Launch of New Telecommunications Licenses for Fixed & Mobile Services

Overview of the Economy and the Telecommunications Sector of the State of Qatar Disclaimer

This document is based on past and forward-looking information that has not been generated by ictQATAR. We believe such information to be reliable and adequately comprehensive but we do not guarantee that such information is or will be in all respects accurate or complete. The purpose of this document is to provide a short overview of the Qatari economy and telecommunications market. Companies interested in applying for any of the licenses should conduct their own more detailed analyses in order to build their business plans. ictQATAR shall not be obligated to maintain, update or correct this market overview document and shall not be liable for any damage or loss caused by the use of this information, including without limitation lost profits or other consequential damages.

Source: ictQATAR 1 Executive summary

Country Qatar offers high economic growth mainly driven by the Oil & Gas economy sector and a myriad of government initiatives in both energy and non-energy-based industries

Telecommu- The telecommunications sector has shown strong financial nications performance historically and is well positioned to benefit from the sector country’s economic and population growth

Telecommu- The State of Qatar and the telecommunications regulator nications (ictQATAR) continue to support the development of the sector by regulatory liberalizing the market. Qatar Telecom (Qtel)’s monopoly will end framework with the award of 1 new mobile license and 1 new fixed license

Source: ictQATAR 2 Executive summary

Country Qatar offers high economic growth mainly driven by the Oil & Gas economy sector and a myriad of government initiatives in both energy and non-energy-based industries

Telecommu- The telecommunications sector has shown strong financial nications performance historically and is well positioned to benefit from the sector country’s economic and population growth

Source: ictQATAR 3 Qatar’s economic performance has been remarkably strong during the past years with an annual real GDP growth rate of 8.4% Real GDP index CAGR Percent, 2001 = 100%

Nominal GDP of USD 53 billion

+8.4 150 Benchmark: 2001–06 142 Real GDP CAGR 134 Percent UAE 8.5 107 111 100 Qatar 8.4 Kuwait 8.2 Bahrain 6.8 MENA 5.0 KSA 5.0 Oman 4.5 US 2.9 EU25 1.9

2001 2002 2003 2004 2005 2006

Source: Qatar Planning Council; EIU January 2007 4 Projections for the next 5 years by external sources predict that the economy should continue to grow at a healthy rate Real GDP index forecast CAGR Percent, 2001 = 100%

Benchmark: 2006–11 +8.7 228 213 Expected real GDP CAGR 198 Percent 178 Qatar 8.7 162 150 UAE 6.3 Kuwait 5.4 Bahrain 5.5 MENA 5.0 KSA 4.7 US 2.6 EU 25 2.2

2006 2007 2008 2009 2010 2011

Source: Qatar Planning Council; EIU January 2007 5 The Oil & Gas sector remains the largest GDP contributor, accounting for more than 60% of the total GDP value Breakdown of GDP by sectors Percent

Transport & Communications Other Trade, Restaurants, & Hotels 3 4 4 Construction 5 Finance, Insurance, Oil & Gas Real Estate, & 5 Business Services 62 Evolution 2001–06 Percent Manufacturing 7

9 Other 42 42 41 40 38 Government 46 Services

Oil & 58 58 59 60 62 Gas 54

2001 02 03 04 05 2006

Source: Qatar Planning Council 6 Qatar has an abundance of natural gas resources sold at very competitive prices

World proven natural gas reserves Industrial gas price Percent, 2005 USD/MMBTU***, 2006

100% = 180 TCM*

14 Qatar EU 25 13.10

US 8.90

RoW** 44 Russia 1.60

27 Russia Qatar 1.00

Iran 0.75

15 GCC avg 0.75–1.20 Iran

* Trillion cubic meters ** Rest of the world *** Million British Thermal Units Source: BP Statistical Review 2006; press clippings 7 GDP contribution from Liquefied Natural Gas (LNG) exports is forecasted to increase by 19% over the next 5 years* Qatar’s forecasted LNG production Million tons per annum (mtpa)

+19% 59.3 59.4 51.9 New capacity comes online The 19% annual 37.6 increase in LNG exports will 28.2 24.8 continue to support the growth in the country’s GDP

2006 07 08 09 10 2011

* Assuming constant gas prices Source: Qatargas; RasGas; QNB 8 Expansion of the pipeline network would generate more revenues from gas exports

Qatar Petroleum has signed an agreement with Dolphin Energy from Abu Dhabi to export 2 billion cubic feet per day of natural gas – the project is valued at USD3.5 billion.

