For the last 25 years, the Middle East has been part of, and benefited from, the telecommunications revolution, taking full advantage of several trends that have shaped the telecom industry over the last few years. Almost all countries in the region have liberalized their telecoms industries since 2000, putting them on a dynamic path of sustainable growth. Despite having a significant financial stake in telecom, some states welcomed competition, albeit to varying degrees, and established effective regulatory authorities while shifting the investment to the private sector.
It is expected that the Middle East telecom market will increase in size by USD 20.57 billion between 2021 and 2026, growing at a CAGR of 3.25%. The industry is also expected to register a YOY growth of 1.80% in 2022, according to Technavio. Recent developments, new product launches, major revenue-generating segments and market behavior across the continent are on the rise.
Growth drivers
Technology enhancement is one of the major factors driving the growth of the market. Businesses are reevaluating and reorganizing their operations to compete in the market due to technological advances in the telecom industry. For example, telecom companies are leveraging digital media channels to boost customer satisfaction and revenue. Telecom service providers are also able to track clients' requirements and provide better services thanks to the adoption of the latest technologies, which contributes greatly to driving the market's growth. In addition, the growth of smart city projects and an increase in global mobile data traffic and bandwidth requirements are further accelerating the market's growth. However, security concerns including compatibility issues, network attacks, digital security threats, data privacy, to name a few, threaten to reduce the growth potential in the market.
The first noticeable trend is that the race for faster, more reliable technology has continued, and the gap between technology leaders and late adopters has widened. The Gulf countries (UAE, Saudi Arabia, and Qatar) have been the leaders in rolling out 5G technology and offering it commercially, just as they took the lead in deploying 4G networks previously.
Another noted trend is the growth of connectivity to unserved (those not covered by telecom networks) or underserved areas (those covered by telecom networks but with technology or capacity limitations or demand restrictions). Telecom operators continue to expand coverage, and the cost of this connectivity is making telecom services more accessible. There are, however, millions living in the Levant and North Africa who are not connected: 140 million without any mobile service and 350 million without connection to mobile internet. Millions of people will need to overcome a lack of technical literacy and/or the prohibitive cost barrier in order to bridge this divide.
The next trend is the emergence of new regulatory challenges: both data privacy and cybersecurity. Due to the increasing access of telecom companies, social media platforms and many other businesses to users' personal data, these issues are becoming increasingly urgent. In response to the General Data Protection Regulation (GDPR) adopted by the EU, countries in the region have realized the importance of data protection. Legislation has been introduced with the purpose of both protecting data and growing the digital economy at the same time. The country has been dealing with it through a top-down approach that is as much about enhancing state control as it is about data protection, a detail which could impede the country's stated plan to rapidly transform government institutions and businesses.
The final trend is that of OTT Players. Global telecom industry growth could be affected by the rise of new competitors, commonly referred to as over-the-top (OTT) players. Through their own platforms and ecosystems, they can provide attractive services such as voice over Internet protocol (VoIP), instant messaging (IM), TV, video, and music. While subscribers pay telecom operators for fast connections, most revenue comes from pay-per-usage and advertisements. Data consumption is charged by operators, but it is often restricted by data packages that offer unlimited data. As a result, the battle between operators and OTT players has begun for spoils including voice revenues (especially high-margin mobile international traffic), short message services (SMS) and media.
Trends in telecommunications throughout the region are headed in the right direction. Yet not enough is being done to make mobile service and mobile broadband accessible to more people. Several countries have been accumulating universal service funds from operators, funds that should have been used to increase coverage in areas that are not commercially viable. Most governments have failed to allocate enough resources or failed to coordinate policies to digitize government services. There is, however, a very promising phenomenon in the region; communities of entrepreneurs in the technology space are building viable, sustainable businesses, and they are supported by a wide network of investors. These entrepreneurs and investors are not restricted by borders or stale bureaucracies. They are changing the region one digit at a time.
