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FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
RESEARCH FORECAST REPORT
FTTx IN THE MIDDLE EAST AND NORTH AFRICA: TRENDS AND
FORECASTS 2015–2020
RUPERT WOOD
analysysmason.com
© Analysys Mason Limited 2016
FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
About this report
This report analyses and forecasts coverage (premises passed), GEOGR APH IC AL COVER AG E KEY METR ICS
conversion (active connections as a percentage of premises
passed) and capex for FTTx architecture and technologies during Region modelled: Coverage (premises passed)
2011–2020. It is based on several sources, including: Middle East and North Africa Conversion (premises with active
(MENA) connections as a percentage
Analysys Mason’s internal research, including our core of premises passed)
telecoms forecasts, our fixed data traffic forecasts, and our Countries modelled individually Capex (split into network and
detailed modelling of the costs of technologies and Algeria connection)
deployment. Our modelling and assumptions are informed by Egypt Split by technology:
professionals in our 12 offices worldwide, including Dubai. Kuwait
Morocco FTTC/VDSL
ongoing engagement with stakeholders in the FTTx market, Oman FTTB/VDSL
including operators and vendors. Qatar FTTB/LAN
Saudi Arabia FTTP (split into incumbent and
United Arab Emirates (UAE) alternative operator)
WHO SHOULD R EAD T HIS R EPOR T
cable DOCSIS3.0 (capex not
This report provides strategic planners with detailed and comprehensive Detailed country commentary provided)
insight into the development of FTTx in comparable markets, enabling
them to understand what level and type of investment is appropriate, Oman
and where opportunities lie. Qatar
Saudi Arabia
For equipment vendors, construction businesses and component
suppliers, this report shows the scale of opportunity in FTTx. United Arab Emirates (UAE)
The model can also serve several other functions beyond the immediate
scope of this report. It can be used to provide the costs of alternative
scenarios, including different mixes of technologies, different demand
profiles in different geotypes, and different completion dates. If you wish
to explore these options, please contact the author.
© Analysys Mason Limited 2016 2
FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Contents
5. Executive summary 18. Country-level trends
6. Executive summary 19. Oman: The Omani government is building a new non-profit neutral national
FTTP wholesale network
7. Worldwide trends
20. Qatar: Despite government intervention, a quasi-monopoly has emerged
8. Worldwide: By 2020, over half the world will have access to
FTTx or cable, which will make up 80% of broadband connections 21. Saudi Arabia: Attempts to increase coverage and competition have stalled
9. Worldwide: Investment in FTTP will peak in 2015, and follow 22. UAE: UAE was one of the first countries in the world to reach universal FTTH
different paths in developed and emerging economies coverage
10. Worldwide: Interest in copper acceleration is strong in Europe, 23. Forecast methodology and assumptions
but much of the rest of the world is going straight to FTTP
29. Definition of geographical regions
11. Worldwide: Older, purely cost-based, models are giving way to
30. Methodology for coverage and conversion
newer thinking about the optimal use of capital resources
31. Methodology for capex
12. Worldwide: The service use case for FTTx is compelling, and
the multi-service use case for FTTP will shape technology strategy 32. About the author and Analysys Mason
13. Worldwide: Interest in FTTx is growing in emerging economies 33. About the author
14. Worldwide: Conversion rates for fibre-based access are 34. About Analysys Mason
improving, and forced migration from legacy access is increasing
15. Regional trends
16. Middle East and North Africa: Outside oil-rich states, there is
little urgency to invest in renewing fixed access
17. Middle East and North Africa: Take-up of FTTP is strong in
places where it is available
© Analysys Mason Limited 2016 3
FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
List of figures
Figure 1: NGA premises passed by technology, Middle East and North Africa, Figure 13: NGA coverage by technology, Middle East and North Africa, 2014–
2014–2020 2020
Figure 2: Active NGA connections, by technology, Middle East and North Africa, Figure 14: FTTx capex by technology, Middle East and North Africa, 2014–2020