Source: Dolphin Energy Web Site; QNB 9 Qatar is also set to become a key global player in energy- based industries Total capacity Investments Thousand tonnes per year

Impact

Norsk Hydro 440 +193% $1.3bn 1st phase Would make Qatar one of the top 15 Aluminum 150 150 150 aluminum producers in the world

$0.7bn Qasco green- field project Would capture 0.6% Steel +184% of world’s steel capacity 3,550 additions 1,250 1,250 1,500

10,136 +53% Would capture 5% of $6.1bn 8,329 ethylene and 6,859 Petro- 6,625 polyethylene chemicals* world growth and 2% of worldwide fertilisers additions 2005 06 08E 2010E * Includes ethylene, propylene, PE, ammonia, urea, benzene and styrene Source: Tecnon; CMAI; IFDC; J.F. King; SRI; broker reports; press articles 10 Several government initiatives have been launched to diversify the economy from Oil & Gas dependency Government investments over the next 5 years Description USD billion

• 10 km2 Qatar Free Zone (QFZ) to be completed by mid 2008 Economic 2 • 9 km logistics and storage zone (LSZ) to support Tourism 17 zones the growing shipping and trading activities in Qatar

• Development of new airport by 2016 with capacity Airlines 15 for 50 million passengers per year • Development of Pearl-Qatar offshore island with Infra- 400 hectare of residential space structure • Development of Lusail township by 2010-2020 Infrastructure 13 • Promoting Doha as the sporting capital of GCC • Building Bahrain-Doha causeway Utilities 3 • Establishment of Qatar Financial Centre to attract global financial institutions and help create a Financial sound and transparent capital markets frameworks Other 15

• Creation of Qatar Foundation & Education city with 2,500-acre campus hosting leading Total 63 Education international universities including Cornell, Carnegie Mellon, Texas A&M, and Georgetown University

Source: Press clippings; Qatar Financial Center Authority annual review 2006 11 The new residential projects are expected to house around 280,000 inhabitants by 2020

Pearl-Qatar (40,000 residents) Al-Khor (40,000 residents)

Lusail (200,000 residents)

Source: Projects' Websites 12 The country has seen double-digit growth in trading activities and foreign investments in the last 5 years USD million CAGR

+30% 14,300 10,100 Imports 6,000 3,800 4,100 4,900

+23% 30,700 25,300 Exports 18,500 10,700 10,800 13,200

+23% Net foreign 2,000 1,600 1,600 1,900 1,800 direct investment 700

2001 02 03 04 05 2006

Source: Qatar Planning Council; Economic Intelligence Unit January 2006 13 The economic growth has spurred an overall increase in population No. of inhabitants CAGR Million

1.34 1.27 1.20 1.14 +5.3% 1.08 1.03 • Qatar’s population is 0.98 0.93 projected to continue to 0.88 0.84 grow at 5.3% annually and 0.80 to reach 1.34 million 0.76 0.72 inhabitants by 2015 0.65 0.68 • Majority of the growth has been fuelled by the influx of foreign labour to fill the market shortage notably in construction and other industries

2001 02 03 04 05 06 07 08 09 10 11 12 13 14 2015 Actual Estimates

Source: Qatar Planning Council 14 82% of the population is concentrated in the capital city Doha and its closely surrounding area

… two of which, Doha and Al Rayyan, are home Qatar has 10 municipalities … for 82% of the population Total area = 11,437 km2 100% = 838,000

Ash Other 18% Shamal

Al Ghuwayriyah Al Khawr Al Jumaliyah Al Rayyan 38% Umm Salal

82% in an Al-Wakrah area of 2 Mesaieed 1,025 km Jariyan al Batnah Doha 44%

2006

Source: Qatar Planning Council 15 22% of the population is less than 15 years old Breakdown of population by age Percent

0.6 mn 0.8 mn 1.1 mn = 100% 65+ yrs 2 2 2 Benchmark: 0–14 yrs Percent • Qatar: 22 15–64 yrs 72 75 76 • UAE: 25 • Kuwait: 27 • Bahrain: 28 • KSA: 42 • Oman: 43 • Average GCC: 31 0–14 yrs 26 22 22

2000 2005 2010F

Source: Economic Intelligence Unit January 2007; World Fact Book 16 63% of the population is economically active Percent

Economically active population Breakdown of workforce by sector, 2004

100% = 0.6 mn 0.8 mn 1.1 mn Other Mining & Quaring 13 Construction 37 37 Economically Transport & 4 27 50 inactive* Communication 4

Manufacturing 9

Education, 7 12 Public Health & admini- 63 63 12 Economically Social 12 stration 50 active Trade Domestic Services

