THE ECONOMIC

BULLETIN

July 2012
VOLUME 8 - ISSUE 97

Growth Opportunities for the UAE Steel industry

The UAE steel industry is part of the basic material sub-sector, which is part of the manufacturing sector. Given the historical growth of the UAE economy, especially in construction, steel has been an important construction material. Furthermore, given the scope for improved design and innovations, the use of steel could also widen to include other consumer and business applications as well. This article discusses future growth opportunities for UAE steel industry given growth in the UAE economy and export prospects in potential foreign markets. It is based on information from the World Steel Association (WSA). According

to WSA, the worlds top steel companies in 2011 included Arcelor Mittal, Hebei Group, Baosteel, POSCO, Wuhan Group and Nippon Steel. Also in 2011 the top four steel producing countries were China, Japan, USA and India. These countries can serve as important source of steel for UAE businesses producing value added steel products for domestic use and exports. UAE Steel Industry overview Table 1 provides data on the number of companies engaged in different activities related to steel production and trading in Dubai. A healthy trend is shown because the number of companies engaged in steel manufacturing and trading has increased overtime indicating a buoyant and growing steel industry. Also as the data shows, signicant
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CURRENT ISSUE

TRADE MONITOR

MARKET MONITOR

SECTOR MONITOR

Reports Published on the Dubai Chamber Website (www.dubaichamber.com) 1. Economic Research Department(2007), Trade and Investment Opportunities for the UAE in Japan 2. Economic Research Department(2007), Potential Business Opportunities in Brazil from UAE Perspective 3. Economic Research Department (2007), Trade and Investment Opportunities for the UAE in Germany

4. Economic Research Department(2007), Identication of Sectoral Investment Opportunities in Dubai 5. Economic Research Department(2008), Trade and Investment Opportunities for the UAE in Saudi Arabia 6. Economic Research Department(2007), Potential Business Opportunities in Russia from UAE Perspective 7. Economic Research Department(2007), Potential Business Opportunities in South Africa from UAE Perspective 8. Economic Research Department (2008), Trade and Investment Opportunities for the UAE in Sudan 9. Economic Research Department(2008), Trade and Investment Opportunities for the UAE in Thailand 10. Economic Research Department(2007), Potential Business Opportunities in UK from UAE Perspective 11. Economic Research Department (2008), Trade and Investment Opportunities for the UAE in Tanzania 12. Economic Research Department(2007), Potential Business Opportunities in South Korea from UAE Perspective 13. Economic Research Department (2007), Dubais Export Winners in Selected Markets 14. Economic Research Department, New Export Markets for Dubai 15. Economic Research Department, EU25 Trade with UAE: 1995 2005 16. Economic Research Department Exports of Dubai Chambers Members: First Semester 2007 17. Economic Research Department(2007), Dubai Logistics & Foreign Trade 18. Economic Research Department(2007), Globalization Impact on Factors of Production with Special Reference to Labor 19. Economic Research Department Exports: What Companies are more likely to export more? 20. Economic Research Department (2009), How to set up a business in Dubai? 21. Economic Research Department (2009), Arabic version of How to set up a business in Dubai? 22. Economic Research Department (2009), Trade and Investment Opportunities for the UAE Companies in Sri Lanka 23. Economic Research Department (2009), Trade and Investment Opportunities for the UAE Companies in Chile 24. Economic Research Department (2009), Trade and Investment Opportunities for the UAE Companies in Syria 25. Economic Research Department (2009), Trade and Investment Opportunities for the UAE Companies in Argentina For More Information Kindly Contact: Mr. TARIQ AL HASSAN
Economic Research Department, Tel.: 04-2028476, Fax: 04-2028478 www.dubaichamber.com, e-mail:tariq.alhassan@dubaichamber.com, P.O. Box: 1457, Dubai, U.A.E.

increase is seen in the number of companies involved in different types of steel trading which is in line with the data in table 2, which shows an increase in exports in some steel sub-product categories.
Table 1. Major steel activity companies registered with Dubai Chamber Item Basic Steel Products Trading Steel Fabrication and Welding Workshop Steel Constructions Contracting Reinforcement Steel Bars Trading Steel Hangars and Sheds Manufacturing Structures and Structural Steel Manufacturing

