Bahrain Telecommunications Report Q1 2008

Batelco may still control a large part of Bahrain's telecoms industry but it is slowly beginning to lose its grip. Determined to create a more competitive sector, regulator the TRA has liberalised the country's internet market and is now about to open bidding for a third mobile operator. All this forms part of the regulator's plan to make Bahrain a telecoms hub for the region, and part of the government's plan to ensure that the country's economy is not so reliant on oil revenues.

Illustrating the journey on which Bahrain's telecoms market is undergoing is the emergence of Mena Telecom. Not only does the alternative carrier expect to roll out its WiMAX network in May 2008, but it also hopes to win the bidding for Bahrain's third mobile licence, probably sometime in 2008. If successful, it would offer a fully integrated telecoms service, and by doing so pose a very serious threat to incumbent operator Batelco and to its main rival Zain.

Bahrain's second largest mobile operator Zain with its 30% market share has also just become a fully integrated telecoms player on the back of its own national WiMAX network, which will challenge Batelco's enhanced ADSL network, in which it has just completed US$57mn of investment. Bahrain is becoming more significant to Zain as it has decided to move its international headquarters away from Kuwait and to Manama, attracted by a more competitive telecoms market run by an independent regulator.

Although Bahrain hosts a steady and inviting business environment for potential investors in the telecoms market, it is a small market, and there is little room for new growth. Penetration is already well above 100% and although we do expect 3G services to increase in popularity, BMI does not forecast the mobile market pushing too far past the 120% mark in the near future. However, there is an opportunity for Bahrain's third mobile player. In a recent survey conducted by the TRA, 22% of those questioned expressed their dissatisfaction with mobile service tariffs. The arrival of a third operator is bound to encourage a series of price wars, and it is highly likely that a new entrant will be able to steal market share away from its two more established rivals, and especially if they choose not to lower their prices.

However, the real engine behind growth in Bahrain's telecoms market will not be the wireless sector, but the internet market, and in particular broadband. We expect Batelco to continue its success in expanding its ADSL subscriber base, but we also suggest that WiMAX will rival broadband on the back of commercial rollouts from Zain and Mena Telecom.

It would appear that on several fronts the TRA will create a more competitive telecoms market in Bahrain over the next year or so.