2014–2020
Figure 15: Active connections per premises, by technology, Middle East and
Figure 3: Conversion rates for NGA overall, and FTTP and FTTx, worldwide, North Africa, 2014–2020
2011–2020
Figure 16: Conversion rates for NGA overall, and FTTP and FTTx , Middle East
Figure 4: NGA coverage by technology, worldwide, 2011–2020 and North Africa, 2014–2020
Figure 5: Fixed broadband active connections, by technology, and NGA’s share Figure 17: FTTP premises passed and connected, and FTTP conversion rates,
of connections, worldwide, 2011–2020 Gulf Co-operation Council states, 2014–2020
Figure 6: FTTx capex by market type, and availability and affordability of NGA, Figure 18: FTTx connections and coverage, Oman, 2013–2020
worldwide, 2013–2020
Figure 19: FTTx connections and coverage, Qatar, 2013–2020
Figure 7: Incumbent operator FTTC or FTTB coverage, by region, 2015 and
Figure 20: FTTx connections and coverage, Saudi Arabia, 2013–2020
2020
Figure 21: FTTx connections and coverage, UAE, 2013–2020
Figure 8: Cost of deploying FTTx by centile, new and old cost models
(illustrative) Figure 22: Regional breakdown used in this report
Figure 9: Bandwidth consumed by pixel resolution and type of MPEG-4 Figure 23: Coverage and conversion model outline
compression
Figure 24: Capex model outline
Figure 10: Emerging economies’ shares of worldwide FTTx premises passed and
connected, and emerging economies’ FTTx coverage, 2011–2015
Figure 11: Conversion rates for NGA by technology, worldwide, 2011–2015
Figure 12: FTTx net additions by technology, worldwide, 2011–2015
© Analysys Mason Limited 2016 4FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
EXECUTIVE SUMMARY
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 5FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Executive summary MENA
There is a stark contrast between complete overhauls of almost Figure 1: NGA premises passed by technology, Middle East and North Africa, 2014–2020
monopoly fixed access in some markets and very little
movement in others. 25
Premises (million)
20
Most NGA in the region is FTTP. The near-absence of cable
broadband has reduced the commercial impetus to invest in new 15
NGA. In areas where FTTP has been rolled out, conversion rates 10
have been very good as is typical with replacement networks. 5
There are very few second fixed NGA infrastructures: Saudi Arabia
0
and Qatar have them, but take-up on the second is markedly lower
2014 2015 2016 2017 2018 2019 2020
than on the incumbent NGA. Unusually for the region, the UAE has
recently introduced mandated bitstream network sharing on the FTTP FTTx but not FTTP Cable but not FTTx
two hitherto geographically distinct FTTP networks. Source: Analysys Mason
Beyond the GCC area, FTTx is limited, and political unrest makes it Figure 2: Active NGA connections, by technology, Middle East and North Africa, 2014–2020
unlikely that this will change soon. Telecom Egypt began
upgrading some copper plant to fibre in 2014. It aimed to pass 4 10
Connections (million)
million premises by the end of 2015, but it is unclear how much
8
has been achieved. FTTx roll-out has started in Iran, and was
made available in limited locations in mid-2015. Iranian Net 6
Communication and Electronic Services aims to provide 20Mbps 4
to a population of 10 million, but the timetable is unclear. 2
The MENA region accounted for 4.0% of premises worldwide in 0
2015, 1.3% of premises passed by FTTP and 0.7% of premises 2014 2015 2016 2017 2018 2019 2020
passed by any NGA technology. The region also had 1.2% of the FTTP Other FTTx Cable
world’s FTTP connections and 0.5% of NGA connections.
Source: Analysys Mason
© Analysys Mason Limited 2016 6FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
EXECUTIVE SUMMARY
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 7FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: By 2020, over half the world will have access to
FTTx or cable, which will make up 80% of broadband connections
Fixed broadband continues to grow worldwide. This is mainly Figure 4: NGA coverage by technology, worldwide, 2011–2020
because the levels and types of usage that are typical of fixed
broadband continue to outstrip the capabilities of mobile 60%
Percentage of premises
networks, in terms of either total system capacity or achievable 50%
Cable only
reliable speeds. Future demand is unquestionably strong.