2009 2010
621 179 152 82 88 65 661 192 157 90 92 73

2011
705 199 159 96 93 76

Up to Apr 2012
718 199 160 100 93 77

and countries in the East Asian region such as Indonesia and Malaysia. Also countries such as the USA and the UK have been important export markets. Demand for the UAEs steel exports is therefore widespread and UAE steel exporters should further explore potential in growing foreign markets in Central Asia, the MENA region, East Asia and the Pacic and in Latin America to increase their steel product exports.
Table 2. UAEs selected Steel sub-product exports and re-exports (AED million) Product category and HS code HS code 73089090, Structures of iron and steel HS code 73170010, Nails of iron or steel HS code 73042900, Casing & tubing of type used for oil or gas Re-melting scrap ingots of iron or steel., HS code 72045000
2007 2008 2009 2010 2011

187.15 266.76 309.65 457.95 611.70 11.77 102.96 157.53 242.48 82.41 32.74 7.03 88.10 130.85 114.78 127.10 65.92 81.82 149.11 136.93

Source: Dubai Chamber.

Source: UAE Federal Customs Authority.

Opportunities for the UAE Steel industry Opportunities for growth of steel businesses in the UAE domestic market are partly due to growth in steel demand from the construction industry. According to BMI UAE Infrastructure report for Q2 2012, the share of the UAE construction industry is forecasted to increase from 10.6 percent of GDP in 2012 to about 11.2 percent of GDP in 2016. According to WSA, the potential for the uses of steel in the UAE is not limited to construction but could also include packaging, use in automobile parts or as stainless steel in applications such as cutlery, furniture or industrial applications. Demand for these applications could be expected to grow over the long-term with growth of the UAE economy. Demand for steel could also come from the use of steel in other applications in industry, homes and furniture in foreign markets. Figure 1 shows the apparent use of steel in selected regions such as Africa, South America and the Middle East which has increased overtime. From 2001 to 2010, apparent steel use in Africa has increased at a Compound Annual Growth Rate (CAGR) of about 6%, in South America about 5%, in the Middle East about 7% and South and East Asia at about 10%. Other developing regions such as Central Asia and Eastern Europe have also seen a trend of growing use, highlighting their potential as important markets for UAE steel exports.
Figure 1. Steel consumption by region (000 metric tons crude steel)
60,000 50,000 40,000 30,000 20,000 10,000 0 Middle East 2009 2010 2001 2002 2003 2004 2005 2007 2006 2008 Africa South America

While steel is a basic commodity, it still provides room for substantial differentiation. Areas in which differentiation can be done include timely delivery of products to nal customers, better packaging, and modern designs of articles of steel and superior customer service. These and other steps could position UAE steel businesses to prot from the growth of key developing markets and gain larger market shares in these markets. Challenges for the UAE Steel industry Demand for steel depends on growth of the global economy, which would drive demand for usage of steel in construction and in appliances. Therefore, any weakness in global economic growth could translate into weakness in global steel demand. Also the need to produce and sell more sustainable steel products could also present a challenge overtime. UAE steel manufacturers, fabricators and designers could make use of the recyclable property of steel by designing products which are easier to recycle. Another challenge for the UAE steel industry is to source cheaper raw materials. According to WSA, iron ore is a major raw material used in manufacture of steel with limestone and recycled steel also being important. Rising prices of these raw material inputs could also present a challenge for UAE steel businesses. These challenges can partly be mitigated by introducing more efcient production processes and producing more value added designs in steel products. Producing more sustainable designs and promoting the sustainability of steel use could further increase sales to domestic and foreign customers concerned about the environmental impact of their activities. Conclusion The UAE steel industry is an important part of the manufacturing sector and therefore the UAE economy. In addition to providing steel for a wide variety of domestic applications, it also provides earnings through exports to major foreign markets. Foreign demand for steel is dependent on the growth of the global economy. As the global economy grows over the long-run, demand for this important material can be expected to increase, thereby providing more lucrative prospects for UAE exporters. Given expectations for the long-term development in economies in the MENA region, in South Asia, East Asia and Latin America, UAE steel businesses could develop closer links with importers in those countries, offering more hi-tech and innovative products and by making more easily recyclable products. Doing so could mean that they are able to establish a strong market presence in these countries and increase their prot margins by providing quality products and differentiating their product and services, to gain market share over competitors thereby contributing to the longterm growth of UAE exports to the world.
In addition to providing steel for a wide variety of domestic applications, the UAE steel industry also provides earnings through exports to major markets.

