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Demand for Broadband Set to Drive Algerian Telecom Market

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The mobile telephony segment in Algeria is reaching maturity. Mobile subscriber growth rates are projected to slow down even as mobile penetration rate was expected to reach 100 per cent by the first quarter of 2012. 3G services are likely to be the next major trend in the Algerian market and are set to boost broadband penetration. However, an inefficient regulatory environment threatens the development of the telecommunications industry.

New analysis from Frost & Sullivan finds that the market earned revenues of USD 4.96 billion in 2011 and is estimated to reach USD 7.36 billion in 2018. The highest growth potential is anticipated to lie in the broadband segment.

"Algeria has a 2.5 per cent broadband penetration rate as of 2011," noted Frost & Sullivan Research Analyst Jonas Zelba. "However, the demand for high speed data services is evident and is expected to increase, thus driving its growth."

Algeria has among the lowest broadband penetration rates in the region. The fixed-line broadband services are monopolised by Algerie Telecom as all the ISPs have to use its network.

"Young consumers access the Internet through shared facilities like Internet cafes which are gaining popularity in the country," remarked Zelba. "This trend restricts the adoption of individual broadband connections which are mainly adopted by the enterprise segment."

The growth in the telecom market is likely to be fuelled by the broadband segment. Frost & Sullivan believes that mobile and wireless services will be the key drivers of broadband adoption in the country. The expected launch of 3G services in 2012 could also accelerate broadband growth. Also in 2009, Algerian Telecom developed a major 5-year USD 6 billion infrastructure development plan.

At the moment, however, fixed-line monopoly and delayed privatisation of the incumbent is causing limited infrastructure upgrade and poor quality of service.

Additionally, the Regulator, Post and Telecom Regulatory Authority (ARPT), has been ineffective in policing the networks' behaviour and has delayed some key licensing decisions. For example, its imposition of pricing control, restricting prices beyond a certain level or the delayed issue of 3G licences has limited the development of operators.

"ARPT should speed up 3G license launch as the growth in the telecom industry is now expected to be driven by broadband segment," concludes Zelba. "The launch of 3G services is likely to accelerate broadband growth."

Vendors should seek opportunities to implement their solutions and provide support in 3G network expansion. Operators have already planned huge investments due to the anticipated launch of 3G.

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Tags: Algeria