The Middle East is facing a technological turning point. The growth in the telecommunications market is creating a paradigm shift, increasing internet and mobile penetration growth. Coupled with the region’s rapidly expanding population, this results in fast-growing profitability and economic growth.
Propelled by digital trends such as social media, the telecommunications environment is burgeoning with potential for competing providers to develop and polarize segments and markets. Innovation within the digital ecosystem is creating seemingly endless opportunities, providing new revenue streams and new operating models.
Defining the competitive terrain for this technological transformation are the key trends below.
Before examining Internet consumption habits and usage, it’s important to highlight key facts regarding the state of the internet in the Middle East. These statistics will inform the state of digitization occurring throughout the region, gauging the region’s potential value and gaps or opportunities in the adoption of a digital economy.
Several key internet usage facts are:
- Internet penetration in the Middle East was 57.8% (as of December 2017). Source: Internet World Stats, 2018
- In 2017, Iran had the highest number of internet users (56.7 million), followed by Saudi Arabia (24.15 million), and Iraq (14 million). Source: Statista, 2017
- Qatar and the United Arab Emirates has the highest internet penetration percentages, with both at 99% internet penetration. Source: We Are Social, 2018
- Majority of internet users still access the web from home, though smartphone penetration is steadily on the rise. Source: World Economic Forum, 2014
- Social media is growing at a staggering rate, nearly complete saturation in the Gulf region. Source: ZDNet, 2017
- Whatsapp is the preferred social media in the region, with Facebook experiencing marginally lower rates. Source: Media In The Middle East, 2017
The penetration and rise of internet usage throughout the Middle East is opening new horizons for its digitally-savvy consumers.
● Stage of market development
The growth of internet usage throughout the region is dominated by competitive dynamics and future growth opportunities.
Barriers that limit increased penetration throughout the Gulf include:
- Scalability of growth markets in less than affluent economies in the Middle East.
- The cost-intensive nature of building the framework and infrastructure required for a digital ecosystem.
The future is promising, though. Consumers are looking to adopt a more digitally enhanced life, enhancing digital infrastructure and high speed connectivity throughout the Gulf to embrace such enthusiasm.
As countries spend more to accelerate digital frameworks, they can expect:
- Increased economic growth, alongside poverty reduction
- Better public access to higher quality education and healthcare
- Improved jobs creation
- Enhanced business practices and funding opportunities.
● New operating models
The current data age is plotting internet applications in the region. Advanced analytics and the continued proliferation of big data is propelling the demand for new operating models. These emerging models will surmount barriers to growth while advancing the growth engine in the region.
Consumer attitude towards digitization is increasing demand for a more borderless and integrated connected marketplace.
IoT, AI and increased machine learning capabilities are several new operating models that are shaping the region’s metropolitan and rural populations. And as internet usage continues to penetrate all aspects of societal life, cybersecurity remains a prevalent evergreen topic. Already, countries in the Gulf are implementing new regulatory frameworks that address key digital issues (data ownership, security and privacy).
These market segments will have substantial impact on the long-term trajectory of digitization and adoption in the region.
● The digitally-savvy millennial
No generation is experiencing higher growth in digital adoption than millennials. This extremely digitized, tech-savvy generation is influencing the growth of internet usage in the Middle East. Many in this digitally-savvy demographic employ a wide variety of internet-dependent mobile devices, from wearable devices and smartphones to tablets and laptops.
This committed cadre of tech-savvy digital natives represents an important element in the region’s burgeoning digital world. Not only does this generational group have a far greater adoption rate of internet use and new technology, they also make up a significant portion of the region’s overall population.
The current urbanization trend occurring throughout the Gulf is also contributing to the rapid growth of internet-based infrastructure and technology. But, the digitally-savvy millennial shows its greatest opportunity and disruption within mobile technology.
No event in the Middle East’s recent history showcased the exact power of mobile use and technology than that of the Arab Spring. Mobile technology and high speed connectivity played an essential role throughout the wave of mass protests. Digital tools like social networks and Wi-Fi calling contributed to the democratization of information communication technology throughout the Gulf.
These events sparked significant growth in mobile infrastructure throughout the Middle East, a growth rate far exceeding that which is occurring in other growth markets such as the Asia Pacific and Latin America. Regardless, there are still barriers to address before complete mobile saturation can occur.
● Remedying structural issues
The application for mobile broadband is not spread equally throughout the region. Certain countries in the Gulf are experiencing more advanced mobile markets and are far more connected than others. This is creating ongoing subscriber growth demand for data.
Regionally, ongoing political unrest and socioeconomic instability are hindering full mobile adoption and penetration. A lack in fundamental infrastructure necessary for mobile broadband and affordability issues are also contributing factors to the region’s modest growth. However, the ongoing hunger for mobile technology and rise of competitive networks is expected to create solutions to the current barriers to future growth.
Indeed, increasing use of smartphones means the Middle East is expected to be among the first to launch 5G networks commercially.
● The use of mobile to address socio-economic challenges
The region’s steady progress towards complete mobile penetration is driving socioeconomic growth and stability. As mobile technology creates improvements in efficiency and productivity, the region is expected to see rises in employment rates and a greater capacity to create more sustainable urbanized environments and efficient societies.
Mobile has emerged as a platform to drive innovation throughout the Gulf. The uptake of startups and economic activity directly correlated to mobile technology is positively impacting the region’s economy. The developing mobile market is making significant contributions through job creation, demand for a greater range of mobile services, increased affordability, and better mobile services.
The fast-growing digital ecosystem is diversifying the regional landscape with a Business Wire report indicating that nearly 70 percent of telecom services will be attributed to mobile by 2022.
● Safety and security
Much like web and desktop usage, security remains a high priority in terms of consumer data and protection. The growing mobile data-focused economy occurring in the region means governing policies are being devised to address an assembly of concerns and potential problems.
Expect to see regulations discourse surrounding market distortions, use, protection, and storage of consumer data, mobile operator licensing policies and sector-specific taxes.
Driving growth in the Middle East
Mobile and the collective internet have become indispensable to our daily social lives.
In emerging markets such as the Middle East, consumers are increasingly embracing its potential. The digital adoption of technology in the Middle East is accelerating the pace of growth in some Gulf countries, while others lag behind.
This aggressive stance by certain countries is undoubtedly contributing to significant economic rewards, but unless this region of contrasts can fully maximize internet adoption, its full digital potential cannot be realized.
As the uses and applications of internet and smartphone technology throughout the region continue to get increasingly pervasive, expect strong expansion at a growth rate that will have a significant impact in all sectors of the region.
Azhar Abulhamayel is the Head of Marketing – National Segment and High Value at Zain KSA. The company was the first operator in the Middle East to commercially launch the 4G/LTE network. Zain serves +10M customers, has extended its network coverage to 94% of the population, and attracts thousands of new customers daily.