Source: World Steel Association, Steel Statistical Yearbook, 2011

Trade data shows that UAE businesses source steel in primary form from countries like Georgia, USA, Germany and Sweden, while semi-manufactured steel products of iron or non-alloy steel are sourced from countries like Russia, Turkey, Ukraine and Malaysia. Table 2 shows some iron and steel sub-products with fast growing exports and re-exports from the UAE. For example, structures of iron and steel have registered a CAGR of about 34% from 2007 to 2011, while nails of iron and steel registered a CAGR of about 63% in same period. UAE exporters could further explore increased exports in these and other products in the developing regions highlighted earlier. The trade data also shows that the major destination countries for UAEs exports of iron and steel and articles of iron and steel have been countries in the Middle East and North Africa (MENA) region such as Saudi Arabia, Oman and Qatar, countries in South Asia such as India and Pakistan

UAE competitiveness has improved while the business environment remains robust
According to the denition of the World Economic Forum (WEF), competitiveness is identied as the set of institutions, policies, and factors that determine the level of productivity of a country. In the current challenging economic environment, the recent drawbacks in the Euro area are closely related to modest competitiveness performances that limit long term productivity growth. Efforts to stabilize scal positions and reduce debt burdens must therefore be complemented by competitiveness enhancing reforms aimed at improving the potential for economic growth. The purpose of this article is to analyze the latest trends in the international competitiveness and business environment of the UAE. As the data shows, UAE has become more competitive. According to the World Economic Forums Global Competitiveness Report 2011/12 UAE ranks as the thirdmost competitive economy in the region after Qatar (1st) and Saudi Arabia (2nd), with a score of 4.9 (where 0 is the least competitive and 7 is the most competitive economy). Overall, UAE ranks 27th out of 142 countries, below Switzerland (in the 1st place), United States (5th), Qatar (14th) and Saudi Arabia (17th), but higher than other regional peers, such as Oman (32nd), Kuwait (34th), Bahrain (37th) and Egypt (94th) (Figure 1).
Figure 1: Relative Competitiveness 2011/2012
Switzerland United States Qatar Saudi Arabia UAE Oman Kuwait Bahrain Egypt 0.00 2.00 least competitive 3.88 4.00 6.00 8.00 5.74 5.43 5.24 5.17 4.89

Figure 2: Regulatory Quality, 2011

Switzerland United States Bahrain Qatar Oman UAE Kuwait Saudi Arabia Egypt -2.50 -1.50 -0.50 0.77 0.54 0.51 0.38 0.18 0.15 -0.18 0.50 1.50 2.50 1.42 1.90

- 2.5 = lowest quality

+ 2.5 = highest quality

Source: Dubai Chamber based on data from world bank governance indicators

Figure 3: Corruption Index, 2011

New Zealand Qatar United States UAE Bahrain Oman Kuwait Saudi Arabia Egypt 0.00 2.00 2.9 4.00 6.00 8.00 10.00 5.1 4.8 4.6 4.4 7.2 7.1 6.8 9.5

4.64
4.62 4.54

0 = most corrupt

10 = least corrupt

Source: Dubai Chamber based on data from Transparency international

7 = most competitive

Source: Dubai Chamber based on data from world economic Forum

Moreover, according to the World Banks Doing Business 2012 report, UAE advanced two places to 33 out of 183 countries compared to the rankings of the previous year. UAE ranks 5th in the world for trading across borders, 6th for registering property and 7th for paying taxes. Added to that, in 2012, UAE has recorded the rst place globally in the eld of efciency of governmental scal policy issued by the International Institute of Management Development (IMD) in Switzerland. Moving forward, the legal and regulatory environment is more than adequate in UAE. According to the World Banks 2011 World Governance Indicators (based on gures for 2010), UAE scores reasonably well in comparison with other countries in the region for its rule of law, whereas general standards across the region have been intensely improved during the last few years. In addition, the regulatory quality is improving in UAE, a trend that has been advancing in recent years (Figure 2). Moreover, the control of corruption has upgraded, government effectiveness is high and the overall freedom to conduct business is well protected under the existing regulatory environment. According to Transparency Internationals Corruption Perceptions Index, UAE has successfully addressed corruption in 2011, receiving a score of 6.8 (where 10 represent the lowest level of perceived corruption and 0 the highest). This score is the second-best of the GCC region, with only Qatar posting a higher result. UAE score has dramatically improved since the 2010 when it received a score of 6.3 and the 2003 report when it received a score of 5.2 thus placing UAE as one of the highest-ranking countries in the GCC region, second only to Qatar (Figure 3).

