New Market Report: Jordan Telecommunications Report Q4 2013

The Jordanian market was volatile in 2012 and the medium-term outlook is somewhat uncertain. In our view, there is limited growth left in mobile subscriptions, and new subscription additions depend predominantly on lower income rural areas and refugees from Syria. Moreover, the government's decision to double taxes on mobile handsets and subscriptions threatens to limit subscriber growth and usage. However, as operators continue to invest in their 3G networks, we expect a significant rise in 3G penetration and use of high value data services to help prop up ARPUs over the long run.

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Key Data

* There were 402,000 net additions in Jordan's mobile market in Q113, equal to q-o-q growth of 4.4% and y-o-y growth of 18.0%. This brought the penetration rate to 143.9%.
* Mobile ARPU continued its downward trend, as operators reported an average drop of more than 10% in Q113.
* The fixed-line sector also contracted in Q11, with the number of subscriptions shrinking by 1.8% q-o-q. According to regulatory data, in March 2013 there were 392,869 fixed-line subscriptions and a penetration rate of 6.1%.

Risk/Reward Ratings

Jordan remained in 10th position in BMI's Risk/Reward Ratings table for Middle East And North Africa in the Q413 update, with an overall score of 45.8. Jordan scores below the regional average in the Industry Rewards, Country Rewards and Country Risk categories of our ratings table. The government's decision to raise taxes on the telecoms sector occurred after this quarter's Risk/Rewards Ratings were calculated, but we warn that they are likely to bring down the country's score significantly in subsequent quarters. As well as affecting its Industry Risks score, the impact of higher taxes may also be reflected in the Industry Rewards category.

Key Trends And Developments

June 2013, Jordan's three mobile operators, Orange Jordan, Zain Jordan and Umniah, criticised the government for the high level of taxation on the telecoms sector. The discussion followed the publication of a survey by Arab Advisors of wireless tariffs in 19 Arab countries, pointing out that Jordan was the second most heavily taxed mobile sector in the Arab world, behind Sudan. Despite this criticism, on July 11 2013 Jordan's government announced its decision to raise taxes on mobile services and hardware by 100%. These included a tax increase from 8% to 16% on the purchase of mobile handsets and from 12% to 24% on both prepaid and postpaid mobile phone subscriptions. After the tax hike, Jordan's total telecoms sector taxation rate reached 40%, the highest in the Middle East and North Africa (MENA).

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