Saudi spectrum woes hang over Middle East LTE launches
The launch of the Middle East’s first LTE service is imminent, with both Etisalat of the UAE and Etisalat’s Saudi affiliate Mobily now having made public commitments to launch LTE commercially during 3Q11.
Etisalat said in early June that it would launch commercial LTE services in 3Q11, while Mobily had already earmarked 3Q11 for its LTE launch.
In Saudi Arabia, Mobily plans to launch LTE in the major cities of Riyadh, Jeddah and Dammam, before extending coverage to more than 30 cities across the country.
Unlike Etisalat, which will deploy FDD-LTE, Mobily is rolling out TD-LTE. This is because the spectrum suitable for FDD-LTE in the 2.6GHz bands in Saudi Arabia is being used by the military and so is not available to the country’s mobile operators.
However, Mobily holds spectrum suitable for TD-LTE in the 2.5GHz band through its subsidiary Bayanat Al-Oula – and will use that spectrum for its LTE deployment.
The strong demand for mobile data services in both Saudi Arabia and the UAE gives some support to the case for the deployment of LTE in those countries.
In Saudi Arabia, Mobily said it had 2.3 million mobile broadband subscriptions at end-2010, and a total of five million subscriptions to all mobile data services. STC had 1.4 million mobile broadband subscriptions at end-2010 and has recently revamped its QuickNet mobile broadband packages as part of a drive to encourage further take-up of those services. UAE incumbent Etisalat says that 25% of its mobile customers are using smartphones.
Saudi Arabia is of course the biggest economy in the Middle East, while the UAE is a commercial hub for the region; both of which are factors that lend support to the idea that there is a case for introducing LTE.
But there are also major problems in Saudi Arabia over the allocation of spectrum for LTE, while a number of countries in the region have also yet to make important decisions about the future assignment of spectrum.
As elsewhere, the progress of LTE services in the Middle East is also largely dependent on the development of the broader LTE ‘ecosystem’, and particularly the availability of LTE-capable devices. Etisalat acknowledges that the availability of devices will be critical to the success of LTE.
Some operators have encountered difficulties in providing indoor LTE coverage when using the 2.6GHz band, so Etisalat and others launching LTE in the Middle East must ensure that they address this problem, by adding coverage in the 1.8GHz band or other means.
Pricing might also present difficulties. In the UAE, prices for mobile broadband service are quite high and if that approach is carried over to LTE services it might discourage the take-up of LTE, especially if a premium is applied to LTE services. Etisalat is currently charging AED145 (US$39.5) per month for a mobile broadband plan with 1GB download limit. A 5GB plan costs AED295 per month.
However, mobile broadband prices are noticeably lower in Saudi Arabia, as a result of competition. STC recently began to offer a 3GB mobile broadband plan for SAR99 (US$26.4) and 10GB for SAR199. That means there might be more scope to introduce attractively-priced LTE services in Saudi Arabia than the UAE. Additionally, the relatively low rate of fixed-broadband penetration in Saudi Arabia represents an opportunity for wireless services.
Recent research by Informa into the strategies of operators that have launched LTE services indicates that attempts to charge premium prices for LTE are unsustainable and that operators are forced to cut premium prices within a few months.
A better proposition is to offer generous download allowances along with guarantees of certain download and upload speeds. That finding is likely to apply in the Middle East as elsewhere.