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More investments seen in Saudi telecom sector
By Saudi Gazette Staff
Published in The Saudi Gazette on 31 - 07 - 2009

A recent study done by Frost & Sullivan on “Telecom Companies Capital Expenditure” for South Asia and Middle East market showed that the sector has shown resilience not only in the revenue generated by operators but also in its spending capacity.
The sector will see investments in developing markets like India, Sri Lanka, and Bangladesh as well as in mature markets like the UAE and Saudi Arabia.
Saudi Arabia is the largest country in the Middle East and also has the highest spending levels.
The entry of new operators has spurred spending in the market.
According to Frost & Sullivan, the total telecom spending in the Saudi market was $ 6,576.5 million in 2008 and is expected to decline with a negative CAGR of around 1.59 percent between 2008 and 2015 to $ 5,875.1 million. Broadband penetration is one of the lowest in the region; this segment will constitute a major portion of CAPEX of the operators in the next 3-4 years.
Girish Trivedi, deputy director, South Asia and Middle East, Frost & Sullivan, said “while fixed line services will have lesser investment, mobile services are anticipated to constitute major CAPEX in the South Asia and Middle East region. Technological advancements like 3G will continue to spur the spending pattern. Investments in Broadband and Carrier networks and multimedia and value-added services will gain significant traction in these regions.”
The telecom network in the UAE is one of the most technologically advanced in the world with 3.5G (HSDPA) and 3.75G (HSUPA) networks being deployed. The introduction of a second operator in the UAE has led to some rationalization in tariff levels and also increased spending levels in the market. The country has one of the highest GDP per capita in the world and hence despite penetration levels being around 160 percent, ARPU of the operators will continue to be high.
The total telecom spending in the UAE market was estimated by Frost & Sullivan at $ 1,263.8 million in 2008; is expected to decline with a negative CAGR of around 0.02 percent between 2008 and 2015 to reach $ 1,261.9 million.
The analysis from this Frost & Sullivan study found that the Indian market with its sheer size will continue to dominate the spending in the region. The total telecom spending in the Indian market was $21,553.1 million in 2008; this is anticipated to grow at a CAGR of 2.2 percent till 2015 to reach $25,128.9 million. The CAPEX will be driven by 3G operations that are expected to start in the next 1-2 years and the thrust on broadband and carrier services by incumbent larger operators.
The high competition amongst the Sri Lankan telecom companies market for a relatively small population of 20 million has impacted investments in the country.
The spending was led by two big operators while other operators struggle to survive. Frost & Sullivan estimates that the total telecom spending in the Sri Lankan market was around $589.4 million in 2008; this is expected to grow at a CAGR of around 0.08 percent between 2008 and 2015 to reach $592.68 million. The end of the civil war has opened up the northern and eastern parts of the country thereby driving the country's CAPEX levels.
The Bangladesh telecom market is plagued with taxation issues and the introduction of SIM tax has adversely affected growth in the sector. Most of the operators are partly owned by global telecom firms and hence spending capacity will be impacted in the next 1-2 years due to the current economic situation. In line with current trends, Frost & Sullivan estimates that the total telecom spending in the Bangladesh market was $ 1,744.9 million in 2008; is expected to grow at a CAGR of around 2.4 percent between 2008 and 2015 to reach $ 2,060.1 million. The growth in spending will be led by the foray into the untapped rural market. __


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