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Euromonitor has identified three emerging economies with the highest per capita consumer expenditure on communications in the developing world in 2012: the UAE, Israel and Qatar. Due to unique factors, such as demographics, infrastructure and culture, these three markets demonstrate some of the world’s strongest digital consumption, offering opportunities for high uptake in segments ranging from smartphones to social media. Interestingly, the top three markets are all located in the Middle East, demonstrating an appetite for connectivity in the region and the adoption by local consumers of digital goods as necessities. Nonetheless, these markets offer individual risks, as well as opportunities.
Consumer Expenditure on Communications in the UAE, Qatar and Israel: 2007-2020
Source: Euromonitor International from national statistics/Eurostat/UN/OECD
Note: Figures in constant 2012 prices, year-on-year exchange rates
1. The UAE: World’s Leading Telecom Consumption Market
With a per capita spend of US$1,603 in 2012, the UAE has by some distance the largest communications expenditure market, both among developed and developing countries. In part, this is down to the high household penetration of pay-TV, in the form of satellite, and mobile telephony, with both considered necessities by local consumers. Increasingly, only low-income homes do not have a fixed broadband connection. Many Emirati homes either pay three separate bills for these services or have a bundled package. The presence of a strong luxury market boosts average telecom spending levels as well, fuelled by wealthy Emiratis and expatriate executives. The presence of 7.4 million foreign citizens in 2012 is also a telecom driver, as many purchase more expensive short-term contracts and rely on digital services for keeping in touch with relatives abroad.
Opportunities and risks: A foreign labour pool highly reliant on mobile money transfers and pre-pay services, strong demand for high-end products and generally high home consumption levels of telecom services offer a ripe landscape for businesses. However, as demonstrated by the global economic downturn of 2008-2009, the impact of a fiscal crisis can result in an outflow of foreign workers and liquidity. The UAE’s per capita consumer expenditure on communications is set to expand by a strong 44.6% in real terms over 2013-2020.
2. Israel: Highly Competitive Telecom Landscape for Consumers
Israel has been forced to develop telecom infrastructure without much neighbouring assistance, as surrounding countries are not politically supportive. As a result, high input costs have been passed on to consumers, who overpay for some ICT services. However, the country was ranked at a respectable 19th place out of 161 nations in the 2011 ICT Price Basket, which measures telecom affordability, suggesting tariffs are in line with incomes. The fairly unique profile of Israel – as an outward looking, multicultural, highly literate nation for whose citizens connectivity with the rest of the world is important – drives high expenditure on telecoms and has also served as a platform for a highly competitive environment across all telecom segments. A vibrant local high-tech industry and early adoption of technologies by consumers also add to a strong digital landscape, which encourages households to stay connected.
Opportunities and risks: A bustling tourist trade offers a significant boost to telecom consumption in what is probably the most advanced digital landscape in the Middle East. Dynamic and expanding urban centres offer hotspots of mobile data services. Israelis are quick to try out new telecom products and demand for innovative segments such as mobile messaging, IPTV and cloud computing is growing rapidly. However, Israel is a relatively mature telecom market that is unlikely to see rapid surging in traditional segments. The country’s per capita consumer spending on communications will rise by a real 19.9% over 2013-2020.
3. Qatar: Best-Connected Homes in the Region
A capital-intensive state strategy to develop an advanced communications network in Qatar has resulted in the country becoming a regional leader across most telecom indicators. Access to highly affordable digital services among a largely urbanised population has driven strong consumer uptake of communications. The country ranked in fourth place out of 161 nations in the ICT Price Basket in 2011, and held the highest household fixed broadband penetration rate in the Middle East in 2012, at 79.4%. As in the UAE, a large foreign citizen population of 1.5 million as of 2012 acts as an additional driver behind telecom uptake, with a market for electronic transactions through mobiles phones and fixed devices growing. A wealthy energy-based segment also fuels a major luxury sector for top-end smartphones and other digital equipment.
Opportunities and risks: As a major emerging market and one of the fastest growing economies in the world, Qatar offers a vibrant and expanding telecom scene. Continuously rising disposable incomes will drive per capita consumer expenditure on communications, which is set to rise by 34.7% in real terms over 2013-2020, while rapid population growth over the period will expand market size. However, the market has limits on competition and the government has been known to censor the online domain.