Bahrain Telecommunications Report Q2 2008

Bahrain's regulator, the TRA, announced in January 2008 that it would make its final decision on whether to open the country's mobile market to a third operator by the end of February. Among the many factors which the TRA will likely consider when making its decision is the increasingly saturated nature of Bahrain's mobile market; by the end of September 2007, the number of mobile subscribers in the country had increased to 969,000, a figure which equates to a 120% penetration rate. Apart from the high penetration rate, it is notable that the number of mobile subscribers at the end of Q307 exceeded the 945,000 mobile customers which we suggested the sector would reach by the end of year. While growth in Q107 amounted to 4%, and growth in Q207 was 3%, in Q307, Bahrain's mobile customer base expanded by 7.7%. Much of this was due to a dramatic increase in the number of prepaid customers reported by Zain; Zain's subscriber base grew by 24% in Q307 (compared with a 1% increase in the number of Batelco mobile customers). The expansion is particularly noteworthy in light of the regulator's recent insistence that operators count only active subscribers within their reported customer totals.

Nevertheless, it is important to remember that Bahrain's regulator uses a three month definition of 'active' when assessing the number of active prepaid customers in the sector, rather than the more conventional 30-day active definition. The very broad definition of 'active' which is used in Bahrain means that there still could be a significant number of largely inactive users included in the subscriber totals of the two operators; this is even more likely given the size of the country's prepaid customer base, which equated to nearly 82% of total mobile users at the end of Q307. However, BMI also believes that one reason for continued mobile market growth in Bahrain is the high rate of multiple SIM card ownership.

Should the regulator decide to proceed with the licensing of a third operator, this is expected to put considerable pressure on the sector's existing mobile operators, Batelco and Zain, especially in the realm of pricing. Our new estimate for Bahrain's mobile market envisages that there were over 1mn mobile subscribers at end-2007. We predict that future growth, which will partly be sustained by the country's growing population, will help to raise the country's mobile penetration rate to 144% by 2012. This rate, we note, is already being reached in some European countries and in other parts of the Middle East.

Elsewhere in Bahrain's telecoms market, other key developments to watch in the weeks ahead include the ongoing deployment of WiMAX broadband services by both Zain and Mena Telecom. The proliferation of WiMAX offerings is expected to have a notable impact on the growth of broadband subscriptions in the coming months. Also, in December 2007, Bahrain's mobile market finally became a 3G duopoly, following the launch by Batelco of its 3G and 3.5G mobile networks. Batelco had previously argued that its EDGE-enabled network was more than capable of meeting its requirements. In January 2008, Batelco launched its 'O-net Mobile Broadband' service, its first internet service based on its newly deployed HSDPA data platform. O-net provides mobile internet access at speeds of up to 3.6Mbps over HSPDA.