It is far from evident that the UAE tax regime is a major attraction for foreign investors. The reason behind this stems from the fact that a highly competitive taxation regime strengthens Foreign Direct Investment (FDI) inows. Added to that, both income and sales taxes are non-existent, while corporate taxation is limited to oil-producing companies and foreign banks, those are accountable to a tax of the prots earned in the respective emirate. UAE government, along with a number of other GCC countries, has recently raised the possibility of introducing a widespread value added tax (VAT) over the next few years, although it is expected that the level to be no higher than 5%, with many exemptions in the rst instance. With the upsurge in government revenues as a result of the increase in the oil price and the economic recovery gaining momentum, along with sustained ination, the time for implementing VAT is expected to be postponed. However, it is projected that UAE would denitely seek to ensure that its GCC peers will consider introducing a similar form of tax simultaneously in order to ensure that domestic competitiveness is maintained. UAE has long been an attractive investment destination; however there are a number of challenges that need to be addressed. According to the World Banks Doing Business 2012 report, there are aspects of the business regulatory environment that remain problematic, including resolving insolvency (ranked 155), contract enforcement (134), protecting investors (122) and getting credit (78). The inadequacies of the bankruptcy legislation remain a major challenge for UAE. Specically, according to the same report, the time taken to resolve bankruptcy is around 5.1 years, well above the regional average of 3.4 years and the average OECD experience of 1.7 years. The recovery rate (at 11 cents in the US dollar) is low in comparison with the regional average of 29.7 cents and 68.2 cents for the average OECD countries. Policymakers are advised to look into these problematic issues of business environment and bring them up to the best practice in the region, if not in the world.

Dubai tourism industry robust recovery

Hospitality industry in the GCC region is poised for growth in the coming few years. According to the latest estimates by Alpen Capital (Q2-2011), the estimated room revenues from the GCC hotel industry was about USD 16 billion in 2010 and projected to rise to USD 27 billion in 2015. Kingdom of Saudi Arabia (KSA) and the UAE dominate about 89% of the GCC region total market share and however, by 2015 their share is expected to dip marginally to 87% in line with the expected rise in the share of other countries in the region such as Qatar and Oman. As can be seen from Figure 1, the number of tourist arrivals in the GCC region is projected to increase progressively from 40.9 million in 2010 to 53.6 million in 2015. In 2020, the number of tourist arrivals is expected to make a remarkable jump to reach about 64.3 million, justifying the projected increases in the industry revenues in the medium term. From the Figure, KSA is highest GCC country that receives tourists followed by the UAE. The number of tourist arrivals to KSA includes the arrival of Haj and Omura pilgrims which is considered as religious tourism mainly. Therefore, UAE is considered the main tourist destination in the GCC.
Figure 1: GCC Tourist Arrivals
70,000 60,000 50,000

Figure 2: Dubai Hotel Room & Appartment Flat Occupancy

100% 80%

60%

40% 20%

0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Hotel room occupancy

Appartment at occupancy

Dubai Chamber based on data from DTCM

The recovery in Dubai tourism market can be attributed to the increase in both hotels and apartments occupancy rate and to the increased number of tourists arrivals .Based on latest data avialable form Dubai Department of Tourism and Commerce Marketing (DTCM), Figure 2 shows that Dubai hotel rooms and apartment ats occupancy rates started to pick up in 2010 and 2011 reaching about 74% in 2011 for both as compared to 84% for hotel rooms and 82% for apartments ats in 2007. Dubai average occupancy rate of 74% is higher than the GCC average of 67%.. The recovery of the occupancy rate is correlated to the recovery in Dubai level of tourism and business activity which is reected positively in Dubai GDP growth rate.
Figure 3: Dubai Hotel & Hotels Appartment Revenues
18,000,000 50% 40% 30% 16,000,000
Revenues in " 000" AED

" 000 "

40,000 30,000 20,000 10,000 Oman Qatar Kuwait Bahrain UAE KSA GCC

14,000,000 12,000,000 10,000,000

10% 8,000,000 6,000,000 4,000,000 2,000,000 0%

Dubai Chamber based on data from Alpen Capital

-10% -20% -30% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

According to the same report, about 61% the hotel rooms in the pipeline will be located in KSA and 29% are expected to be in the UAE and the remaining will be distributed among the rest of the GCC countries, implying that both KSA and UAE will continue to dominate the region tourism market in the short to the medium term.

