support for training.
Projections from data analytics firm GlobalData suggest the kingdom is on track to post a compound annual growth rate (CAGR) of 8.6% in ICT spending between 2019 and 2024, to reach $2.1bn. Energy and financial services are expected to be the toptwo industry drivers of ICT growth, with CAGRs of 28.9% and 22%, respectively, over the period. Manufacturing came in third, at 12.2%, followed by construction (7.5%), and transport and logistics (5.1%). When it comes to IT solutions, data and analytics is forecast to lead expansion, with a projected CAGR of 16.6%, followed closely by cloud computing, with 16.5%; storage (14.5%); business process outsourcing (10.2%); and networking (9.7%).
In terms of sourcing the talent needed to power these high-growth subsectors, Bahrain ranked first in the GCC in 2020 for the availability of advanced computer programming talent in ICT, according to the UN’s International Telecommunication Union.
Start-up Scene
Bahrain has a well-established accelerator and incubator ecosystem for start-ups. According to the EDB, the number of start-ups in the kingdom has grown at a three-year CAGR of 46.2%, fuelled by support from a number of organisations.
StartUp Bahrain, a community of investors, accelerators, incubators and education institutions, helps to link start-ups with funding and grants, mentoring and co-working spaces, among other services. It has more than 160 start-ups under its umbrella, with over 30 accelerators, incubators, co-working spaces and government entities offering support.
In a sign of regional interest in Bahrain’s entrepreneurial environment, Egypt’s Flat6Labs – one of the MENA region’s top seed and early-stage venture capital firms – works with Tamkeen to launch and accelerate local and international start-ups in the kingdom. Bahrain is home to more targeted initiatives as well. Bahrain FinTech Bay, for example, functions as a dedicated ecosystem for fintech start-ups, providing commercial and co-working space, workshops and other tailored support. Meanwhile, Riyadat, which is a joint project by the Supreme Council for Women and Bahrain Development Bank, helps female entrepreneurs build small and medium-sized businesses by offering a range of administrative, training and consultative support.
Cloud & E-government
As the kingdom looks to foster more digitally native start-ups and services, the cloud ecosystem is an import prerequisite for growth. The inauguration of the first Amazon Web Services (AWS) centre in the MENA region took place in Bahrain in July 2019. This was a significant milestone for the cloud services industry, and AWS has partnered with various government organisations to facilitate their digital transformation in the intervening years. Notably, Bahrain’s sovereign wealth fund, Mumtalakat, became the first government body to migrate to AWS in August 2019.
While Bahrain is positioning itself as a nexus for private cloud and data centre services, the government remains a major driver of industry growth. The Cloud First Policy, launched in 2017, seeks to digitalise government systems to increase security, cut costs and boost productivity. This effort is being steered by the National Enterprise Architecture Framework, which aims to bring all government entities under a unified, integrated IT network, and the Information & eGovernment Authority (iGA).
In early 2022 Mohammed Ali Al Qaed, chief executive of the iGA, announced that more than 70% of the systems and operations of 72 government entities shifted to the cloud in 2021, in addition to the complete migration of 32 public and private entities, and the launch of four new cloud-based government bodies. According to Al Qaed, the Cloud First Policy had led to a 60% decrease to date in the time needed for technical infrastructure readiness, and a 60-80% rationalisation of operational expenses. EDB data points to continued public and private uptake in the years ahead. By 2024 cloud data centre traffic is projected to post 19% annual growth.
Digital Banking
Bahrain has a supportive ecosystem for fintech start-ups, including those that cover e-money and digital banking. The Central Bank of Bahrain has a dedicated FinTech and Innovation Unit, charged with keeping the bank’s regulatory framework sufficiently agile to facilitate innovation. The unit is responsible for granting approval to firms to participate in the onshore regulatory sandbox, introduced in 2017, where local and international fintechs can pilot new platforms and products. As of late 2021 there were 23 approved entities participating in the sandbox.
Open banking is an example of how Bahrain’s stance on financial innovation is paying dividends. In 2019 the country became the first in the Middle East to adopt an open banking system, designed by fintech Tarabut Gateway, the regulatory sandbox’s first graduate. The system, adopted by the National Bank of Bahrain, enables easier access to financial information in a tailored way, displaying accounts from multiple institutions in one app.
Although the rapid shift to online life engendered by the pandemic has helped drive uptake of mobile banking and e-commerce, the latest figures show room for further expansion in both segments. While 82.6% of Bahrainis had an account with a financial institution in 2021, just 29% had used online banking in the past year and 77.3% had made or received a digital transaction in the same timeframe, according to Hootsuite and We Are Social.
Cybersecurity
As Bahrain and the wider Gulf’s business and government ecosystems increasingly move online, data protection and cybersecurity concerns are coming to the fore. “With the adoption of cloud technologies, user convenience will be enhanced, but this will require more efforts to bolster cybersecurity,” Rashed Al Snan, CEO of ICT firm Etisalcom Bahrain, told OBG.
The average cost of a data breach incident in the Middle East was $6.93m in 2020, according to Ponemon Institute and IBM Security, which exceeded the global average. This is helping drive demand for cybersecurity services: between 2021 and 2026 MENA’s cybersecurity market is projected to expand by a CAGR of 7.92%. Bahrain was an early advocate for more robust online protections, having passed the Personal Data Protection Law in 2018. Under the law, which came into force in 2019, companies are required to obtain customers’ permission to collect, process, store or use any personal information for commercial purposes. Failure to comply is a criminal rather than a civil offence, as is the case with comparable frameworks in the US or the EU.
The government has established a National Cybersecurity Centre, which was working alongside the iGA to develop a National Cybersecurity Strategy in early 2022 in order to identify goals and divide responsibility for cyber-risk mitigation.
Outlook
The post-pandemic era offers myriad opportunities for Bahrain to build upon its ICT credentials in a number of competitive landscapes. As a leader in 5G and cloud services, the kingdom is well placed to enable the adoption of IoT technologies, from electric vehicles to smart cities. Supportive government policy has fostered an attractive operating environment for major multinationals, as well as a creative sandbox for smaller start-ups that can introduce cost-saving and experience-enhancing innovations to the marketplace. Against this backdrop, commitment to best practices in cybersecurity will continue to be central to protecting the ICT ecosystem in its current growth phrase and beyond.
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