Spending on Information & Communications Technology (ICT) in the GCC countries is likely to reach nearly $180 billion over the next three years, Kuwait Financial Center (Markaz) said in its latest report on the industry. ICT spending has been growing at a healthy rate in the GCC. As the world has become increasingly digitized, the GCC countries have made concentrated efforts at keeping up with global developments in the ICT field, ranging from direct government investment - such as fixed, mobile and internet communication networks - to liberalizing the ICT sector in order to promote private sector activity. ICT infrastructure includes the hardware and software required in an IT system in addition to telecommunication equipment (such as analog and fiberoptic cables). The report said IT spending in the region is expected to grow 8-10 percent driven by Saudi Arabia and the UAE, which account for 50 percent and 25 percent, respectively, of total GCC ICT spending. Moreover, most GCC telecommunication markets are liberalized and highly competitive. ICT spending in Saudi Arabia grew 17 percent year-on-year in 2008 to $24 billion, over 75 percent of which was for communication spending. This is expected to have decelerated sharply to a four percent growth in 2009. ICT spending is forecasted to grow at a three-year CAGR of eight percent to $32 billion by 2012, versus the 17 percent CAGR it clocked over the past five years. As far as the majority of spending is concerned, roughly 50 percent goes to the consumer sector, followed distantly by energy and utilities at an average of 12 percent. Government sector stand at nine percent and services is at seven percent. The fixed line network, with a subscriber base of nearly 4.17 million and penetration level of 16 per cent, covers 69 per cent of households in the country. “In line with the regional and global ‘fixed to mobile substitution' trend, the fixed line segment has shown very stagnated growth compared to the mobile and internet segments, growing at a CAGR of just three per cent between 2002-2008,” Markaz said in the report. “The Communications & Information Technology Commission (CITC) issued three new licenses in 2008 for the establishment and operation of public fixed telecom networks offering national and international services. The mobile subscriber base has expanded nearly seven-fold from five million in 2002 to 34.8 million in the first nine months of 2009, the majority of which (85 percent) are in the pre-paid segment. This represents a penetration level of 134 percent,” it said. The growth resulted from huge investments in infrastructure in addition to the rapid expansion of telecom operators in the kingdom, which has fuelled developments in service offerings, quality of service, customer care and subscriber growth. Increased personal wealth in the past decade, coupled with increased IT awareness, has decreased cost of personal PCs and internet access has caused a surge in users across the Kingdom. Total Internet users increased to nearly 10 million in the first nine months of 2009 with a broadband penetration level of eight percent. “The ICT market is expected to see robust spending in Saudi Arabia led by the issuing of entry of new players in the communications segment,” the report further said. “The upgrading of the telecommunications networks is likely to be a major driver of infrastructure spending. Saudi Arabia is expected to account for more than 50 per cent of spending on ICT in the GCC over the next three years. Of the nearly $90 billion expected to be spent on ICT infrastructure by 2012, $22 billion is likely to be spent on IT and $67 billion on telecommunications,” it noted. In the UAE, the second biggest market, spending on IT infrastructure has grown at a CAGR of 18 percent over the past five years to nearly $12 billion, about 75 percent of which is for communications. The growth is expected to moderate over the next three years with a CAGR of 10 percent to $16.5 billion by 2012. In 2008, ICT spending grew 23 percent before decelerating sharply to a five per cent estimated annual growth in 2009. The majority of ICT spending in the UAE is on the consumer segment at about 50 percent, while about seven to eight percent is spent on each of the energy and utilities, government and services sectors, said the report. “In the telecom field, the number of fixed line telephone connections, which increased from one million in 2002 to nearly 1.5 million in 2008, represents a population penetration of 32 percent. In the first nine months of 2009, this has jumped to 1.56 million, representing a penetration of 35 percent. Residential lines account for 48 percent of total connections. The mobile subscriber base registered robust growth, rising at a CAGR of 21 percent from about 2.4 million in 2002 to 9.3 million in 2008.” “Mobile penetration in 2008 touched the 200 per cent mark from 72 percent in 2002. In the first nine months of 2009, mobile subscribers have neared 10 million, pushing the penetration rate to 221 percent.” On the other hand, the Internet subscriber base recorded strong growth, increasing at a CAGR of 21 per cent from 300,000 in 2002 to 1.17 million in 2008. Penetration by year-end 2008 stood at 59.5 percent. Internet subscribers grew 14 per cent in the first nine months of 2009 to 1.3 million, a penetration of nearly 65 percent. Spending on IT - which includes capital expenditure on hardware and software - in the UAE has at 18 percent led by the expansion in industry. IT spending is expected to moderate, growing by 10 percent over the next three years to a total of $45.8 billion. The majority of the spending, $36.4 billion, is expected to go to communications, while the remainder is for the IT segment. In Kuwait, the only GCC country yet to establish an independent communications regulator, the report said penetration rate in the fixed line segment is around 16 percent. Penetration rates are expected to remain at the same level due to high household tele density (around 95 percent) and increasing use of mobile phones. Kuwait's mobile subscriber base increased five percent to 2.9 million (84 percent penetration) in 2008, a deceleration from historical growth. However, the number of subscriptions is not the same as the number of customers in the market. Approximately 30 percent of the mobile subscriber base owns more than one SIM. This could effectively lower the penetration rate to around 70-75 percent. Around $16.5 billion is likely to be spent on ICT infrastructure over the next three years. More than $12.7 billion is expected to be spent on the communication segment. Qatar is seeing huge demand for ICT services as its population grows. The country's population was 1.45 million in 2008 and is expected to grow 5.3 percent per year to three million by 2016, thereby creating huge demand for ICT services. Residential fixed line penetration in Qatar is one of the highest in the world. Internet user penetration stood at 38 percent in the third quarter of 2008 versus 31.4 percent in 2007. Broadband internet subscriptions (per 100 inhabitants) was at 5.4 percent towards the end of 2008 versus 5.3 percent in 2007. Spending on ICT in Qatar is expected to grow 10 per cent over the next three years. Around $15 billion is expected to be spent on ICT infrastructure in the country by 2012. This includes $3.5 billion of spending on IT infrastructure and $11.4 billion on telecommunication infrastructure. Bahrain is expected to spend $5 billion on ICT infrastructure over the next three years.
