Falling consumer confidence and Saudi employment reforms continue to dampen the Middle East’s once booming handset market, according to new figures from International Data Corporation (IDC).
The global technology research and advisory services firm’s latest ‘Quarterly Mobile Phone Tracker’ shows that shipments in the Middle East fell 8.0% quarter on quarter in Q2 2016, the second successive quarter of decline for the region. Shipments totaled 23.9 million units for the quarter, representing a 15.9% slump when compared with the corresponding period in 2015.
“Low oil prices, reduced government spending, and ongoing political instability continue to hamper demand in the region,” says Nabila Popal, Research Manager for mobile phones at IDC Middle East, Africa, and Turkey.
“Furthermore, consumers now expect much more from new devices before opting for an upgrade, a factor that has significantly lengthened the mobile refresh cycle and led to flagging spending in the consumer segment. Even the relative success of the Samsung S7 Edge could not halt the slump in the overall industry. Compounding all of this was the traditional slowdown in demand that accompanies the holy month of Ramadan, which coincided with the end of the second quarter.”
The UAE and Kuwait saw their mobile phone shipments decrease 15.1% and 4.4%, respectively, in Q2 2016 when compared with the previous three months, while Bahrain was the only GCC state to see growth in the quarter, recording a marginal increase in shipments of 0.8%. Saudi Arabia suffered a particularly sharp decline of 22.3% over the same period, largely due to regulatory changes that severely impacted the channel’s performance.
“The introduction of a new government stipulation that only Saudi nationals can be employed within the Kingdom’s mobile phone industry – covering sales, maintenance, and accessories – took a heavy toll on shipments in Q2 2016,” says Popal.
“This regulation has created panic across the industry, as independent retailers make up 80% of the Saudi mobile phone market and are traditionally run by foreigners. A large number of these independent retailers have now closed their doors, causing a sudden drop in orders. The market will eventually adjust, as there will be a shift towards major chain retailers; but the slump will continue until the channel adjusts to the changes.”
IDC’s latest figures show that this new consumer purchasing environment has caused quite a stir among the market’s leading players.
“The past two quarters have been particularly tough going for Apple,” says Saad Elkhadem, a research analyst at IDC Middle East, Africa, and Turkey. “The iPhone 6s and 6s Plus models have failed to gain the level of traction enjoyed by the 5s, while the newly released iPhone SE has so far not had the impact required to pick up the slack. All of these means Apple’s regional shipments were down 6.6% quarter on quarter in Q2 2016, giving the vendor a share of 13.3%.”
Samsung continues to lead the way with 37% share of the Middle East smartphone market, but suffered a sharp 19.6% decline in shipments quarter on quarter in Q2 2016. Intriguingly, Huawei is now the brand to watch in the Android space, with the vendor’s shipments up 17.6% quarter on quarter in Q2 2016, proving that opportunities to grow and gain share still exist in the smartphone market.
“Top-end Android devices continue to sell well in the region,” says Elkhadem. “But beneath this tier, purchases are increasingly veering towards value models, even in the more affluent Gulf states. Huawei’s portfolio is well positioned to capitalise on this trend, with a strong mid-level lineup complemented by the vendor’s new upper-level P9 model, which itself is priced low for a flagship device. The vendor is actively raising awareness of its brand by engaging in lots of promotional activities across the region, while also giving the channel the important care it deserves.”
The region’s retailers and distributors remain hopeful that ownership of the latest flagship device has not completely lost its allure in the Gulf markets. With the recent launch of Samsung’s Note 7 and Apple’s next set of iPhones expected to hit local stores soon, the market should indeed see a recovery of sorts.
“However, the speed of that recovery remains to be seen,” says Popal.
“Given the slower rate of innovation and change in each new smartphone iteration, consumers are finding it increasingly difficult to justify expensive upgrades. So while IDC expects mobile phone sales in the Middle East to stop contracting soon, the turn-around anticipated for the fourth quarter of the year is likely to be more muted than the industry might hope.”

Sluggish demand from consumers across much of the Middle East and Africa (MEA) saw the region’s tablet market shrink 13.3% year on year in Q2 2016, according to the latest ‘Middle East and Africa Quarterly Tablet Tracker’ from International Data Corporation (IDC).

The global ICT research and advisory services firm’s latest data shows that the overall market totaled 3.52 million units for the quarter, with Middle East shipments declining 18.8% year on year. By contrast, Africa performed much better, with shipments increasing 2.0% over the same period.

“Market saturation continues to inhibit the growth of tablets in Middle Eastern countries, while poor consumer sentiment caused by the effects of low crude oil prices is compounding the issue,” says Fouad Rafiq Charakla, Senior Research Manager for Personal Computing, Systems, and Infrastructure Solutions at IDC.

“In light of these circumstances, the commercial sector – spurred by some large-scale education deals – holds the key to driving growth in the region’s tablet market over the coming quarters.”

