iPhone 5: winners and losers in the Middle East

With Apple’s usual polished performance, it took the wrapper off the not-so-well-kept secret – the iPhone 5 – in the early hours of last Thursday morning. It was greeted with huge enthusiasm by the public: US pre-orders sold out within an hour and the UAE grey market price soared to five times the recommended retail price. With that sort of demand, operators in the Middle East will be keen to start selling the phone as soon as possible, and they will use any opportunity to gain a marketing advantage over their rivals.

So what is new in the iPhone 5? It is longer than the previous generation, while being lighter and thinner. The old 30-pin connection has gone, replaced by a much smaller and reversible connector that will spark a boom in sales of accessories. The phone’s processor is more powerful and the screen is brighter, supporting a wider colour range to make those photos even more realistic. The updated software, iOS 6, delivers several new features that will be available on the iPhone 4 and 4S as well.

However, it is the 4G (LTE) connectivity that is generating the most column inches in the media. In a smartphone market as fashion-conscious as the Middle East, this aspect could also be the biggest selling factor – or will it?

The global harmonisation of LTE frequencies has been challenging. Different regions are selecting different frequency bands, so Apple has produced three iPhones: one for Verizon and one for AT&T and Sprint, both US-specific; and a ‘rest of the world’ phone. The latter supports LTE in three bands: 850MHz, 1800MHz and 2.1GHz. Somewhat surprisingly, it does not support the two bands that are gaining a lot of LTE traction (outside the US): 800MHz and 2.6GHz.

Regional winners and losers: the scores

For operators in the Middle East, marketing the iPhone 5 as an LTE device will be a huge differentiator, but they need to have the right LTE network to do so. Analysys Mason tracks operators’ LTE network deployments, so from that analysis, here is an initial view of the regional winners and losers in the iPhone 5 LTE battle summarised in the form of football scores – the higher the score, the more the operator will benefit.

Bahrain is currently auctioning 2.6GHz (which the iPhone does not support), along with additional 2.1GHz and1800MHz. All the established operators (Batelco, Viva and Zain) have 2.1GHz and 1800MHz, so technically they could launch LTE in one of those bands in order to support the iPhone 5. Their challenge will be to clear enough capacity on their existing network. The most astute and nimble of these three will undoubtedly benefit from being the first to market an LTE iPhone 5. Result: score draw.

Kuwait is difficult to predict because the operators have been very quiet about their plans. It appears that Viva has launched an LTE network, but its frequency band is uncertain. Given limited news about future spectrum licences, Kuwait is in the ‘wait and see’ category. Result: no score draw.

Oman already has either an 1800MHz or 2.1GHz (data is unclear) LTE network owned by Nawras, which should be able to launch the iPhone 5 from day one. Its competitor, Omantel, is deploying LTE at 2.3GHz, which is unsupported by the iPhone 5, so Nawras has the opportunity to launch an exclusive iPhone 5 LTE package, taking share of the premium customers from Omantel. This will be one of the markets to watch. Result: Nawras 3 – Omantel 0.

In Qatar, both Qtel and Vodafone have launched LTE after running trials at 800MHz, so neither could support LTE on the iPhone 5 immediately. Given the country’s high GDP per capita and desire to be at the forefront of telecoms, we are sure it will not be long before both operators deploy LTE1800 specifically for the iPhone 5. Result: Qtel 3 – Vodafone 3.

Saudi Arabia is the region’s most spectrum-challenged country. Only Zain KSA has deployed LTE1800. STC and Mobily are using LTE in 2.3GHz and 2.5GHz, respectively, neither of which are ever likely to support a wide range of handsets. As a result, the weakest operator in the country has an unrivalled marketing opportunity with the LTE iPhone 5, which could provide the boost Zain so badly needs. It remains to be seen how the fickle Saudi consumer will react to a Zain exclusive. Buying an expensive phone that will only work ‘properly’ on the nation’s smallest network may not be an attractive proposition. An LTE iPhone 5 LTE launch by Zain could spur Mobily and STC to put even more pressure on the government to resolve the spectrum issues. As many attempts by various bodies and the operators to get the Saudi Government to admit they have a spectrum problem have not worked, we expect a new attempt to fail as well. Result: Zain KSA 2 –Mobily/STC 0.

The UAE is at the forefront of spectrum management and has many different frequencies available. Etisalat initially deployed LTE in 2.6GHz, although recent comments suggest they want to switch to a lower frequency. du has deployed LTE1800, and the iPhone 5 could be just what the operator is looking for to kick-start consumer interest in 4G. If du does aggressively market the iPhone 5 as an LTE device, we are confident that Etisalat will resolve its spectrum issues and roll out LTE in 1800MHz, or even 2.1GHz. If it does, other LTE handsets (such as the Samsung Galaxy S3 LTE) are likely to be launched rapidly in the market. Result: du 4 – Etisalat 3.

One crucial component is missing in this analysis: performance. We mentioned the speed and latency improvements, but we did not mention that LTE is a data-only network at the moment. In order to service voice calls, LTE handsets will have to maintain two radio connections, LTE for data and 3G or 2G to carry voice. This will have an impact on battery life and increases complexity in terms of handing over between different networks and different cells. Apple claims that they have worked hard to optimise battery life when using LTE – let us hope they have done their homework well.