Overview of Telecommunications Sector in Kuwait - Article Example

Overview of Telecommunications Sector in KuwaitSince its inception, the telecommunications sector in Kuwait has experienced over 100% mobile penetration though this is low compared to about 199% in some other countries. The sector has also experienced a lower rate of fixed-line penetration. The fixed and mobile broadband services in the sector have also been widely available, and the Telecommunications sector in Kuwait is currently recording one of the highest average revenue per subscriber in the Gulf regionMarket competitionThe entry of Viva in December 2008, stepped up competition in the Kuwait telecommunication sector.

This has worked against Wataniya Telecom, for example, the company had to drop charges on incoming calls. In early 2009, there was a shift from mobile-to-mobile calls because charges for calling from fixed lines to mobile were abolished. This has resulted in the APRU levels declining and tighter competition prompting consumer price reduction. Telecoms revenues dropped to KD475.5m ($1.66bn) in 2009 from KD476m ($1.66bn) in 2008 though there was a 31.4% increase in net profits from KD82.4m ($288m) in 2008 to KD108.3m ($378.5m), 2009 (Business Management International 2010) Even as prices go down, the Telecommunications sector in the country is experiencing elasticity and is expecting further growth in subscriptions.

There has also been an increased use of cell phones due to lower tariffs. This puts the sector in position to make up for the reduced revenue through increased utilisation of value-added services. The main focus in this sector now is the increase of broadband and mobile internet services. One telecommunications company in this sector, Wataniya’s recently acquired revenues of about 43%, and is a very important revenue generator for the country. At the end of 2009, some other companies in the sector were also very profitable.

Telecom held 39% of the Kuwait market as compared to 15% for Viva and 46% for Zain, which are all companies in Kuwaits telecommunications sector. Telecom also took about 30% of the new telecommunications subscriptions, as compared to 61% for Viva.The Telecommunications sector in Kuwait bundles its services unlike other telecommunication companies. However, they sell handsets separately except for Blackberry and iPhone which are under promotion. Customers are given Blackberry and iPhone handsets for free after acquiring a pre-paid subscription and operating on pay-as-you-go basis.

This has led to increased usage of mobile internet therefore a source for revenue from non-voice services. This has helped offset the decrease in voice revenue. The Telecommunications sector in Kuwait does not have its own regulator. It operates under the regulation of the Ministry of Communications which is responsible for licensing and setting operation the plans. This has not affected Telecom’s growth though it makes it difficult for the company to monitor subscriber numbers. This means subscribers can switch to another company while still keeping their old numbers.

It has also made it hard for the company to monitor access to the Telecom international gateway. The lack of a regulator has also worked for the advantage of Telecom because it has helped to maintain the market competition at friendly trends because the levels of ARPU in Kuwait are very high. This has made companies to compete on offers instead of waging war against each other using prices.Even as competition rises, organisations in the country’s Telecommunications sector are becoming more creative in generating revenue.

With increasing mobile and broadband penetration rates, these companies have proven themselves able to stand the fierce competition in Kuwait’s telecommunication market.ReferencesBusiness Management International (2010). Kuwait Telecommunications report Q2 2010. Online.http://www.businessmonitor.com/telecommunications/kuwait.html. Viewed on 8th February, 2011.