Middle East operators urged to evolve

In the Middle East, as elsewhere, the convergence of media and telecoms is creating fresh opportunities as well as new difficulties and operators in the market need to develop new business models if they are to succeed. The warning comes from a report published by Informa Telecoms & Media this week, identifying the strategies for success in the rapidly-growing market for online and mobile content in the Middle East and North Africa.

Key enabling factors include the strong growth in both fixed and mobile broadband in the MENA region. The number of fixed broadband subscriptions in the region grew by about 160 per cent in the three-year period to end-June 2011. While the number of mobile broadband subscriptions in the region increased from 919,000 in 1Q08 to 6.9 million in 1Q11. The use of smartphones is also growing strongly, with smartphone penetration in Saudi Arabia forecast to rise from 25 per cent at end-2011 to 48.63 per cent at end-2016.

Additionally, strong growth in the use of social-media services, which was accelerated by the events of the Arab Awakening, demonstrates the interest in the region in new digital media content and formats. The region’s nascent e-commerce sector is also seeing a rise in activity.

However, there are constraints on digital media in the region, including the limited availability and affordability of data services in the less-developed markets; a lack of attractive local content; high levels of content piracy; and an unpreparedness to pay for goods, services or content online.

These are barriers that must be overcome, because the telecoms industry’s best prospects for growth now lie in data services rather than voice – while the media industry must adapt to viewers’ increasing preference for digital media and new content formats.

Google and Facebook have gone to considerable lengths to localize and Arabicize their services and that is an important factor in their success in the regional market, according to Reda Haidar, Dubai-based consultant for Informa. “Localization and Arabicization are essential if international players are to reach a mass market in the Middle East,” said Haidar.

Investments in the region by Yahoo and LivingSocial demonstrate the interest that international players have in the regional digital-media market. But players from within the region have the advantage of local knowledge, which is a strength that international entrants find hard to replicate.

“In the Middle East, as elsewhere, the convergence of media and telecoms is creating fresh opportunities as well as new difficulties,” said Matthew Reed, Informa’s head of mobile research for the Middle East and Africa. “In many cases, operators, media companies and others with a stake in the sector need to develop new business models if they are to succeed. Few, if any, have the option to stand still.”