Bahrain's telecoms market is rapidly moving towards high-value wireless and wireline data services, supported by the launch of 4G LTE network services and 100Mbps fibre broadband services in 2013 and early 2014. We expect this to help operators offset revenue shortfalls from traditional voice services and improve their subscriber mixes, as consumers turn to postpaid contracts to subsidise the purchase of LTE-enabled smartphones. We retain a positive outlook for the take-up of these services based on the government's continued expansionary policy, which will sustain high private consumption levels, but note that strong growth in mobile data services poses downside risks to growth in the fixed broadband sector.
- Following strong growth in H113, Bahrain's mobile market contracted by 1.3% in Q313, bringing the total number of subscriptions down to 2.223mn. This was a penetration rate of 166.9%, down from nearly 170% in June 2013.
- Regulatory data showed continued rapid take-up of mobile data services, as the 3G and 4G market grew by nearly 5% in Q313, bringing total subscriptions to 1.053mn.
- After recording growth in 2012 the fixed-line sector took a turn for the worse in the first nine months of 2013. Subscriptions continued to decline in Q313, resulting in a further downward revision of our forecasts. We estimate there will be 254,000 fixed-lines in Bahrain at the end of 2013, dropping to 245,000 by 2018.
This quarter Bahrain's Risk/Reward score increase 0.2points to 51.6, pulling ahead of the regional average of 51.4 and climbing ahead of Oman on BMI's Telecoms Risk/Reward Ratings table to sixth place. Bahrain's lowest score is in the industry risks category, which reflects strong state influence on the telecoms sector despite the existence of an independent telecoms regulator, and continued government ownership of the incumbent operator. Bahrain's highest score is in the country rewards category, as the country benefits from a high GDP per capita and a small land size, which reduces the challenge of building universal access to telecoms services.
Key Trends And Developments
In January 2013 Viva Bahrain launched commercial 4G LTE mobile broadband services in the country. The operator is committed to providing data speeds of up to 100Mbps and claims to have wider coverage than its competitors Batelco and Zain, which both launched LTE in H113. The operator is offering mobile, home and office wireless broadband LTE data plans, activated through an add-on package, which would be available without any extra cost for a promotional period until the end of February. BMI believes the added competition will ensure continued strong growth in the 4G segment during 2014.
Batelco's planned acquisition of Cable & Wireless Communications' subsidiaries in Monaco and Seychelles fell through in November and December 2013, respectively. For Monaco, Batelco returned the 25% stake in Compagnie Monagesque de Communications to CWC in exchange for US$100mn. Batelco stated that the agreement for Seychelles fell apart because it had not secured regulatory approval to buy the business by the required date. These changes did not affect the sale of the rest of CWC's Islands division to Batelco, including the Maldives, Channel Islands and Isle of Man. However, they do illustrate the risks of state-ownership to Batelco's diversification strategy, in line with Bahrain's comparatively low Industry Risks score in our MENA Risks/Rewards Ratings.