Dubai Chamber based on data from DTCM

Dubai key hospitality metrics

In Dubai, hospitality industry has emerged as a major pillar of the emirate economic development. Dubai takes the lead in the GCC as the fastest growing holiday destination in the history of the travel industry according to the World Tourism Organization (WTO). Dubai has been the lead tourist destination in the GCC regarding sport tourism and event tourism. Dubai hospitality industry experienced dynamic growth, which is reected in the increased number of passengers coming to the UAE. The majority of tourists coming to UAE opt for Dubai domestic carrier Emirates Airlines, the most protable airlines internationally in 2011. Another manifestation is the presence of the most luxurious international hotel chains attracting tourists from all over the world. Post the global nancial crisis, the sector showed signs of resilience and in fact acted as one of Dubai major economic sectors that supported its economic recovery. The recent political turmoil in the Arab world (Arab spring) is a good test for the capacity of Dubai hospitality sector. With the eruption of the Arab spring, most of the tourism activity has diverted into UAE from two of the most attractive tourism destinations of the region such as Egypt and Tunisia. The total number of Dubai hotels guests showed an upward trend during 2010 and 2011 registering an average annual growth rate of about 10%.

Another indicator for robust recovery of Dubai hospitality sector in 2010 and 2011 is the V shape recovery in revenues growth rates of hotel and apartment. Dubai hospitality industry revenues registered 20% annual growth rate in 2011as compared to -19% in 2009. In 2011, Dubai hospitality industry earned AED 15.9 billion in revenues from hotel and hotel apartments which is slightly higher than the industry revenues in 2008 of AED 15.3 billion (Figure 3).

Conclusions
To conclude, Dubai hospitality industry is on the path of robust recovery in line with Dubai GDPs pick up. Looking ahead, in the short to the medium term the sector prospects are positive, nonetheless, it is expected that revenues may be affected due to supply of large number of rooms that are expected to enter the market over the next few years. In addition, the Eurozone crisis and USA slow economic recovery might also present a challenge for Dubai hotels revenue and occupancy rates, given the fact that on average about 23% of Dubai hotel guests are from Europe and the USA. Another challenge to the revenues generated from Dubai hospitality industry is the increased number of newcomers, which will raise the competition among the existing players and will press revenues and prot margin down. On the other hand, the expansion of the middle class in both India and China will contribute greatly towards tourism receipts in the Dubai and other GCC countries. Notwithstanding the current situation, the region remains an attractive destination for investors looking for medium to long term returns.

% change

20%

OTT Services and the Implications for MENA Telecom Operators

Over-the-top (OTT) services such as messaging, voice over internet protocol (VoIP) and video have been evolving rapidly in recent years, mostly due to the boom in smart phone adoption. Telecom operators have been quick to respond to the ramping up in demand for data. Doing so, however, has created a dynamic where telecom operators are facing cost pressures to existing business models. Transmitting several bytes of data is a relatively cheap in comparison to the traditional services that those bytes replace. Some operators are thought to be facing nancial challenges as a result of relatively slow growth in revenues and rising network costs due to a number of factors, including OTT services. This article looks briey at some of these trends and how operators globally are responding to the new data-centric dynamic. Challenges Telecom operators globally have been facing a steady fall in the contribution of voice and short messaging services (SMS) to their revenues. The introduction of data-centric devices has deected the use of traditional voice and SMS services towards relatively efcient data platforms that are based on internet technologies. Sending an SMS of 140 characters using a feature phone costs approximately 18 UAE ls. Relaying the same number of characters in the form of data through most smart phones using third generation (3G) network costs less than one l, Table 1. Messenger services such as the popular Blackberry messenger (BBM) is one such OTT offering. OTT services can take a broader range of forms including substitutes for traditional services. Skype has the propensity to replace traditional voice calls but can prove costlier to the consumer if conducted over a 3G connection. On the ipside there are no traditional equivalents of WhatsApp, video from YouTube or Netix, music from Spotify or Deezer. These OTT content platforms present a spectrum of opportunities to operators. Such services that require a data plan come with less risks of revenue erosion.
Table 1: Messaging in the UAE: Traditional vs. IP (ls) SMS (per sms) DU Etisalat 18.0 30.0 60.0 60.0 0.2 0.2 Voice (per minute)* DU Etisalat 30 33 212 212 450 450

