VZCZCXRO7809
PP RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHROV
DE RUEHKU #0443/01 0871327
ZNR UUUUU ZZH
P 281327Z MAR 07
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 8610
INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 KUWAIT 000443 
 
SIPDIS 
 
SIPDIS 
 
EB/CIP/BA FOR GIBBS, NEA/ARP FOR BAGWELL 
 
E.O. 12958: N/A 
TAGS: ECPS ECON KU
SUBJECT: PROFILE OF KUWAIT'S TELECOMMUNICATIONS SECTOR 
 
¶1.  Kuwait's growing telecom sector is still dominated by the 
Ministry of Communications, which maintains a monopoly over 
all local and long-distance landline telephony.  Internet 
service is privatized, with three competing ISPs (Qualitynet, 
Fastelco, and Zajil), but all have their basic rates set by 
whatever the Ministry is charging for data lines.  Fixed line 
penetration at the end of 2005 was approximately 19 percent, 
very low compared to mobile penetration which is 
approximately 89%.  The Ministry struggles unsuccessfully to 
install new residential landline services at a pace to match 
Kuwait's rapid growth in population and real estate 
development.  Kuwait currently has no independent 
telecommunications regulatory authority - the Ministry of 
Communications retains sole responsibility for all regulatory 
matters. 
 
¶2.  The only telecommunications sector in Kuwait with real 
competition is the mobile sector, which currently has two 
competing carriers, MTC-Vodafone and Wataniya (National 
Mobile Telecommunications Company).  The GOK still retains a 
significant stake in both MTC and Wataniya, but the companies 
are free to compete on pricing, handset selection, and 
services.  The two companies also try to differentiate 
themselves through value-added services.  Recently, Motorola 
announced the deployment of a nationwide 3G mobile broadband 
network in Kuwait for MTC which includes High Speed Downlink 
Packet Access (HSDPA) to increase download speeds and improve 
the user experience streamed content.  Wataniya plans to 
offer similar services in the near future. 
 
¶3.  MTC dominates the Kuwaiti market with 57% of revenue and 
59% of subscribers as of September 2006.  With a market 
capitalization of $14.7 billion, MTC is the largest 
publicly-traded company in Kuwait.  Internationally, MTC is 
present in 20 countries (soon to be 21 following Government 
of Saudi Arabia's approval of its $6.1 billion bid for the 
Kingdom's third mobile license on 27 March).  Wataniya has 
operations in Iraq, Tunisia, Saudi Arabia, Algeria, and the 
Maldives, and has recently won a bid to build and operate the 
second mobile service in the Palestinian Territories.  In 
February 2007, Wataniya announced that it was forming an 
international alliance with Sprint Nextel to cooperate on 
ventures to deliver advanced wireless services across the 
Middle East and North Africa.  In  March 2007, state-owned 
Qatar Telecom (Qtel) paid $3.7 billion to purchase a 51% 
stake in Wataniya, which we believe is one of the largest 
sales of a private sector company ever in Kuwait. 
 
¶4.  In December 2006, the Kuwaiti Cabinet approved a proposal 
to establish a third mobile operator.  Sixty percent of 
shares in the new firm will be available to the public, 24 
percent to state-owned authorities, and 16 percent to 
international investors.  According to press reports, a 
consortium led by Kuwait Finance House is preparing to bid 
for the third mobile telecom license and plans to run the 
company as the world's first Islamic Shariah-compliant 
telecom operator. 
 
¶5.  The telecom sector constituted 12.72% of market 
capitalization ($14.7 billion) on the Kuwait Stock Exchange 
at the end of 2006, indicating the importance of the sector 
to the Kuwaiti economy.  In 2005, mobile segment revenues in 
Kuwait grew by 13.3% to $1.27 billion, while the number of 
subscribers grew by 11.4%.  By of October 1, 2006, the number 
of subscribers reached 2.54 million (Kuwait's population is 
approximately 3.05 million) and revenue for the first three 
quarters of 2006 reached $1.06 billion.  With population 
growth at about 8.7%, mostly due to the growing number of 
low-income expatriate workers, there seems to be room for 
further, albeit slower, market growth, especially in pre-paid 
categories.  The mix of customers in Kuwait is highly 
inclined towards pre-paid customers, who make up 80% of the 
total customer base.  The average monthly blended ARPU 
(average revenue per user) in Kuwait during the first six 
months of 2006 was $46. 
 
¶6.  U.S. companies Motorola, MCI, and ITT all maintain a 
presence in Kuwait, doing business primarily with the public 
sector.  AT&T operates its Global Hubbing service in Kuwait. 
Among foreign companies, Siemens maintains a significant 
presence and is under a major contract with the Kuwaiti 
government to install a fiber optic network in Kuwait City. 
********************************************* * 
 
For more reporting from Embassy Kuwait, visit: 
 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
 
 
 
KUWAIT 00000443  002 OF 002 
 
 
Visit Kuwait's Classified Website: 
 
http://www.state.sgov.gov/p/nea/kuwait/ 
 
********************************************* * 
LeBaron