Construction is the largest sector 2000 2005 2010F in terms of jobs created, indicating the large amount of development occurring in the country

* Economically inactive population includes the elderly and children under the age of 15 Source: Economic Intelligence Unit; Qatar Planning Council 17 The Qatari population enjoys one of the highest GDP per capita in the world Nominal GDP per capita at current prices USD, 2006

Luxembourg 87,955 Qatar 62,914 US 43,444 UK 39,213 Germany 35,204 UAE 33,397 Kuwait 31,051 Spain 27,767 Bahrain 21,447 Saudi Arabia 14,715 Oman 13,846

Ø37,359

Source: International Monetary Fund 18 Executive summary

Country Qatar offers high economic growth mainly driven by the Oil & Gas economy sector and a myriad of government initiatives in both energy and non-energy-based industries

Telecommu- The telecommunications sector has shown strong financial nications performance historically and is well positioned to benefit from the sector country’s economic and population growth

Source: ictQATAR 19 Executive summary

Telecommu- The telecommunications sector has shown strong financial nications performance historically and is well positioned to benefit from the sector country’s economic growth and population boom

The telecommunications sector plays an important Overall role in the economy and has shown strong growth in sector revenues and subscribers

Mobile services are the main driver of growth in sector Mobile revenues

Fixed services have shown steady growth over the Fixed past years

Internet and broadband services have been Data increasing significantly over past years

Source: ictQATAR 20 The Telecommunications sector plays an important role in the economy accounting for 5% of the non-oil GDP value Percent

GDP breakdown* Labour force breakdown* 2006 2004

Government 24 13 Services

Manufacturing 19 4

Finance, Insurance 14 10 and Real Estate

Construction 14 28

Trade, Restaurants 10 15 & Hotels

Communication 5 1

Other services 14 29

Total 100 100

* Excludes oil Source: Qatar Planning Council 21 Currently, Qatar Telecom (Qtel) Q.S.C has monopoly in the fixed and mobile markets

Background Products and Services • Exclusive telecommunications Residential provider since 1987 • Landline • Listed on the Doha Securities Market • Mobile (GSM) since 1998 • Cable TV service • Subsidiaries in Oman, Singapore and • Internet services Indonesia through participation in Asia Mobile Holdings • Recently acquired 51% of Wataniya, Business the Kuwaiti mobile operator, for • Landline USD 3.8 billion • Mobile (GSM) • Cable TV service • Internet services • Data services

Source: Qtel website 22 Sector revenues have been growing at 23% annually, making Qatar the country with the highest revenue per capita in the region CAGR

Qtel annual revenues* Annual revenue per capita, 2005 USD million USD

1,083 Qatar 981

+23% Kuwait 720 781

624 Bahrain 690 533 442 378 UAE 664

KSA 393

Oman 263 2001 02 03 04 05 2006

* Numbers exclude revenues from international subsidiaries & revenues classified as ‘other’ in Qtel annual reports Source: Qtel annual reports; Arab Advisors Group 23 Qatar has high penetration rates in the fixed and mobile markets but moderate rates in the internet market Penetration Percent, 2006

Fixed line* Mobile** Internet***

Qatar 117 110 53 Singapore 98 103 133 Bahrain 98 114 38 UAE 85 126 49 Kuwait 83 100 82 Syria 71 20 7 KSA 70 68 35 EU 25 67 107 48 Lebanon 63 28 25 Egypt 63 20 7 Oman 54 62 22 Jordan 45 69 15

* Fixed line penetration = total fixed residential lines divided by no. of households ** Mobile penetration = total reported mobile lines divided by population *** Internet penetration = total internet accounts(dial-up and broadband) divided by no. of households Source: Arab Advisors Group, Pyramid Research, Operators annual reports 24 Executive summary

The telecommunications sector plays an important Overall role in the economy and has shown strong growth in sector revenues and subscribers

Mobile services are the main driver of growth in sector Mobile revenues

Fixed services have shown steady growth over the Fixed past years

Internet and broadband services have been Data increasing significantly over past years

Source: ictQATAR 25 Mobile services account for the majority of the revenues and growth in the telecommunications sector Total revenues generated by segment CAGR USD million

Numbers include all revenues generated from 5-year growth national and international CAGR outgoing calls 1,083

Fixed and +23% 35% 8% 781 Internet

624 36% 533 442 39% 378 41% Mobile 42% 47% 65% 68% 64% 59% 61% 53% 32% 2001 02 03 04 05 2006

Source: Qtel annual reports 26 Mobile service penetration is high and has shown a steady annual growth in the last 5 years Mobile line penetration rate CAGR % of population

