GCC telcos’ subscriber base takes hit in first half due to departure of expats

• Kuwait, Oman and UAE telcos take big hit in first half subscriber base.
• Du reported a 20% year-on-year fall in mobile subscribers, followed by STC (Kuwait) with 18% and Ooredoo (Oman) with 17%.
• Prepaid segment badly hit as foreign workers make up a large proportion of region’s population and are the first to be affected by economic disruption.
• Mobile operators likely to experience a continued contraction of their subscriber base for a few more months as more expats leave and social distancing measures are retained.

Dubai: Telecom operators in the Gulf Cooperation Council (GCC) countries were more exposed to the impact of Covid-19 than other regions because of its economy’s strong dependency on foreign workers, according to Analysys Mason report.

“The prepaid segment was particularly badly hit in the first half of the year because foreign workers make up a large proportion of the region’s population and are the first to be affected by economic disruption,” Karim Yaici, Senior Analyst at Analysys Mason, said.

The telecoms sector is usually relatively resilient during economic downturns, he said, but the departure of expats is having a large effect.

In the region, operators in Kuwait, Oman and the UAE were the worst performers; UAE-based telco du reported a 20 per cent year-on-year fall in mobile subscribers, followed by STC (Kuwait) with 18 per cent and Ooredoo (Oman) with 17 per cent.

“Du has been losing customers since the beginning of 2018, and the pandemic intensified the contraction in 2020 due to the operator’s high exposure to low-value prepaid customers,” the report said.

However, Yaici said that Etisalat’s number of prepaid subscribers fell by 10 per cent in the second quarter after having been stable since the beginning of 2019.

“The number of postpaid subscribers grew during this period and this momentum has helped to limit the number of disconnections in the second quarter,” he said.

Ooredoo Oman has reported a slight acceleration in the contraction of its prepaid base in the second quarter but it has been on a steep downward trend since June 2019.

Telcos need to retain remaining subscribers

“Ooredoo’s postpaid user-base continued to grow during the first half but at a slower rate than in 2019 when it was offering very appealing discounts for new subscribers,” Yaici said.

Zain Kuwait, which controls more than 40% of the prepaid market, recorded the biggest prepaid net losses in the country in the second quarter following two consecutive growth quarters.

“The postpaid segment returned to growth (in terms of the number of subscribers) in June 2020 after two-quarters of decline, which suggests that some high-value prepaid customers switched to postpaid plans,” Yaici said.

Moreover, he said that mobile operators are likely to experience a continued contraction of their subscriber base and an erosion of their revenue for a few more months as more expats leave and social distancing measures are retained.

“Operators’ priority should be to retain their remaining subscribers as much as possible. Operators may be tempted to adopt a more ambitious strategy to gain shares in a shrinking market, especially with the expected departure of more expats, and we have already observed such moves in Kuwait and Qatar with 5G price reductions,” he said.

However, he said that the telcos should be aware that such strategies come with a risk of revived price competition and value erosion.

“They should therefore focus on retaining their high-value customers and investing in protecting (or better, increasing) spending to avoid exacerbating the negative effect that the pandemic has already had on ARPU,” he said.