Vodafone Qatar has made a better-than-expected start to its operations in the Gulf state and is now building substantial market share at the expense of Qtel, the market-leader and former monopoly operator. Vodafone launched commercial services in mid-2009 and had built a mobile customer base of over 600,000 by Q3 2010.

According to the latest Wireless Intelligence data, this gave Vodafone a 22 percent share of the market in Q3 and we forecast that its market share could reach 40 percent by next year. Vodafone’s strong start has inevitably had a negative impact on Qtel, which has seen its mobile customer base remain relatively flat for the last year and decline by 20,000 in Q3.

UK-based Vodafone and the state-backed Qatar Foundation own a dominant 45 percent share of Vodafone Qatar with 15 percent held by local minority investors and the remaining 40 percent sold via an IPO. The new entrant has been able to quickly build market share on the back of attractive prepay mobile tariffs (‘Freedom’ and ‘Red’) and a range of desirable handsets, including the iPhone 4 and the latest BlackBerry devices. As a consequence, prepay accounts for 95 percent of customers at Vodafone, compared to 86 percent at Qtel. However, there is now little difference in ARPU between the two rivals: Vodafone’s ARPU rose steadily throughout 2010, but Qtel registered a decline in ARPU in eight of the previous nine quarters as it lowered prices to react to the new competition.

Due to Qatar’s relatively small geographic area, Vodafone has been able to quickly bring its network up to par with its rival, achieving 100 percent 2G coverage and 98 percent 3G coverage by Q3 2010. It also has a fixed-line licence and launched its first commercial fixed-line broadband services serving The Pearl (Qatar’s artificial island complex) in July 2010. On the financial side, the operator said it was on track to achieve its first quarter of positive EBITDA in Q4 2010 and forecasts it will be EBITDA positive on a cumulative basis by mid-2012 (three years after launch). Revenues reached QAR210 million (US$58 million) in Q3, the highest level since launch and up 19 percent from the prior quarter.

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