110

90 +32%

65 52 39 27

2001 02 03 04 05 2006

No. of 178 267 377 490 717 920 Subscribers Thousands

Source: Qtel annual reports 27 Both subscribers and revenues from mobile services have grown substantially in the past 5 years CAGR

+42% 702 Revenues 504 USD millions 313 382 232 121

2001 02 03 04 05 2006

920 +39% 717 Subscribers 490 377 Thousands 267 178

2001 02 03 04 05 2006

* Numbers exclude revenues from international subsidiaries Source: Qtel annual reports 28 In line with other countries in the region, the majority of mobile subscribers in Qatar use prepaid services Postpaid Prepaid CAGR Breakdown of users by type of service Regional comparison, 2006 Thousand Percent

920

20% Bahrain 84 16 +36% 717 UAE 82 18 22% 490 Kuwait 81 19 377 28% 80% Qatar 80 20 267 39% 78% Oman 78 22 51% 72% 61% 49% KSA 68 32

2002 03 04 05 2006

Source: Pyramid Research; Qtel annual reports 29 Qatar has one of the highest mobile usage in the region with postpaid subscribers spending triple the time of prepaid users Minutes of use per month

Average prepaid Average postpaid

Qatar 173 554

UAE 193 539

Kuwait 179 480

Oman 176 376

KSA 104 307

Jordan 89 496

Bahrain 85 274

Egypt 55 486

Source: Pyramid research 30 Prepaid minute rates are relatively high compared to the rates charged for the same services in the region USD, October 2006

Average national price per minute Activation fee

Qatar 0.15 55

Kuwait 0.15 44

KSA 0.14 11

Oman 0.12 20

Bahrain 0.09 14

UAE 0.08 44

Source: Arab Advisors Group 31 Postpaid minute rates are in line with rates charged across the region USD, October 2006

Average national price per minute Activation fee

KSA 0.10 13

Qatar 0.09 69

Bahrain 0.09 7

Kuwait 0.09 47

Oman 0.08 25

UAE 0.08 50

Source: Arab Advisors Group; operators' websites 32 Executive summary

Telecommu The telecommunications sector has shown strong financial -nications performance historically and is well positioned to benefit from the sector country’s economic and population growth

The telecommunications sector plays an important Overall role in the economy and has shown strong growth in sector revenues and subscribers

Mobile services are the main driver of growth in sector Mobile revenues

Fixed services have shown steady growth over the Fixed past years

Internet and broadband services have been Data increasing significantly over past years

Source: ictQATAR 33 The fixed line penetration has remained high over the past 5 years Fixed line penetration rate* Percent of households

143 135 123 121 120 117

2001 02 03 04 05 2006

No. of residential 117 128 126 136 146 154 subscribers Thousands

* Assumes 131,000 households in Qatar in 2006 Source: Arab Advisors Group 34 Both subscribers and revenues from fixed services have been steadily growing over the past 5 years CAGR

+6% 204 185 162 167 176 Revenues USD millions

2002 03 04 05 2006

+5% 205 217 185 191 177 64 55 59 Business Subscribers 49 59 Thousands 128 126 136 146 154 Residential

2002 03 04 05 2006

* Numbers exclude revenues from international subsidiaries Source: Qtel annual report 35 International call prices are low in Qatar while fixed-to-mobile call prices are high compared to rates in the region Average fixed call cost per minute USD

Average international call price per minute* Average fixed-to-mobile call price per minute

Kuwait 1.82 KSA 0.13

UAE 1.19 Qatar 0.12

Oman 0.97 Oman 0.12

KSA 0.72 UAE 0.08

Qatar 0.56 Bahrain 0.04

* Represents average price per minute for all countries available to call from operators’ network Source: Arab Advisors Group; operators’ websites 36 Residential connection and subscription fees in Qatar are in line with fees charged in the region Residential connection and subscription charges USD

Consumer activation fee Consumer monthly subscription

KSA 80 8

Qatar 55 9

Bahrain 53 3

UAE 49 4

Oman 26 16

Source: Operators’ websites; Arab Advisors Group 37 Executive summary

The telecommunications sector plays an important Overall role in the economy and has shown strong growth in sector revenues and subscribers

Mobile services are the main driver of growth in sector Mobile revenues

Fixed services have shown steady growth over the Fixed past years

Internet and broadband services have been Data increasing significantly over past years

Source: ictQATAR 38 The overall number of Internet subscribers has increased significantly in the last 5 years Thousands