40%
The rationale for investment comes from evolving end-user needs, 30% Other FTTx
as well as from the need to create lower-opex fixed networks and but no FTTP
to have highly distributed transmission networks in place for 20%
future mobile and wireless requirements. 10% FTTP
The rest of this section outlines the principle drivers and the level 0%
of investment that will be required to supply these outcomes. 2011 2013 2015 2017 2019
Source: Analysys Mason
Figure 3: Conversion rates for NGA overall, and FTTP and FTTx, worldwide, 2011–2020 Figure 5: Fixed broadband active connections, by technology, and NGA’s share of
connections, worldwide, 2011–2020
80% 1000 100%
Percentage of connections
70% 69%
Connections (million)
800 80% 80% FTTP
premises passed
60%
Percentage of
50% NGA Other FTTx
46% 600 60%
40% FTTP Cable
30% FTTx 400 38% 40% Non-NGA
20%
200 20% NGA's share
10%
0% 0 0%
2011 2013 2015 2017 2019
2014
2019
2011
2012
2013
2015
2016
2017
2018
2020
Source: Analysys Mason Source: Analysys Mason
© Analysys Mason Limited 2016 8FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: Investment in FTTP will peak in 2015, and follow
different paths in developed and emerging economies
In developed markets, fixed broadband is still a strong, growing Figure 6: FTTx capex by market type, and availability and affordability of NGA, worldwide,
component of operator revenue, and it exhibits less volatility than 2013–2020
80 60%
Percentage of premises
mobile. For infrastructure-based players that offer both retail and
Capex (USD billion)
wholesale connectivity, fixed broadband is also one of the most 50%
60
profitable components of telecoms. Within the fixed broadband 40%
sector, competition from cable operators spurs continued 40 30%
investment. Some integrated multinational operators have 20%
retrenched their business to markets where they can compete as 20
10%
the leading integrated operator. Cash from sales of non-core 0 0%
operations has allowed them to concentrate investment on FTTP 2013 2014 2015 2016 2017 2018 2019 2020
in core markets. The macro-economic environment is slightly
improved in Europe and North America, although fixed broadband Developed Emerging Availability Affordability
investment (and revenue) has historically been less influenced by Source: Analysys Mason
macro-economic effects than mobile.
FTTx investment in developed economies will remain strong for the
The European trend for mobile operators to invest in fixed rest of the decade. However, investment in emerging economies
broadband has spread to much of the rest of the world. Where will be limited by an affordability threshold. Global median
revenue growth has started to falter, mobile operators have household income is about USD10 000 per year, and assuming
pursued a number of approaches to diversification – including subscribers’ willingness to spend 2.5% of income on a connection,
investment in FTTx. Part of the rationale is a defence of revenue in fibre will need to cost as little as USD20 per month (or, for
the face of service bundling, but a further factor is ownership of example, what Telkom Indonesia charges for 10Mbps) to reach
dense optical distribution networks for future mobile transport. 50% of households. The delta between forecast investment and
Vendors have also reflected this mood of greater confidence. For affordability is narrowing. However, a more multi-service approach
example, in late 2014, Huawei significantly expanded its R&D that encompasses mobile backhaul and enterprise will aid the
commitment to ultra-fast fixed broadband, claiming that the business case. However, operators’ focus in emerging economies
period 2014–2017would be a turning point for fixed broadband. will be directly on conversion.
© Analysys Mason Limited 2016 9FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: Interest in copper acceleration is strong in Europe,
but much of the rest of the world is going straight to FTTP
Copper solutions are preferred by northern European incumbent Figure 7: Incumbent operator FTTC or FTTB coverage, by region, 2015 and 2020
operators facing a strong presence of cable operators that are
often taking market share. Roll-out speed is critical in these highly 60% 2015
Percentage of premises
competitive markets. Deutsche Telekom (in Germany, at least) and 50% 2020
Openreach (British Telecommunications) in the UK appear fully 40%
committed to a hybrid fibre-copper roadmap. In addition, the
Australian operator nbn has shifted from pure FTTP to a 30%
combination of HFC, FTTC and FTTP in its wireline coverage areas. 20%
Improvements in copper-based access technologies (variants and 10%
hybrids of VDSL and G.fast) have been faster than anticipated, 0%
particularly with regard to capacity over longer loops. This reduces WE CEE MENA SSA EMAP DVAP NA LATAM
the need to roll out additional fibre to new micronodes.1 VDSL2 Source: Analysys Mason
vectoring has had some limited success, but in some cases looks
likely to be bypassed by G.fast (which requires vectoring) or any of The strongest FTTP roll-outs have come from state-owned
the intermediate FTTC-oriented solutions, such as Alcatel-Lucent’s businesses or state-sanctioned monopolies. In pure numerical
Vplus or Huawei’s SuperVector. We expect most G.fast terms, China dominates, but there are further examples of strong
deployments to be FTTC-based and not FTTdp, although this roll-outs in some predictable places – such as Singapore – or
depends on the topology of each operator’s copper network. unexpected places, such as Uruguay. However, other state-
Some incumbent operators appear to be changing direction. AT&T financed schemes have pursued a mix of FTTC/B and FTTP
and CenturyLink in the USA have previously pursued FTTC, but are (including HSBB in Malaysia and Indonesia, as well as some
rolling out more FTTP. GVT in Brazil has been one of the strongest earlier deployments in China), and it is in these markets that
proponents of FTTC outside Europe and North America and FTTC/B combined with Wi-Fi access tails has started to emerge as
appears to be shifting to FTTP. European incumbents eircom, an alternative to xDSL or G.fast.
