Even if the subscriber numbers may shrink, the average revenue per user (ARPU, the industry measurement scale of profitability), is what matters to the telcos. These figures are rising, challenging those in mature telecoms markets elsewhere. Two examples are Zain and Qtel, both of which have now ranked in the top 20 global operators, with ARPUs exceeding $50, according to figures released at GSM Arab World.
For large telecom groups in the Gulf that have expanded into Africa, Southeast Asia and India over the past few years, there is an even tougher challenge at hand, something they hadn’t probably anticipated. “These are the regions where GDP growth this year, and probably next year as well, is going to be much lower than in the past three to five years,” says Javier Alvarez, a partner at Dubai-based advisory and investment firm Delta Partners.
Even though these operators may have enjoyed revenue growth in these regions, they have a long way to go before reaping the full potential from recent acquisitions there. Moreover, the revenue generated from these markets will be thinned out as exchange rates fluctuate. Since Gulf currencies are pegged to the US dollar, when these funds go to the holding telco their value is eroded, as local currencies in the foreign markets have depreciated against the dollar.
Saudi operator STC’s fourth-quarter results last year confirmed this phenomenon. According to EFG Hermes’ MENA telecom sector report, STC’s results were below estimates, mainly due to foreign exchange movements. The bank estimated a 12.3 billion Saudi riyal return ($3.28 billion), yet revenues came in 13.3 percent below this, “as two key non-Saudi subsidiaries (Turkey and South Africa) saw a significant depreciation in their local currency,” the report said.

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