Vodafone Pays US$2.1 bil. for Qatar Licence

Vodafone officially won the Qatari second mobile licence in December last year (see Qatar: 11 December 2007: Vodafone Consortium Wins Second Qatari Mobile Licence) and is finalising the legal framework to go ahead with the launch of services. In a statement issued from Doha, the Supreme Council of Information and Communication Technology (ictQATAR), Qatar's telecom regulator, said today that Vodafone/Qatar Foundation Consortium will pay a fee of 7.716 billion riyals for the second mobile licence in the country. In a statement it said: "The licence will be issued to the new company once the legal details relating to the formation of the Licensee Company are finalised." ictQATAR also announced the shareholding structure of the Licensee Company, which will include Vodafone/Qatar Foundation Consortium (45%), public shareholders through an IPO (40%), and Governmental/Qatari Institutional Shareholding (15%). The IPO for the 40% of the shares to be held by the public will be held in or before 30 November 2008, which is now the latest date for the IPO. The regulator also stated that Vodafone is expected to launch services in the first quarter of 2009.

In Qatar, Qtel currently provides fixed-line and mobile services and has already deployed 3G services such as mobile email, mobile internet, and more innovative services including 3G MobileCam (see Qatar: 3 October 2007: Qtel Launches MobileCam in Qatar for Home Security), a wireless camera which can be placed in customers’ homes or offices and accessed via 3G video calls initiated by a 3G mobile phone from anywhere and at any time. Market conditions for Vodafone will be fairly tough considering mobile penetration in the country is above 120% and the population is only 930,000.

Outlook and Implications:

• Licence Cost: The Qatari licence is relatively expensive considering other prices of licences offered within the region. Towards the end of last year, STC won Kuwait's third mobile licence for US$907.6 million and Zain won the third mobile licence in Saudi Arabia for US$6.1 billion. Thus STC has paid less than half of what Vodafone will pay and although Zain has paid three times more than Vodafone for its Saudi licence, the country has a much lower penetration of 75% equating to approximately seven million people without a mobile phone. The 40% offering on free float is a fairly hefty chunk; however, it is essential that the operator raise capital from the country's citizens. In addition to this, the IPO will significantly increase public awareness of the company through publicity by making their products known to a new group of potential customers.

• Vodafone Previous Middle-Eastern Investments: Within the Middle East, Vodafone previously has a partner network agreement with MTC in Kuwait and Bahrain, which now has been rebranded as Zain. When MTC-Vodafone entered the Bahraini market in December 2003, it also broke the mobile monopoly of the incumbent Batelco and secured a massive 19% market share after one year. Since Batelco's provision of mobile data services in Bahrain, MTC-Vodafone's market share acquisition reached a plateau at about a 25-26% market share in 2005 and 2006.

• Market Share Potential: Although Vodafone will only have one competitor in Qatar, it faces a very tough task in taking Qtel's market share. With very high mobile penetration levels in a low populated country, Vodafone will have to offer more innovative and competitive services to really attract new customers. In the United Arab Emirates last year, du launched a mobile service which also broke Etisalat’s mobile monopoly; at the time, mobile penetration was also 120%. Within one year of its launch du acquired one million customers, equating to a market share of 15%, while mobile penetration in the country now stands at 170%. du benefited from the country's economic growth and increasing business and tourist users, but also deployed like-for-like mobile services throughout this year to ensure that it maintained competition with Etisalat.

• ARPU Levels: Currently Qtel enjoys ARPU levels of US$65, which is one of the highest levels in the Middle East. As GDP per capita is close to the US$30,000 mark, ARPU levels are not expected to fall significantly. Both operators will compete on innovative services rather than cost, which will lead to greater offerings of choice and innovation to the Qatari mobile market.

Find out more about Same-day Analysis