In terms of vendor rankings, Samsung continued to lead the tablet market in Q2 2016 with 20.8% share, despite seeing its shipments decline 35.3% year on year. Lenovo remained in second place with 12.9%, having suffered a 15.1% decline in shipments.

Huawei leaped above Apple to rank third in the market after its shipments increased 179.3% year on year to give it 10.0% share. Apple followed closely behind in fourth place with 9.3% share, having seen its shipments decline 28.1%.

“Tablets have traditionally been used for content consumption rather than content creation, and as consumers have gradually transitioned to bigger smartphones, the majority of content consumption activities have shifted in the same direction and away from tablets,” says Nakul Dogra, a Senior Research Analyst for Personal Computing, Systems, and Infrastructure Solutions at IDC.

“Looking forward, the rise of detachable tablets will help to boost the use of tablets for content creation purposes, something that has traditionally been limited to PCs for the majority of consumers.”

Partially compensating for the continuing slowdown in consumer demand is a massive order for Windows-based detachable tablets that has been placed as part of Kenya’s Digital Literacy Programme. The size of this deal has led IDC to revise its growth forecast for shipments of Windows tablets in 2016 upwards from 78.2% year on year to 232.3%. It has also resulted in a slight upwards revision of IDC’s forecast for the overall MEA tablet market’s performance in 2016, although shipments will still be down 7.0% year on year to 15.07 million units.

“The pace of innovation in the tablet market has slowed considerably, and consumers are now holding onto their tablets for longer due to the minimal differences between their existing devices and the new-generation of tablets being pushed by vendors,” says Dogra.

“This trend of longer replacement cycles is likely to continue as there are no innovative products lined up for the foreseeable future.”

IDC’s ‘Middle East and Africa Quarterly Tablet Tracker’ provides insightful analysis of key market developments, covering vendors, operating systems, screen sizes, user segments and distribution channels, quarterly market share data, and a comprehensive 5–8 quarter and five-year forecast.

With the recent receipt of Electronic Money Establishment licenses (EME) in four countries (Senegal, Mali, Côte d’Ivoire and Guinea), Orange has further strengthened its position as a major player in the mobile financial services segment in Africa. This change of status is accompanied by the creation of a new organisation, CECOM, which provides mutualized risk and compliance management for its mobile money activities in these countries.

A Favourable Environment
In 2015, noting the significant growth of mobile money services within the Economic Community of West African States (ECOWAS), the Central Bank of West African States (BCEAO) published an update of the regulatory framework related to such services.

This change, initiated in similar fashion by the Central Bank of the Republic of Guinea (BCRG), encourages telecommunications operators to obtain an EME license in order to conduct their mobile money operations within a broader framework of responsibility.

It was in this context that Orange filed license requests with both Central Banks and received EME status in early 2016 in four countries: Senegal, Mali, Côte d’Ivoire and Guinea.

Each EME, licensed by the Central Bank of its territory, is an autonomous subsidiary controlled by the local telecom operator. The EME:

ensures the issuance, management and distribution of electronic money for Orange Money;

manages the compliance policy. (The EME is effectively taking over this role from Orange’s partner banks who previously carried this responsibility);

co-ordinates requests to the Central Bank for the launch of new functionalities and monitors overall activity.

This status gives Orange more autonomy and agility, enabling it to offer customers increasingly innovative services in a shorter amount of time.

CECOM, a fundamental role in risk management and compliance
The Group has set up a dedicated organisation, CECOM, to provide risk management for the business scope of the EMEs.
Based in Abidjan, Côte d’Ivoire, CECOM reports to the Orange Group and provides second-level control for the Orange Money business. It serves Orange’s EME subsidiaries, which provide first-level control. CECOM is staffed by a multidisciplinary team of experts with advanced skills in banking, telecommunications and information technology.

Orange strengthens its position as a major player in mobile finance
The compliance challenges of Orange Money as regards financial and banking regulations are still recent to Orange.

The creation of the CECOM to deploy a mutualized policy for managing risk and conformity issues is an important milestone which demonstrates Orange’s maturity in this segment. Orange Money’s global operations now represent major stakes in a growing number of countries. In Côte d’Ivoire, Orange Money amounts to as much as 10% of the operator’s revenues.
Marc Rennard, Deputy Chief Executive Officer in charge of Customer Experience and Mobile Financial Services, announced:

“With this new milestone, mobile financial services become an integral part of Orange’s DNA. The licenses received from the Central Banks together with our investment in the CECOM are testimony to our commitment to this diversification, which will benefit our customers who use Orange Money services several million times each day.”
Bruno Mettling, Deputy Chief Executive Officer of the Orange Group and CEO of Orange Middle East and Africa, said:

“By securing EME status, we are able to further develop the Orange Money business, which lies at the heart of our mission of being the strategic partner for the digital transformation in Africa and the Middle East, with the objective of generating more than 200 million euros by 2018. Today, the Orange Money customer base represents 5% of all customers in this market worldwide. Acceleration is already in progress, in particular with the opening of new corridors to expand our international money transfer services.”