Orange Polska and Telecom Italia are proposing more FTTP.
1 See Analysys Mason’s FTTdp: the opportunities for deployment. Available at
www.analysysmason.com/FTTdp-Jul2015.
© Analysys Mason Limited 2016 10FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: Older, purely cost-based, models are giving way to
newer thinking about the optimal use of capital resources
Much of the planning for NGA was informed by an assumption that Figure 8: Cost of deploying FTTx by centile, new and old cost models (illustrative)
economies of scale made FTTP viable only in densely populated
Lower-than-expected costs
areas, and that less dense areas would have to make do with
Cost per premises passed
Higher-than-expected and higher-than-expected
FTTC or, failing that, wireless access. However, the reality for many costs demand
operators – especially in mature economies – has turned out to Savings can be made Savings can be made New
be quite different from the models for several reasons. using FTTx/G.fast. in urban areas
Old
The additional costs and delays associated with ducting fibre
and MDU access in urban areas are unexpectedly high.
City centres do not always have best demand-side metrics,
especially where household size is small. Wireless substitution 10 20 30 40 50 60 70 80 90 100
may actually be more prevalent in 4G and 4.5G cities. In Centile (100 = least dense)
Source: Analysys Mason
middle- and high-income markets, the policy of deploying full
FTTP first to high-value urban property has not always served as
a particularly reliable measure for the broader viability of FTTP. As demand matures, operators may want to maximise coverage
for given service sets – and within a given capital budget. This
Rural fixed wireless is inadequate for the current and forecast could involve reducing expenditure in urban areas by using G.fast,
volume of traffic on broadband, and upgrades to wireless and recycling the savings to roll out more fibre to rural areas. If
physical infrastructure can be as expensive as FTTC. Moreover, governments recover state-aid from assisted areas where FTTx
aerial fibre can be cheaply deployed in in rural areas, which take-up has been strong (for example, this has been the case in
makes the cost of rural fibre lower than anticipated. the UK), this can be redeployed for more technologically ambitious
Rural areas in developed economies often have significantly coverage in even more challenging areas. The outcome of this may
better demand-side metrics than urban ones, partly because of be that FTTP is the ‘natural’ fit for less dense areas, and FTTB/C
a lack of competition from cable, and partly because existing the more natural fit for dense areas in developed economies at
ADSL networks are inadequate for modern needs. least, but possibly also some middle-income economies.
© Analysys Mason Limited 2016 11FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: The service use case for FTTx is compelling, and
the multi-service use case for FTTP will shape technology strategy
It is difficult to judge customers’ needs, and what they in fact buy Figure 9: Bandwidth consumed by pixel resolution and type of MPEG-4 compression
is not always a good indicator of this. Many believe that buying
higher speeds will address all issues in end-to-end services. In 50
some markets, customers get superfast or even ultra-fast speeds AVC (high)
Bandwidth (Mbps)
by default. However, in markets where they have a choice, 40 HEVC (high)
customers have compelling reasons to consider NGA as essential 30 AVC (low)
rather than a luxury. 20
HEVC (low)
Even good ADSL2+ connections will be severely strained by 4K 10
formats, and we expect 4K to become an important component 0
of the video landscape within the next 2–3 years.1 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
The number of fixed-compatible devices (including mobile Vertical pixels (thousand)
devices) per household is expanding rapidly. Fixed/Wi-Fi Source: Analysys Mason
remains the default indoor network choice for most users.