Figure 1: Broadband and 3G Subscribers, MENA

subcribers (000) 100,000 80,000 3G Broadband subcribers (000) 100,000 80,000

60,000

60,000

40,000

40,000

20,000

20,000

0 2009 2010 2011 2012 2013 2014 2015 2016

Source: BMI

On balance, operators globally have attempted to adjust their pricing strategies in order to adapt to the new norm. Other operators have attempted to amend their service offerings. In the Northern Europe, one operator introduced deep-packet inspection last year to manage VoIP trafc with a view to potentially block or charge for the service. In response to consumer and media backlash, strict net neutrality legislation was subsequently introduced which has limited room for operators to manoeuvre in response to OTT competitive threats. Most MENA countries currently enjoy open access to VOIP services on a purely peerto-peer basis, the introduction of VoIP to xed line services is typically seen as a high-risk to revenues. Limiting the growth of innovation in such an area, however, also risks reducing space for experimenting with price and service delivery in the future across a broader range of other OTT services across mobile and xed devices. Beyond network costs Other than reducing costs by making networks more efcient, there are a number of other areas operators can address in the short-term. One such example is subsidies for smart-phones. For example, subsidies on Apple products from telecoms operators are often signicant but such subsidies lock-in consumers for longer as they are less likely to migrate to other operators. Subsidies are however coming under scrutiny as revenue and margin pressures intensify going forward. As a way to harness the user experience, a leading telecoms operator in Europe has partnered with an established internet browser to implement HTML5 a coding ecosystem that makes websites and smart phones work more efciently in terms of data and usability. In this particular case, over-the-counter (OTC) handset subsidies for high-end smart phones have eroded bottom-line nancial performance. Migrating to HTML5 has the added benet embracing an ecosystem that is app-centric such as Apples iStore and Googles Play store. This will enable operators to compete on a more even footing in terms of innovation. This is probably a high risk but nonetheless illustrative of the scope for opportunity for operators. Implications Operators in the Middle East face challenges from OTT services. The obstacles can be segmented into OTT substitution and OTT content, which have different characteristics with regards to OTT content and how they deliver signicant benet to operators. MENA operators are in a relatively strong position to offer regionspecic apps and content leaving ample scope for operator involvement in apps and platform development than other parts of the world. This also opens the potential for operators to grow revenues using innovation alongside the on-going operational cost strategies in a new era of data-centric service performance. While OTT substitution is a potent threat to operator revenues, they also present signicant opportunities for operators who have adapted rapidly to the new norms. For businesses and consumers the increase low-cost OTT communication services represents a signicant milestone in cost efciencies in addition to the added ease of doing business. This has been considered as good for business in recent years. For the telecommunications market OTT services mean increased competition between telecom operators to attract consumers with lower rates and better bundling of deals in which several mobile and xed line services are grouped together. This will also benet the consumers in the long-run.

Local International* IP (via 3G)

* example: standard USA peak rate Source: Dubai Chamber based on Du and Etisalat portals

Heavy data usage through OTT content, however, can put network resources under cost pressures. Networks have to be upgraded to accommodate the increase in trafc, albeit with limited increases in revenue. Network sharing has thus become one way of achieving operational efciency. For example, operators can and should minimize network infrastructure costs through tower sharing, network infrastructure joint ventures, managed services- or a combination of these measures across a geographic footprint. To overcome the increase in data usage, telecom operator can introduce their own VoIP or SMS IP services to meter trafc. The advantage is that operators can control the quality of the audio, adjusting in accordance with network usage. Middle Eastern operators are in a stronger position with respect to European operators, primarily because VoIP and smart phone adoption is in its nascent stages, Figure 1. Business Monitor International forecasts strong 3G and broadband subscriber growth across the Middle East and North Africa in the medium term. This is in part driven by consumer desire to access OTT content such as video from Googles YouTube. It should also be noted that, in addition to driving subscriber uptake, OTT video content has the added benet of boosting demand for higher capacity wireless and xed line broadband services thereby increasing the combined value of operators subscriber bases.