Internet accounts* Personal computers

+7% 140 134 127 119 110 100

70 +39% 53 37 32 19 13

2001 02 03 04 05 2006 2001 02 03 04 05 2006

* Dial-up and broadband Source: Arab Advisors Group; Euromonitor International 39 Despite remarkable past growth and a promising future, broadband penetration still lags behind other developed markets CAGR Broadband subscriptions Thousands

Broadband penetration 147 Percent of households, 2006 +26% 128 Hong Kong 72 109 Netherlands 62 90 Singapore 61 68 France 44 47

25 UK 42 11 Qatar 33 0 2 2002 03 04 05 06 07 0809 10 2011 Germany 30 Actual Estimates

Source: Arab Advisors Group 40 Broadband and dial-up rates are moderately priced compared to charges for similar services in the region USD

Dial-up rates per minute Broadband subscription per month, 512 kpbs

Residential Business

Bahrain 0.019 Kuwait 131 345

KSA 0.013 KSA 92 92 Broadband prices, however, are high Qatar 0.009 Bahrain 66 200 compared to European Kuwait 0.008 Qatar 55 165 benchmarks with average monthly Oman 0.008 UAE 51 162 subscription of USD 25 UAE 0.006 Oman* 31 311

* Excludes usage charges of USD2.6 per 1 gigabyte Source: Operators’ websites; Point topic 41 Both Internet accounts and revenues have grown significantly over the past 5 years CAGR

64 +30% Revenues 43 34 USD millions 27 17 21

2001 02 03 04 05 2006

70 +39% 53 Internet 37 accounts 32 Thousands 19 13

2001 02 03 04 05 2006

Source: Qtel annual report 42 Executive summary

Country Qatar offers high economic growth mainly driven by the Oil & Gas economy sector and a myriad of government initiatives in both energy and non-energy-based industries

Telecommu- The telecommunications sector has shown strong financial nications performance historically and is well positioned to benefit from the sector country’s economic and population growth

Source: ictQATAR 43 The regulatory framework of the telecommunications sector has undergone significant changes in the last 10 years

1987 1998 2002 2004 2006 Establishment of Transformation of Establishment of Establishment of the Promulgation of the the Qatar Public the Qatar Public the Information/ Supreme Council Telecommunication Telecommuni- Telecommunication Technology and for Information and Law providing cation Corporation Corporation into Communication Communications the regulator the Qatari shareholder Committee Technology power to issue company (Qatar (ictQATAR) new licenses Telecom (Qtel) Q.S.C.)

Source: ictQATAR 44 The Supreme Council for Information and Communications Technology (ictQATAR) has the responsibility to regulate the telecommunications sector

• Connect Possibilities • Create core engine of the • Enrich Knowledge information-based economy • Inspire Knowledge • Universalize access to social services through technology • Democratize learning to create a knowledge-based on-line society • Create technology multiplier- effect to all sectors To enable the community at large to • Extend reach of political reforms use information and communication through real-time communication technology to improve the quality of • Connect opportunities for life, actively contribute to the social economic participation in all and economic development of our facets of the society nation and transform it into a truly • Reinforce culture of a knowledge-based and progressive progressive nation society

Source: ictQATAR 45 ictQATAR’s regulatory authority is composed of three sections

Key responsibilities • Regulatory policy and planning Policy and • Licensing economics • Tariffing • Competition

• Spectrum management Regulatory Technical • Interconnection management authority department • Quality of services

• Consumer protection Legal • Dispute resolution department • Legal proceeding

Source: ictQATAR 46 The Telecommunications Law of 2006 governs all aspects of the telecommunications sector and provides ictQATAR the mandate to issue new licenses Decree Law No. (34) Major provisions • Enhance the sector’s performance through encouraging competition • Encourage the introduction of advanced and innovative information and telecommunications technologies • Establishing a fair, objective and transparent licensing regime for ictQATAR has service providers started the • Promoting universal service process to • Grant, amend, renew, suspend, and issue 1 new revoke all types of licenses mobile and 1 • Set the terms of interconnection and new fixed access between service providers license • Observe a no conflict of interest policy in all dealings of the Council contracts and business

Source: Decree Law No. (34) of 2006 on the promulgation of the Telecommunications Law 47 Appendix Abbreviations

• GDP: Gross Domestic Product

• Real GDP index: Real Gross Domestic Product indexed to the year 2001 as a base case

• GDP per capita at current prices: Total country’s nominal GDP measured at current prices divided by total population

• GDP per capita at PPP: Total country’s nominal GDP measured at purchase power parity prices divided by total population

• MMBTU: Million British Thermal Unit; a unit to measure natural gas

• LNG: Liquefied Natural Gas

Source: ictQATAR 48