The case for next-generation FTTP (10G-PON and NG-PON2) is also
End users want rapid upload and download, not just streamed growing. This is partly driven by halo-effect marketing: customers
services. Therefore, codec bandwidths do not provide a useful may be attracted to a provider that offers speed greater than
measure of need. Cloud services make this more important. 1Gbps, even if they do not buy it. However, the use cases for FTTP
The causal relation between access speed and usage is unclear, beyond fixed broadband are compelling, and are likely to become
but may provide an indication of what users feel they need. The more so as 5G, Cloud-RAN and ever-more virtualised enterprise
point at which usage levels cease to be affected by access speed environments become reality. In particular, NG-PON2 (TWDM-PON)
appears to have now exceeded ADSL2+ levels. For example, in the is beginning to appear in field trials in a basic form, and opens up
UK it stood at between 30Mbps and 40Mbps in 2014. new revenue possibilities for the future that could help bring
forward payback for FTTP.2
1 See Analysys Mason’s Connected TVs and 4K video are driving next-generation fixed access 2 See Analysys Mason’s Harnessing the value of TWDM-PON. Available at
investment. Available at www.analysysmason.com/4K-NGA-Aug2015. www.analysysmason.com/TWDM-PON-2015.
© Analysys Mason Limited 2016 12FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: Interest in FTTx is growing in emerging economies
The plateauing of mobile revenue in some developed markets has Figure 10: Emerging economies’ shares of worldwide FTTx premises passed and connected,
led mobile network operators (MNOs) to invest in fixed networks, and emerging economies’ FTTx coverage, 2011–2015
either through M&A or through organic investment. Infrastructure- 70%
Percentage of premises
based fixed businesses tend to have more stable revenue, tend to 60%
be more profitable than mobile, allow operators to experiment Share of premises:
50%
with quad-plays (if they so wish), and offer long-term synergies on Passed
transmission. In some emerging economies, MNOs are 40%
Connected
experiencing – or may reasonably anticipate – similar effects. 30%
Moreover, some integrated incumbents that have previously 20%
concentrated their investments in mobile are stepping up 10% Coverage
investment in fibre-based access – not only as a defensive 0%
measure against churn, but also because there are new 2011 2012 2013 2014 2015
opportunities for them. Recent movers into FTTx from a Source: Analysys Mason
predominantly mobile position include the following.
Telefónica Brasil (Vivo and GVT): Telefónica’s acquisition of GVT
China Mobile, faced with concerns about being left behind as a gives it national FTTx coverage, and the opportunity to develop
mobile-only player, has ambitious plans to catch up with its FTTP coverage that augments GVT’s mainly FTTC networks.
main competitors, China Telecom Corporation and China
Unicom, which had rolled out FTTP to 41% of China by mid-2015. There are many instances of FTTP roll-out to high-end properties in
poorer markets. Even in very low GDP markets, some FTTP is
Thailand’s largest MNO, AIS, launched 1Gbps access in 2015, appearing, especially where the local fixed incumbent offers very
and has ambitious plans to reach 10 million properties (or 60% little: Kenya has three FTTP operators, for example. Unlike mobile,
of the country) with a mix of FTTP and VDSL by 2020. FTTx has a hard threshold for affordability. Therefore, income
Mobily in Saudi Arabia has invested heavily in FTTP (in addition distribution (measured as GINI), as well as average GDP per head
to an LTE fixed wireless network), and aims to reach 1.5 million of population, has a major effect on the viability of roll-out.
properties (about one quarter of the country) by the end of 2016.
© Analysys Mason Limited 2016 13FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Worldwide: Conversion rates for fibre-based access are
improving, and forced migration from legacy access is increasing
FTTP has significantly better conversion rates worldwide than FTTC Figure 11: Conversion rates for NGA by technology, worldwide, 2011–2015
or FTTB/VDSL, for several reasons.
60%
Apartment networks are often rolled out to all apartments,
50% FTTC/VDSL
premises passed
which makes customer upgrade to FTTP simpler.
