Vodafone, the world's largest mobile operator by sales and Middle Eastern mobile operator Zain have confirmed talks over a roaming agreement. Zain's regional footprint makes it a key partner for Vodafone in the region, as the latter's operations cover just three markets in the Middle East and North Africa. While Vodafone will benefit from extended coverage in the Middle East, Zain will also gain access to networks across Europe and additional markets in its own region.
There are few opportunities for building new networks in the Middle East, limiting the prospects for generating new revenues from subscribers in new markets. Zain's footprint reaches Bahrain, Iraq, Jordan, Kuwait, Lebanon, Saudi Arabia and Sudan, making up much of the region. Vodafone in comparison has majority stakes in operators in Egypt, Libya and Qatar.
|Roaming Opportunities For Markets With Limited Subscriber Growth Prospects|
|Mobile Penetration (%) Zain Markets (LHS) And Vodafone Middle East Markets (RHS), 2012f|
For Vodafone, the deal allows it to reduce roaming fees while also expanding coverage for roaming customers. The high cost of roaming can make customers less likely to use their mobiles when abroad, particularly avoiding high data fees when roaming on another network. However, with mobile growth stalling revenue growth must be sought from new sources. As roaming costs are higher for consumers, these bring in good revenues for operators. Lowering the cost of roaming is a good tactic, in BMI's opinion, because it encourages greater roaming usage among subscribers and provides long-term growth for this cash cow business.
Zain subscribers will also benefit from access to over 20 markets, particularly in Europe and also see roaming fees lowered. The deal will provide a key marketing advantage for Zain in the Middle East, where the majority of markets are saturated and offer limited growth potential. Product differentiation is an important tool that encourages subscribers to use a particular network and a roaming deal of this scale will benefit Zain immensely.
While details of the deal are scarce, it has been suggested that the two companies could potentially band together to get better deals on the latest handsets, generating lower subscriber acquisition costs, which would benefit both companies. Many mobile operators are seeking lower costs as they try to boost profits while revenue growth slows. As an additional boost to the deal, both companies could see further benefits beyond traditional roaming agreements.