KUWAIT: As the first market in the Gulf to allow competition between private operators, Kuwait 's mobile sector is considered relatively mature and advanced, with high penetration rates and per capita spending on mobile services. While Kuwait's mobile companies enjoy solid earnings, they cite increased competition and burdensome restrictions as causes for a steady erosion of revenue earnings from voice services. As a result, they are continually rolling out and focusing on new services and technologies as a means of ensuring growth. Until the arrival of Viva as a third entrant in late 2008, Kuwait's mobile market was divided between two operators, Zain and Wataniya, both well-established global players that ploughed their domestic profits into aggressive expansion efforts across the Middle East and Africa. Zain was operational in 24 countries, with a global subscriber base in excess of 70m, until the recent sale of much of its African assets to India's Bharti Aircell. While Wataniya, majority owned by Qtel since 2007, has a presence in Algeria, Saudi Arabia, the Maldives, Tunisia and the Palestinian Territories, with a subscriber base of 11m. Despite both operators' significant geographic footprint, Kuwait still remains an important revenue earner for each, accounting, for example, for 43 percent of Wataniya's group earnings. Kuwait's penetration rates and average revenue per user (ARPU) levels are considered high by global standards, standing at around 115 percent and $30-$35 per month, respectively. However, by regional standards, penetration is behind other Gulf markets such as Bahrain (199 percent) and the UAE (193 percent), pointing to opportunities for further growth potential. ARPU, similarly, needs to be considered in the context of Kuwait 's high disposable income levels: based on a percentage of national income, prices for fixed, mobile and broadband access ranked fourth lowest in a survey of 159 countries conducted by the International Telecommunications Union. Only two years ago, ARPU stood at almost twice the current figure (around $60), with the substantial drop in per-user expenditure considered to be attributable to two events. Firstly, Viva's entrance as a third operator introduced a new element of competition to the market. Through smart pricing and promotions, the new operator was able to capture a 15 percent market share in its first year of operation, accounting for 61 percent of new subscriptions in 2009. The second event was a decision in early 2009 by the Ministry of Communications (MOC), which has a monopoly over fixed-line services, that all domestic calls from the fixed-line network would be free. This prompted a huge shift away from mobile-to-mobile calls and dramatically cut into revenue. In turn, this lead to a move by mobile operators to abolish charges for incoming calls in a bid to protect market share. The MOC bars mobile operators from accessing the international gateway, and in turn takes in all revenues from international calls to and from both landlines and mobiles. This, in tandem with the fact that voice-over-internet-protocol (VoIP) calls are not allowed, results in high rates for making and receiving international calls. According to the operators spoken to, both these practices are rare in mature mobile markets and significantly cut into earnings potential. As Scott Gegenheimer, the general manager and CEO of Wataniya Telecom, told OBG, "I would happily drop my prices by 10-15 percent in exchange for eliminating free fixed line to mobile calls and gaining access to the international gateway. Even if we were permitted to charge only a few cents for incoming calls from fixed lines, it would make a huge difference as when it is completely free, there are abuses on the network." These and a number of other prevailing issues that could help promote and monitor fair competition are unlikely to be resolved without the formation of an independent regulator to monitor and oversee the sector, according to Najeeb Mohammad Al Awadi, the CEO of VIVA. He told OBG, "Kuwait was the first market in the Gulf to allow a private GSM operator, yet is the last to have established an independent regulator. While we hope that one will be established in the coming year, equally important is that it is set up to be truly independent. Ideally, it should be headed by an outside expert who is completely neutral and has absolutely no previous ties or connections to any one operator or government body." In the meantime, with reduced voice revenue, firms are looking at introducing value-added services as a means of ensuring continued growth in earnings. As part of this strategy, the past year has seen promotion of mobile internet devices such as Blackberry and iPhone, with operators working to attract new customers with tempting offers. Pre-paid Blackberry services have become hugely popular in Kuwait, meaning that even those who want to manage their expenditure can still use popular social applications such as Facebook. As Al Awadi told OBG, "Kuwaitis are early adopters, and social media offers a major source of potential revenue stream growth. All the operators are presently negotiating with content providers to seek exclusive deals and become first to market for a number of popular media applications."