Percentage of
40% FTTB/VDSL
Many local incumbents simply replace copper with fibre, which
30%
leaves the subscriber with no choice of copper-based service. FTTB/LAN
20%
In most countries, FTTC cannot legally be marketed as a ‘fibre’ FTTP
10%
service, although FTTB/VDSL can usually be marketed as such. FTTx
0%
In developing markets with big FTTP roll-outs, legacy copper is 2011 2012 2013 2014 2015
inadequate for existing needs, and there is less likely to be a
Source: Analysys Mason
competing cableco present. Therefore, upgrades may be seen
as more desirable. Figure 12: FTTx net additions by technology, worldwide, 2011–2015
FTTB/LAN is, in many respects, a legacy technology: although 100
conversion rates are high, coverage is not growing fast in the main
markets where it is present, and in many cases the providers now FTTC/VDSL
Net additions (million)
80
face competition from incumbents that typically deploy FTTP. FTTB/VDSL
60
Net FTTP additions worldwide increased slightly in 2014, FTTB/LAN
compared with 2013. However, we expect a much larger increase 40 FTTP (China)
in 2015, driven primarily (though not exclusively) by the massive
20 FTTP (rest of
FTTP roll-out in China. Net additions for FTTC and FTTB were
the world)
slightly down in 2014, but are expected to increase again in 2015
when operators reduce premiums and domestic bandwidth needs 0
increase. 2011 2012 2013 2014 2015 Source: Analysys Mason
© Analysys Mason Limited 2016 14FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 15FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Middle East and North Africa: Outside oil-rich states, there is MENA
little urgency to invest in renewing fixed access
The variations in terms of investment in FTTx between markets Figure 13: NGA coverage by technology, Middle East and North Africa, 2014–2020
reflect the difference in income levels between the richest and
Percentage of premises
poorest countries in the region, which has very little infrastructure- 25%
based competition from cable. For example, Qatar and the UAE 20%
have 100% coverage for FTTP. Saudi Arabia incumbent SBC and 15%
MNO Mobily are gradually rolling out FTTP. Mobily is one of the few
10%
MNOs in the region to invest in fixed broadband infrastructure,
although this is now quite common in the Asia–Pacific region. For 5%
years, Oman Telecommunications (Omantel) offered only fairly 0%
2014
2015
2016
2017
2018
2019
2020
basic ADSL, but has started to use the FTTP infrastructure being
rolled out by the state-owned Oman Broadband Company. Bahrain
is also in a strong build-out phase. FTTP FTTx but not FTTP Cable but not FTTx
The fixed telecom market has not been liberalised in Kuwait,
which has little modern fixed access infrastructure, and despite Figure 14: FTTx capex by technology, Middle East and North Africa, 2014–2020
plans, we see little impetus to change this. In the Arab world
beyond the GCC, FTTx is limited, and political unrest in many of 1.2
Capex (USD billion)
these markets makes it unlikely that this will change soon. 1.0
0.8
Telecom Egypt began the process of upgrading some copper 0.6
access to fibre in 2014. The aim was to pass 4 million premises by 0.4
the end of 2015, but it is unclear how much has been achieved. 0.2
FTTx roll-out has started in Iran, and was made available in limited 0.0
2014
2015
2016
2017
2018
2019
2020
locations in mid-2015. Iranian Net Communication and Electronic
Services aims to provide 20Mbps to a population of 10 million, but
timescales are unclear. FTTP Other FTTx
© Analysys Mason Limited 2016 16FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Middle East and North Africa: Take-up of FTTP is strong in MENA
places where it is available
There is good take-up of FTTx (almost all FTTP) where available. Figure 16: Conversion rates for NGA overall, and FTTP and FTTx , Middle East and North Africa,
This, in part, indicates that replacement is preferred to overlay 2014–2020
strategies. Fixed broadband usage tends to be heavy in this 80%
Premises connected / premises
region, which may reflect its indoor culture. One issue for FTTP 70%
players will be how to convert pay-TV subscribers (all satellite- 60%
based) to broadband-based access. 50%
FTTP
passed
40%
In GCC countries, FTTx ARPU can be astonishingly high even with 30% FTTx
such high conversion rates. NRAs will have to balance public 20% NGA
benefit considerations with economic expediency. 10%
In Arab countries outside the GCC, and in Iran, FTTx coverage is 0%
2014
2015
2016
2017
2018
2019
2020
too selective for conversion levels to be meaningful.
Figure 15: Active connections per premises, by technology, Middle East and North Africa, Figure 17: FTTP premises passed and connected, and FTTP conversion rates, Gulf Co-
2014–2020 operation Council states, 2014–2020
10% 80% 80%
9%
Premises connected / total
Share of all premises
Conversion rate
8% 60% 60%
7%
6% 40% 40%
premises
Cable
5%
4% Other FTTx 20% 20%
3% FTTP 0% 0%
2%
2014 2015 2016 2017 2018 2019 2020
1%
0% Premises connected Premises passed, not connected
2015
2020
2014
2016
2017
2018
2019
Conversion rate
© Analysys Mason Limited 2016 17FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 18FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Oman: The Omani government is building a new non-profit
neutral national FTTP wholesale network
Oman has historically had very limited fixed broadband (FBB)
FIXED BROADBAND MARKET KPIs 1H 2015
access, and, with a high proportion of small-town and rural
inhabitants for the region, has relied mainly on legacy ADSL
with slow speeds, and on fixed–wireless LTE with datacaps.
