MENA region – (one of the) final frontiers confronting the data-centric pricing challenge

MENA region – (one of the) final frontiers confronting the data-centric pricing challenge

The Delta Perspective

Authors: Mayssaa Issa and Reema Sajnani

In modern times, where global telecom operators’ focus has evolved from traditional voice and SMS services to data-centric monetisation and partnerships with internet and Over-the-top (OTT) providers, the journey to data centricity is still at its early stages for many in the Middle East and North Africa (MENA) region. A thorough review of operators’ data offerings in MENA has revealed some interesting observations. Volume-based pricing (including unlimited data) is still dominant in this region; voice still prevails as the foundation of plans, and the lack of interest to cater for all segments (especially low-end) is still desired.

Data offers: Unlimited, but not for all to benefit
Globally, the sophistication of mobile data pricing has evolved in the past four years, mainly triggered by the arrival of LTE in the US and European markets. The unsustainable proposition of unlimited data plans was slowly phased out, being substituted with new pricing models based on data-centric and customer-centric models. These pricing models take a variety of forms, be it the shared data or family plans pioneered in the US by the four biggest operators (i.e. AT&T, Verizon, T-Mobile and Sprint), QOS-based plans (Singtel’s Priority Pass), speed-based plans (Swisscom), Zero-rated plans (E-Plus) and others. However, the competitive snapshot in MENA remains very nascent, where majority of operators are still adopting very simplistic, one size fits all approach on pricing data. Often volume-based, around 50% of operators’ offerings are still basic unlimited data1, with volume tiers reaching 60 GB in some Levant countries and topping 300 GB in the GCC.

Exhibit 1: Data pricing proposition available in MENA (Source: Operators’ websites)


While ABM-based2 pricing can help operators micro-segment their subscribers base and tailor offerings according to varied data consumption patterns, segmentation offers in MENA are still primarily based on data buckets. A limited number of sophisticated operators have emerged, classifying their offering based on usage (e.g. light, medium, heavy), social network apps (e.g. WhatsApp plans) or network capacity (off-peak usage). However, many regional operators have opted to increase data volumes to cater for varied segments, while still maintaining voice at the centre of offers.

Giving away higher data bundles in place of superior network quality and bundled content may not necessarily increase subscriber uptake, as in the case with Sprint in the US.  The operator has offered increased data volumes for less to undercut AT&T and Verizon’s prices but the quality of experience on a sub-par network did not help Sprint achieve the desired results. In contrast, Vodafone UK’s strategy to drive data usage through differentiated content has worked well in driving larger data bundles uptake. On bundles not associated with any content, 76% of connections are on Vodafone Red (smaller data bundle) versus 23% for Red L and Red XL/XXL (with larger data allowance). Where Netflix is bundled, the proportion of connections on Vodafone Red decreases to 48% while higher data bundle plans increase its share to 52% of connections.

Limited data pricing innovation in oligopolistic markets
The lack of competitive threats and lackadaisical regulatory landscape in MENA have resulted in limited data pricing sophistication. Duopolies are still very common in the region (e.g. Lebanon, Syria, Oman, the UAE), with governments or state agencies still very much in control of these two or three-player markets, further reinforcing their anti-competitive nature. The protectionist mindset of these governments through banning apps (e.g. Skype) has helped delay the inevitable threat of OTTs, indirectly encouraging operators to be lax in their offerings.  Internationally, the region’s big groups are under tremendous pressure to devise compelling data-centric strategy in foreign markets. However, these operators choose to keep the focus on traditional voice services as key revenue generator in their domestic markets as they are not compelled to innovate with differentiated data offerings and pricing according to the varied demands of subscribers. 

Urgency to evolve? Evolving towards the data centric model
Voice is still the main revenue generator for operators in the region and is priced at a significantly high premium compared to data (i.e. 12x higher in some Levant countries and 25x higher in some North African countries3). Of late, specific regulators are loosening their grip on data offers and promotions, allowing operators’ data pricing strategy to shape in response to subscribers’ needs and evolving global trends. In fact, a few operators have reported data revenues of above 30% of total revenues, namely UAE’s Du, Zain Bahrain, Zain Kuwait, and Ooredoo Oman. Ooredoo Oman’s CEO anticipates data revenues to make up 50% of revenues in the next 12 months.

The shift in revenue mix is consistent with the global scenario and MENA operators should prepare to counter the imminent OTT threat on traditional revenues. More innovation is expected on overall bundled offering and data pricing, going beyond the current standalone or voice-centric data bundles.

Seismic changes in the industry are already evident in many parts of the world, as consumers get more sophisticated.  In fact, many global operators are beyond just data pricing strategies, focusing more on getting the network economics and content delivery strategy (incl. caching/CDN) right – with the ultimate objective of not just data revenue uplift and customer retention, but data yields.

MENA operators must speed up the journey towards data-centricity and customer-centricity, leaving behind the legacy mindset of relying largely on the traditional voice segment and regulatory protection for future growth.

1: Based on products and services portfolio of the leader and challenger operators in 12 MENA markets.
2: ABM refers to Analytics-Based Management
3: The ratio compares PPM for basic prepaid package and PPMB for 1GB prepaid data (or closest offer available).

Authors’ Bio
Mayssaa is a Senior Research Associate working in the Intelligence Unit at Delta Partners. Her main area of expertise includes networks (spectrum, international connectivity, technologies) and broadband (fixed and mobile broadband, pricing, value proposition). Mayssaa looks after the Middle East region with great focus on the GCC. Prior to Delta Partners, Mayssaa worked for 3 years as an account manager with focus on unified communications, wireless solutions and security.

Reema is a Research Analyst working in the Intelligence Unit at Delta Partners. Reema looks after the SEA region and her main area of expertise includes customer experience, digital strategies, mobile voice and data pricing, and cost optimization. She has also supported a wide array of Private Equity investment themes and Corporate Finance projects including valuation exercises, due diligence and mergers and acquisitions.

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