Qatar Telecommunications Report Q2 2008

The provision of all telecoms services in the Kingdom of Qatar is currently under the monopoly of a single operator, Qatar Telecom (Q-Tel). However, in December 2007, the Qatari authorities awarded Qatar's second mobile telephony licence to a consortium comprising Vodafone of the UK and local partner, the Qatar Foundation. Before its planned launch, which is expected sometime in 2008, the new venture will list a 40% stake in an initial public offering (IPO), and is also required to sell a 15% stake to the Qatari government.

The launch of services by Qatar's second mobile operator, in mid-2008, is likely to coincide with the awarding of a licence to offer fixed network services such as fixed-line telephony and internet access, in competition against incumbent Q-Tel. Qatar's telecoms regulator, ictQATAR, launched an auction for the country's second fixed-line network operating licence in December 2007. In February 2008, it was revealed that a total of eight companies had officially registered their interest in applying for Qatar's second fixed-line licence. The companies are understood to be AT&T of the US, Bahrain's Batelco, BT of the UK (through a regional subsidiary), Italian alternative telco Eutelia, Jordan Telecom, PCCW of Hong Kong, Verizon of the US and Vodafone of the UK. The fixed-line concession will be awarded through a 'beauty contest,' with ictQATAR assessing the technical merits of the bids based on the quality of the network and the range of services proposed by applicants. The licence will cost a fixed fee of QAR10mn (US$2.75mn), and will allow facilities-based services, including authorisation to operate an international gateway. The winning operator is expected to be announced in May 2008.

Qatar's second fixed-line operator is expected to bring about a radical shake-up in a market where broadband connectivity is expensive (and broadband penetration low), and both broadband and fixed-line growth is predicted to continue over the next five years. Growth in both sectors will be supported by Qatar's expanding economy and by demand for fixed network services from within the business sector.

Meanwhile, although the country's mobile market is already nearing saturation, with penetration believed to have surpassed 137% by the end of 2007, it is important to remember that Qatar has a large number of prepaid users, many of which could be relatively inactive. Furthermore, BMI believes that multiple SIM ownership is high in Qatar; these mobile market phenomena suggest that there are still opportunities for the country's second mobile operator once it comes to market in mid-2008. In addition to winning market share from Q-Tel, we also predict strong growth opportunities for the second mobile operator in the country's 3G market. According to figures released by Q-Tel, there were 50,000 regular 3G service users in Qatar at the end of 2007, equivalent to 4.3% of mobile users. All indications point to strong and sustained demand for mobile internet and data services over the next five years.

Qatar has the second highest score in our latest set of Business Environment Rankings for the Middle East. The country benefits from having the highest country structure score in the region, as well as a relatively high score for country risk.