This article first appeared in February’s print edition of Business Monthly.
In the coming years, Egypt urgently needs to significantly boost investments to increase internet speeds and reliability. Speedtest Global Index, a portal ranking internet speeds worldwide, said that with no improvement in mobile internet speeds for the year ending in November, Egypt fell five places to rank 109th out of 146 countries. For fixed landlines, internet speeds increased a whopping 40.46% over the same period, yet the country’s rank improved by only six places to 77th out of 178.
Shifting from 4G to 5G networks is essential to achieve that much-needed acceleration. “5G connectivity is already proving to be a power driver of GDP growth,” said the Mobile Economy Middle East and North Africa 2023 report. It was published by GSMA, a nonprofit organization representing mobile network operators worldwide.
Egypt is taking its first steps into 5G, giving its first license to state-owned Telecom Egypt (aka We Telecom) in January. In that, the country significantly lags behind GCC nations. “5G networks now cover 75% or more of the population in GCC states,” the GSMA report said. “5G contribution to MENA’s [GDP is] expected to reach just under $60 billion in 2023.”
That could open the door to cooperating with GCC telecom operators to expedite local deployment of 5G networks. The threat is that 5G-dependent investment opportunities will likely land in Gulf countries first.
Fast growing
MENA should witness rising demand for increasingly faster and more reliable internet. The GSMA report estimates “unique mobile subscribers” in the region will increase 32.5% from 2022 to 2030. “In absolute terms … Algeria, Egypt, Iran and Turkey … have the highest number of unique mobile users.” By 2030, “they will account for more than half the regional total.”
In that time frame, unique subscription penetration will jump from 65% to 77% of MENA’s population. The caveat is “penetration levels vary widely, with GCC states [averaging] 89%, while [less wealthy and developed nations] have penetration rates below 40%.”
Also during that time, the number of SIM cards accessing the internet should increase from 51% to 59% of the total number of issued cards. Driving that growth is “the availability of affordable data plans and the cheapest internet-enabled handsets across low- and middle-income countries,” the report said. The other factor is MENA’s young population, which is “increasingly engaging with various online content.”
Accordingly, smartphone ownership will increase from 79% to 90% of device owners by the end of this year. The “availability of affordable devices and digital awareness [are also] key in driving smartphone adoption in the region.”
Two-speed prospects
The GSMA report stressed the growing disparity between the “mobile economies” in the GCC and North Africa.”
In 2022, 68% of GCC residents used 4G networks versus 16% for 5G networks. The rest used 3G or older networks. North Africa, meanwhile, has no commercial 5G networks. According to GSMA, 45% used 4G and 38% 3G, while the rest accessed 2G mobile technology.
By 2030, the GCC will have stormed ahead with 95% of mobile owners using 5G. The rest will use 4G. Africa will still be in transition, with 41% using 5G, 42% using 4G, and the rest using 3G and 2G networks.
The report said that one reason for that difference is that the GCC needs 5G to upgrade metropolises to smart-city status and build new fourth-generation cities. “In GCC states, the smart-city agenda is closely tied to national economic development,” the GSMA report said. “Several nations have already begun developing smart cities, such as Neom in Saudi Arabia, Pearl Island in Qatar and Dubai’s smart city.”
GCC
By November, 23 mobile operators in the GCC had commercial 5G networks. According to GSMA’s report, most rely on updated 4G networks, making them hybrid 5G networks, to shorten deployment time. That setup remains dominant in MENA countries, the report noted. “Several operators in the region have put [it] at the center of their 5G expansion strategies.”
However, several GCC telecom companies have started investing in “standalone” or “private” networks, built from day one as 5G networks. Those networks are “true 5G networks,” John Burke, chief technology officer at Nemertes Research, a consultancy, told TechTarget, a specialized portal. “5G standalone offers all the intended benefits of 5G and is not subject to the limitations of 4G.”