FTTx
In 2014, a new non-profit state-owned wholesale entity OBC was $
established to use wastewater infrastructure to deliver FTTP
initially to Muscat but subsequently to all urban areas by 2030
29% 9% 87.5
PER MONTH
and some rural areas starting in 2020. OBC aimed to pass FTTP
100 000 properties by the end of 2015.
The main two operators, Omantel and Ooredoo Oman, signed an
agreement in April 2015 to use OBC networks. Take-up so far has
not been disclosed. TELECOMS MARKET LEADERS, 1H 2015
Figure 18: FTTx connections and coverage, Oman, 2013–2020
500
Premises (thousand)
Coverage
400 48% 31%
42%
300
Penetration 32% 58%
200 69%
100
Conversion 65%
0
2013 2014 2015 2016 2017 2018 2019 2020 Omantel Ooredoo Omantel Ooredoo
FTTx connections FTTx passed
© Analysys Mason Limited 2016 19FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Qatar: Despite government intervention, a quasi-monopoly
has emerged
In 2012 the Qatari government established Qatar National
FIXED BROADBAND MARKET KPIs 2014
Broadband Network (QNBN), to roll out an open-access network,
but this has been eclipsed by Ooredoo’s FTTP roll-out.
The state’s twin aims for QNBN were near-universal 100Mbps
coverage and a choice of at least two providers. Ooredoo’s $
response to QNBN was to roll out its own closed fibre network
independent of the QNBN. Vodafone, the number two in mobile,
73% 88% 87.5
PER MONTH
initially agreed to acquire QNBN, but subsequently backed out. FTTP
Ooredoo is utterly dominant in FTTx provision. Its entire network is
FTTP, and conversion rates are already very high. The QNBN will
survive largely as a dense backhaul network, though it remains
the basis for Vodafone’s offer. TELECOMS MARKET LEADERS, 2014
Figure 19: FTTx connections and coverage, Qatar, 2013–2020
500 3%
Coverage 100%
Premises (thousand)
400 34%
85%
300 Penetration
66%
200
97%
100
0 Conversion 85%
2013 2014 2015 2016 2017 2018 2019 2020 Ooredoo Qatar Vodafone Ooredoo Qatar Vodafone
FTTx passed FTTx connections
© Analysys Mason Limited 2016 20FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Saudi Arabia: Attempts to increase coverage and competition
have stalled
Poor FTTH coverage means that FBB penetration is falling.
FIXED BROADBAND MARKET KPIs 2014
Incumbent operator STC had rolled out FTTH to over 1.4 million
premises) by the end of 2014.Its network replaces the legacy
ADSL network. Its main competitor Mobily had relied on a fixed
FTTx
wireless network to deliver broadband (since there is no wholesale $
obligation on STC), but given huge traffic loading has itself rolled
out FTTH to over 1 million premises through subsidiary Bayanat Al
51% 25% 87.5
PER MONTH
Oula. STC and Mobily’s access networks largely overlap. FTTP
Conversion rates are much lower than in other GCC countries and
FTTx coverage is still limited to densely populated areas.
Competition to STC remains fractured, despite attempts at
consolidation, and this limits expansion of coverage. TELECOMS MARKET LEADERS, 2014
Figure 20: FTTx connections and coverage, Saudi Arabia, 2013–2020
3000 Coverage 17%
Premises (thousand)
2500 38%
45% 45%
2000
55%
1500 Penetration 20%
38%
1000
500 Conversion 54%
0
2013 2014 2015 2016 2017 2018 2019 2020 STC Mobily Zain STC Others
FTTx passed FTTx connections
© Analysys Mason Limited 2016 21FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
UAE: UAE was one of the first countries in the world to reach
universal FTTH coverage
FTTH coverage reached 100% in 2013, FTTH penetration at
FIXED BROADBAND MARKET KPIs 1H 2015
2015 was 65% and ARPU is very high, so the focus now is on
balancing innovation and competition.
Until October 2015, users had no choice of provider because du
was limited to newer parts of Dubai. Bitstream access which $
enables du and Etisalat to share each other’s network, was
launched in at that date.
