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Middle Eastern Digital Media, Broadband and Internet Markets

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Middle Eastern Digital Media, Broadband and Internet Markets A BUDDECOMM REPORT MIDDLE EASTERN DIGITAL MEDIA, BROADBAND AND INTERNET MARKETS 9th Edition Researcher: Tine Lewis Copyright 2010 Published in August 2010 Paul Budde Communication Pty Ltd Tel 02 4998 8144 – Int: 61 2 4998 8144 5385 George Downes Drive Fax 02 4998 8247 – Int: 61 2 4998 8247 BUCKETTY NSW 2250 Email: [email protected] AUSTRALIA Website: www.budde.com.au Middle Eastern Digital Media, Broadband and Internet Markets Disclaimer: The r eader a ccepts a ll r isks a nd responsibility f or l osses, da mages, costs a nd other c onsequences resulting directly o r i ndirectly f rom u sing this report or from reliance on any information, opinions, estimates a nd forecasts c ontained herein. T he i nformation c ontained herein ha s been obtained f rom sources believed to be reliable. Paul Budde Communication Pty Ltd disclaims all warranties as to the accuracy, co mpleteness o r a dequacy of s uch i nformation an d s hall have n o l iability f or er rors, omissions or inadequacies in the information, opinions, estimates and forecasts contained herein. The materials in this report are for informational purposes only. Prior to making any investment decision, it is recommended that the reader consult directly with a qualified investment advisor. Forecasts: The following provides some background to our scenario forecasting methodology: • This report i ncludes w hat we t erm s cenario forecasts. B y d escribing l ong-range s cenarios w e identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band. • The projections shown in the tables in this report are based on our own historical information, as well a s o n t elecommunication s ector s tatistics f rom o fficial a nd n on-official, n ational a nd international sources. We assume a possible deviation of 15-20% around this data. • All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities. Free Consultancy Service: Subscribers to our publications are entitled to use our ‘Free-over-the-Phone’ Consultancy Service. You can use it for any question in relation to any of the information in this publication or to other related issues. We will advise you over the phone or provide you with the necessary contacts for your further information. Internet Website: Continuously updated information on the reports, described in this report, is available on our Website: www.budde.com.au. Copyright: Paul Bu dde Co mmunication P ty L td r eports a re l imited pu blications c ontaining valuable m arket information provided to a select group of customers in response to orders. Our customers acknowledge when ordering that Paul Budde Communication Pty Ltd reports are for our customers’ internal use and not for general publication or disclosure to third parties. No part o f t his r eport m ay be gi ven, l ent, r esold o r di sclosed t o n on-customers w ithout w ritten permission. Furthermore, no part may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise without the permission of the publisher. For information regarding permission, please write to: Paul Budde Communication Pty Ltd, 5385 George Downes Drive, BUCKETTY NSW 2250, AUSTRALIA. © Copyright Paul Budde Communication Pty Ltd, 2010 Website: www.budde.com.au Middle Eastern Digital Media, Broadband and Internet Markets EXECUTIVE SUMMARY EXECUTIVE SUMMARY The broadband market in the Middle East is starting to move Internet a nd b roadband pe netration r ates r emain l ow i n m any c ountries of t he M iddle E ast, a ccess speeds are often relatively slow and tariffs are relatively high compared with other regions in the world but the region is making a strong push towards higher broadband penetration. The young population will be a driver for growth as they grow up with Internet use as the norm. In addition liberalisation and increased competition are producing a greater variety of services and mediums. While broadband growth has taken off in the small, oil-rich and developed countries of the Gulf, wide income disparities across the Arab Middle East region as a whole are echoed by wide disparities in Internet a nd br oadband pe netration r ates. C omputer p enetration l evels a re ge nerally low. Qa tar, Bahrain and UAE all have high household broadband penetration, particularly amongst nationals. The largest country in the region, Saudi Arabia, has low broadband penetration but it is rising quickly. ADSL is the prevailing broadband Internet technology