MENA's ICT growth to decrease by 5 per cent in 2009

albawaba.com - dollarsA drop in IT spend is expected in 2009 as the MENA region begins to adjust to new market conditions, revealed an information and communications technology (ICT) study conducted by Madar Research in conjunction with marketing communications consultancy Orient Planet. While the previous years were marked by unprecedented growth in PC expenditure wherein Arab countries took advantage of high oil prices and overall economic boom to heavily invest in computer technology, the latest study pointed out that the scenario has since changed, owing partly to the ongoing global financial crisis. The study concluded that the region is likely to experience a five per cent drop in ICT growth in 2009 as it eases its IT expenditure.

In terms of computer penetration the UAE has maintained the number one position, recording a 26.44 per cent rate with 1.482 million installed computers in 2007. Led by the UAE, the top five rankings for PC penetration in the Arab World are dominated by GCC countries with Oman lagging a little further at eighth among 18 countries surveyed. Overall, the MENA achieved a PC penetration rate of 5.95 per cent – while this figure indicates enormous business opportunities and huge market potential, prevailing economic conditions and a widely anticipated drop in overall expenditure will be the primary growth inhibitors of PC adoption.

The study also predicts a slight drop in mobile phone penetration, although this particular slowdown is more dependent on the corrections made on population figures in the GCC region. According to Madar Research, previous phone penetration estimates were drawn without having clear statistics about the number of expatriates in the GCC region; with the actual figures now available, a correction in future estimates will be made accordingly.

The effects of the global financial crisis and changes in population statistics notwithstanding, the ICT study emphasised that mobile phone subscription will remain the main driver of the MENA region's steady progress in overall ICT adoption. In particular, the study cited the recent decisions to award second mobile licenses in Palestine and Qatar in 2007 and 2008 respectively – effectively liberalising the two remaining monopolies in the MENA's mobile phone sector – as some of the major developments that will create a long-term impact on the region's ICT adoption rate.

Abdul Kader Kamli, President & Research Director of Madar Research Group said: "The ICT adoption index shows that almost all countries in the region have achieved steady progress in the adoption of information and communications technology. It is also clear that mobile phone subscriptions have remained the strongest driving force behind the widespread use of ICT tools across the Arab World. The liberalisation of the industry has certainly played a key role in unlocking its enormous growth potential in various countries. While corrections are expected to cause some short-term changes, we are optimistic of stronger long-term growth rates in the entire region, especially with Qatar and Palestine breaking the monopoly of their respective mobile phone sectors."

Nidal Abou Zaki, Managing Director, Orient Planet said: "Market liberalisation opens considerable growth opportunities and is very influential in boosting the confidence of investors in the MENA region. I believe we are still in a stage of transition wherein Arab economies are adjusting to various corrections and introducing and reinforcing economic policies. However it is already clear that the region is facing very bright long-term prospects as it aims to enhance the economic contributions of the ICT sector."

According to the 2007 Arab ICT Use Index, which gauged the vigour of ICT adoption in 18 countries, mobile phone subscription in the MENA region registered a 40.51 per cent growth in 2007, helping sustain the significant progress in ICT adoption in the 18 MENA economies, whose ICT Use Index increased to 0.83 by end 2007, rising 30.21 per cent from the previous year. The UAE topped the MENA 2007 index with a score of 2.19 becoming the only country in the region to break through the Arab ICT Use Index's 2.00 barrier.

The study also revealed that a number of Arab countries have registered a drop in index scores, while future growth figures in other sectors may also drop due largely to corrections made to official statistical figures and newly introduced policies. For instance, countries such as Bahrain and Qatar made drastic corrections to their population figures in 2007, resulting in lower index figures for the year despite strong gains across all indications. Madar Research emphasised that it is therefore not viable to compare index scores for 2006 and 2007, especially for countries that reported major changes in statistical data.

In a related development, new definitions made by the UAE's Telecommunications Regulatory Authority (TRA) for active subscribers may result in a sharp drop in the country's 2008 mobile phone subscriber figures. Both operators previously defined subscribers as any customer who generated revenues in the financial year, but according to the new definitions put out by the TRA, active subscribers are those who make or receive calls, or send SMS or MMS within the past 90 days. As a result, UAE operator Emirates Integrated Telecommunications Company (Du) has revised its 2008 figures, announcing that while its total first quarter subscribers numbered around 1.7 million, its active subscribers numbered only 1.4 million according to the new definitions. The other UAE mobile operator, Emirates Telecommunications Corporation (Etisalat), has not revised its figures but the new definition of active subscribers is expected to be reflected in the company's subscriber figures for end 2008.