74% 86% 87.5
FTTP PER MONTH
This could lead to ARPU erosion. The two operators are pushing
hard on multi-play bundles and ever higher speeds to maintain
their existing level of ARPU. By the end of 2015, there were
residential packages from both operators offering 500Mbps and
1Gbps retailing at well over USD1000 per month. TELECOMS MARKET LEADERS, 1H 2015
Figure 21: FTTx connections and coverage, UAE, 2013–2020
2500 15%
Coverage
Premises (thousand)
100
2000 %
43%
1500 84%
57%
Penetration
1000
85%
500
Conversion 84%
0
2013 2014 2015 2016 2017 2018 2019 2020 Etisalat du Etisalat du
FTTx passed FTTx connections
© Analysys Mason Limited 2016 22FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 23FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Definition of geographical regions
Figure 22: Regional breakdown used in this report
The Middle East
and North Africa
Algeria
Bahrain
Egypt
Iran
Iraq
Jordan
Kuwait
Lebanon
Libya
Morocco
Oman
Palestine
Qatar
Saudi Arabia
Syria
Tunisia
United Arab Emirates
Yemen
Source: Analysys Mason
© Analysys Mason Limited 2016 24FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Methodology for coverage and conversion
Figure 23: Coverage and conversion model outline
Total
premises
Adjustment
Premises Calculate Operator Adjusted for for overbuild Forecast
passed overlap targets achievability of previous coverage
Operator NGA
and
regulator
data
Premises Adjusted for Forecast
connected local factors conversion
GDP per capita
Competition
Price trends
Source: Analysys Mason
© Analysys Mason Limited 2016 25FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
Methodology for capex
Forecast levels of coverage are what we consider to be the most likely outcome based on operators’ plans. Conversion takes into account
macro-economics and inter- and intra-country trends, which we monitor on a quarterly basis. Our capex forecasts are derived as follows.
Figure 24: Capex model outline
Adjustment
Baseline Adjusted for Adjusted for Adjusted for for overbuild Forecast
cost to pass geo-type local costs cost erosion of previous × coverage
NGA
Capex per
Technology + = country per
technology
Baseline
Adjusted for Adjusted for Adjusted for Forecast
cost to
building type local costs cost erosion × conversion
connect
FTTC/VDSL Active equipment Based on deciles, Based on real General unit cost If an operator For FTTP,
unit costs from densest capex erosion shifts from, for separate
FTTB/VDSL 10% to least benchmarks example, calculations are
Passive dense 10% Additional costs FTTB/VDSL to made for
FTTB/LAN equipment unit Labour rates such as vectoring FTTP, then incumbent and
costs General assume some for other
FTTP assumption is Availability of Labour costs already operators.
Labour and cost build from physical efficiencies over sunk Therefore, the
of physical densest infrastructure time (deskilling) cost of overlaid
infrastructure outwards, but networks is taken
adjusted where Topology of into account
this is known not existing copper
to be the case for FTTC (lines
per cabinet)
Aerial or
underground Likelihood of
deployment vendor discounts Source: Analysys Mason
© Analysys Mason Limited 2016 26FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
CONTENTS
WORLDWIDE TRENDS
REGIONAL TRENDS
COUNTRY-LEVEL TRENDS
OMAN
QATAR
SAUDI ARABIA
UAE
FORECAST METHODOLOGY AND ASSUMPTIONS
ABOUT THE AUTHOR AND ANALYSYS MASON
© Analysys Mason Limited 2016 27FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
About the author
Rupert Wood (Research Director) is the lead analyst for Analysys Mason’s Fixed Networks and Wireless Networks research programmes. His
primary areas of specialisation include next-generation networks, long-term industry strategy and forecasting the dynamics of convergence and
substitution across fixed and mobile platforms. Rupert regularly contributes to the international press on a wide range of telecoms subjects and
has been quoted by The Times, The Economist, Business Week, Telecommunications Online and La Tribune. Rupert has a PhD from the
University of Cambridge, where he was a Lecturer before joining Analysys Mason.
© Analysys Mason Limited 2016 28FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
About Analysys Mason
Knowing what’s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the
complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist
knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research.
Research Consulting
We analyse, track and forecast the different Our focus is exclusively on TMT.
services accessed by consumers and
Consumer We support multi-billion dollar investments,
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© Analysys Mason Limited 2016 29FTTx in the Middle East and North Africa: trends and forecasts 2015–2020
PUBLISHED BY ANALYSYS MASON LIMITED IN JANUARY 2016
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