in the region. Only in Israel does cable have a significant market share. Services are provided by HOT Cable Systems Media, which is subject to the same broadband universal service obligations as is DSL network operator Bezeq. This has resulted in broadband being available to 99% of all households. Much i s being pr omised by W iMAX a cross t he M iddle East r egion. I n B ahrain s ervices f rom Z ain Bahrain and Mena Telecom, both with country-wide networks, have rapidly gained over 30% market share. It is also having a significant impact in Saudi Arabia and Jordan. All t he GC C, Israeli a nd T urkish o perators o ffer HSPA mobile b roadband services. Saudi A rabia’s second mobile operator, Mobily, has claimed a 70% share of the country’s broadband market. Fibre t o t he Home ( FttH) is l ikely t o r evolutionise t he br oadband market i n t he m ost a dvanced countries. Both Israel and the UAE will have nationwide fibre networks in the next two years. One of the reasons for slow Internet and broadband subscriber growth in Arab Middle East countries has been a lack of sufficient content in Arabic for users to need a high-speed broadband connection in their daily lives. There has been too much emphasis on hardware and the latest must-have gizmo and not enough on creativity. This is beginning to change with the increasing digital content produced by the f lourishing D irect-to-Home (D TH) satellite T V s ector, i ncluding e ntertainment, e ducational programming, news and sports. At least 60-70% of homes across the Middle East have access to multi- channel T V, m uch of i t free t o ai r D TH satellite. A round 70% of t he 4 00+ ch annels ar e p rivately owned. A further impetus was gained from the sale of Jordan’s Maktoob to Yahoo. This immediately prompted venture capital funds to take a greater interest in the sector. Advertising provides only a very small revenue f or d igital media companies. The U AE’s ad vertisers al lot a 3.5% s hare of t heir budgets t o online advertising compared to a regional average of 1%. Market Highlights Israel Israel has one of the highest household broadband penetration rates in the world. Market competition is fierce, both between ca ble and D SL i nfrastructures a nd between I SPs. C ompetition i s a lso fierce between B ezeq’s s atellite T V s ubsidiary YES a nd c able T V operator HOT. Israel’s v ery h igh broadband penetration r ate pr ovides g reat pot ential f or t riple play a nd digital m edia market developments and competitors are manoeuvring for position. Bezeq commercially launched an NGN in September 2009. It had 374,000 subscribers connected to the network at end-2009 and 580,000 by early May 2010 (around 25% of Israeli households). Bezeq plans to make t he NG N a vailable t o a pproximately 50% of I sraeli ho useholds by e nd-2010 a nd 9 0% of households by end-2012. The network is ‘fibre to the curb’ and allows for an up to 50MB bandwidth offering. © Copyright Paul Budde Communication Pty Ltd, 2010 1 Website: www.budde.com.au Middle Eastern Digital Media, Broadband and Internet Markets EXECUTIVE SUMMARY Jordan Licensed WiMAX operators are beginning to make inroads into the Jordanian broadband market, with over 17% market share of the small broadband market by late 2009. Jordan i s a n i mportant ba se f or r egional digital media a nd Internet c ompanies a nd s eems to be particularly successful in b reeding v iable s tart-up c ompanies. Whilst Dubai i s h ome t o t he r egional HQs of more established companies, Jordan’s cheaper operational costs, relatively open economy and pool of talent favour younger companies. The best known of these is the Maktoob Group. In August 2009, the Maktob.com portal, with its news, financial information and social networking services, was bought by Yahoo!, at a purchase price variously reported as being between US$75 and US$85 million. Services have been co-branded as ‘Yahoo! Maktoob’. Saudi Arabia The broadband market has been slow to grow in Saudi Arabia. Penetration rates for both fixed lines and ADSL are very low for the level of development, only partly due to large household sizes. This has provided f ertile gr ound f or t he de velopment of m obile a nd wi reless br oadband s ervices, with alternative operator Mobily claiming to have the busiest HSPA network in the world Whilst few Middle East media companies are based in Saudi Arabia, most of the larger ones are Saudi owned, including the most watched FTA channel MBC, two out of the three regional satellite pay TV operators, and TV and digital media company Rotana.
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