Throughout 2023, Bahrain, Saudi Arabia and the UAE said they completed trials of standalone 5G networks. In September, Jordan commissioned Orange Telecom to build a standalone 5G network for the Aqaba cargo port. Meanwhile, unconfirmed news reports said UAE telecom operators also are looking to construct “private” 5G networks for the country’s cargo ports.
The move to 5G led GCC telecom companies to change their business model. “In the MENA region, the majority of tower assets had traditionally remained in the hands of mobile operators,” said the GSMA report. “In recent years, … there has been a notable shift [as] independent tower companies have been among the main acquirers of operator sites, utilizing [shared use with other operators] to drive profitability.”
The upside is it frees mobile operators to accelerate deployment of hybrid and standalone 5G networks. “Mobile data traffic is expected to grow threefold in MENA in the next five years, in part due to the growing adoption of 5G,” the GSMA report said. “Operators will have to increase the number of sites, particularly in urban areas, to cope with rising demand for data.”
North Africa
North African nations are still working on deploying 5G networks. Algeria was the first to make a formal announcement. In November 2022, mobile operator Djezzy said it had tested 5G networks.
In March, mobile operator Ooredoo Group signed a deal with Nokia to upgrade infrastructure to be 5G-ready and build new 5G stations in Algeria and Tunisia. In May, Tunisia’s ICT minister said the country would launch commercial 5G services in 2024.
In January, Egypt’s National Telecom Regulatory Authority announced it had given state-owned We Telecom a license to operate 5G networks locally for $150 million to be renewed after 15 years. At press time, none of the other three foreign-owned local operators have announced plans to acquire a similar license. Also, there is no news year on spectrum availability or plans to build 5G towers.
GCC nations could greatly benefit from a win-win scenario by cooperating with North African countries to expedite their 5G deployment. “The relatively small size of [the GCC] markets makes it challenging to compete at the same scale as their global peers,” the GSMA report said. “International expansion has been a core growth and diversification strategy for major GCC operators looking for opportunities to scale up and drive new revenue and subscriber growth.”
Emerging low and middle-income nations are good options for GCC operators. They “enable the companies to claim a vast geographical footprint and tens of millions of subscribers due to large youthful populations,” the report said.
However, North Africa’s target markets need to address GCC’s telecom operators’ concerns. “Revenues and profitability [have] been less convincing [in emerging markets] because of the high competition and low [average revenue per unit],” the GSMA report said. “This is in addition to a myriad of macroeconomic challenges, such as forex losses and high inflation, as well as the political and regulatory challenges that often characterize emerging markets.”
Challenges to opportunities
The fast deployment of 5G networks and the rapid rise of tools and applications that won’t function otherwise can lead to problems. “Adoption of 5G is outpacing that of previous wireless technologies, leading to a surge in demand for telecom equipment and devices,” the GSMA report said. That makes the “concept of circularity a top priority for policymakers and industry stakeholders in the region.”
Correctly disposing and recycling discarded electronic devices requires scalable investment in the region. The GSMA report said there were more than 270 million operational non-5G devices in MENA in 2022.
In the GCC, almost all non-5G devices must be replaced by 2030, as 95% of the population will be using 5G. In Africa, that disposal problem could be less severe as only 41% of users will access 5G networks by 2030. The rest will still be on 4G (42%), 3G (15%) and even 2G (2%) networks.
The other opportunity arising from having commercial 5G networks is accelerated innovation that would not be possible without those fast networks. “5G in the region … has a key role to play in enabling new applications and becoming the backbone for the future of smart cities,” the GSMA report said.
Enticing local operators and investors to capitalize on 5G capabilities will depend on government decisions. The GSMA report said contracts should be three to five years to “help facilitate ongoing network investments and enable planning that ensures service continuity.”
The other factor is “fair spectrum prices,” the report stressed. “Higher spectrum prices can slow the rollout of next-generation mobile networks and reduce the network quality. They can also be associated with higher retail prices in developing countries.”