Despite the corrections and new policies, mobile phone subscriptions offer strong potential for long-term growth in the UAE and the rest of the Arab World. Stimulated by the liberalisation of the mobile phone sector, mobile phone subscriptions in the UAE grew at a 27.57 per cent compounded annual growth rate (CAGR) over the period 2003 to 2007, the strongest growth of all sectors in the country. The UAE likewise achieved a 42.61 per cent growth in 2007 alone, while mobile phone penetration rose to 131.64 per cent, the highest penetration rate in the Arab World in 2007, up from 124.52 per cent in 2006.

The study also reported that the entry of two new mobile phone operators in the region's mobile phone industry in 2007 – Du in the UAE and Etisalat Misr in Egypt – will further increase the growth prospects of the sector in the long-term. In addition, several major developments have also taken place in 2007 and 2008, whose impact on the ICT sector will be carried over in the next several years. In September 2008, Bahrain's Telecommunications regulatory authority invited bids for the country's third mobile phone licence with the new operator expected to launch services in 2009. Kuwait likewise awarded the country's third mobile phone license in November 2007 to a consortium that launched services in end 2008. New licenses were also awarded in Qatar, KSA and Palestine.

Although Gulf Cooperation Council (GCC) countries dominated the top five positions on the Arab ICT Use Index, they did not achieve the MENA region's highest growth rates. The privilege went to a selection of economies representative of the remaining MENA regions, which have largely underdeveloped ICT markets where growth tends to be more visible. Sudan, for instance, achieved 104.57 per cent growth in the number of mobile phone subscriptions in 2007, the strongest in the Arab World.

Regionally, Levant countries grew by a strong 50.21 per cent to register 57,560,330 mobile phone subscriptions by year end 2007, from a growth rate of 48.15 per cent in 2006. GCC countries meanwhile registered 43,921,844 mobile subscriptions in 2007, up 40.04 per cent over the previous year's figures (35.16 per cent growth in 2006).

Internet usage was the second fastest growing sector in the MENA, with users rising 32.55 per cent from 29,731,910 to 39,408,690 in 2007. Moreover, all 18 Arab countries have liberalised their Internet services provision sector, one of the first sectors in most countries to be fully liberalised. Growth was driven by the steady progress shown in traditionally low-penetrated countries such as Algeria, Egypt and Sudan. Algeria registered the region's strongest growth in Internet users in 2007 at 62.27 per cent for a total of 4 million users. Except for Palestine, which registered a modest 5.24 per cent growth – its Internet users rising from 525,000 in 2006 to 552,500 in 2007 – all MENA countries registered double digit growth, albeit modest in most cases. In total, 11 countries grew at a rate lower than the Arab average, including the UAE, Jordan, Oman and Kuwait.

Average Internet penetration for the 18 MENA economies was a low 12.16 per cent. The UAE for its part remained the leader in Internet penetration with a 37.79 per cent rate, followed by Bahrain (31.52 per cent) and Qatar (31.41 per cent) at second and third place respectively. Only four countries failed to breech the double-digit mark, with Yemen registering the lowest Internet penetration at 5.01 per cent.

There was not much difference in regional growth levels in 2007, with Internet users in the GCC countries rising by 31.88 per cent (10,830,000 users), to 30.14 per cent growth in the Levant (14,979,500 users). North Africa registered stronger growth at 37.17 per cent in 2007 to bring the number of Internet users up to 10,027,190. However, the year-on-year growth rates for each region represented a dramatic increase, where the Internet user growth rate in the GCC in 2006 was 9.36 per cent, 16.40 per cent in the Levant and 20.17 per cent in North Africa. Overall, Internet users in the MENA region grew by 15.20 per cent in 2006.

Another important factor that is poised to strengthen the region's ICT sector is the creation of independent regulatory authorities, which oversee and decide on many or all aspects of telecommunications policy in markets that are already competitive or are being prepared for liberalisation. At the end of 2007, Madar Research revealed that 13 of the 18 MENA economies surveyed for its study possessed independent regulatory bodies – representing an addition of one regulatory body over the previous year. Regulatory functions in the five countries – Yemen, Palestine, Kuwait, Libya and Syria – that lack an independent telecommunications regulatory authority are carried out by telecommunications ministries and government-owned incumbent providers.

Madar Research has likewise reiterated in its study that it has been difficult to calculate growth for the GCC region and other countries in the Arab World in 2007, given the fact that a number of indicators for 2006 and 2007 were corrected or adjusted by the service providers, in addition to major corrections in population figures made by some of the GCC countries in particular.