DUBAI, Jan 29 (Reuters) - Bahrain is to auction radio spectrum for next-generation networks, a move that could seen new players enter the market and should see its telecoms infrastructure catch up with Gulf neighbours.
The three existing mobile operators, who have seen profit fall, were quick to say on Tuesday that any further competition may jeopardise their financial viability.
The auction will comprise five lots of spectrum primarily for long-term evolution (LTE), or 4G, networks, which the Telecommunications Regulatory Authority said were inadequate in an earlier strategy document.
The winning bidders were expected to be announced in April.
"The TRA is sending a strong message to existing operators that if they do not enhance their service offerings and set up the necessary infrastructure, the TRA is willing to offer additional mobile licenses to other operators who are," said Nishit Lakhotia, a telecoms analyst at Securities & Investment Co (SICO) in Bahrain.
In a consultation report on the TRA website, the current operators - Bahrain Telecommunications (Batelco), Kuwaiti group Zain and Viva Bahrain, an affiliate of Saudi Telecom Co - said the auction should be restricted to them and WiMax operator menatelecom, a subsidiary of Kuwait Finance House.
As well as the three mobile operators, 10 internet providers also serve Bahrain's 1.3 million population in one of the most liberalised markets in the Gulf. While this has cut prices for consumers, sector earnings are shrinking - mobile penetration is 128 percent, or nearly 1.3 subscriptions per resident.
Batelco's domestic profit fell 32 percent in 2012, outpacing a 12 percent drop in revenue, while Zain's net income in Bahrain more than halved in the first nine months of the year.
The profit slump showed "that despite higher revenues from device sales, overall revenue growth is negative due to a decline in tariffs," SICO's Lakhotia said.
As well as buying new spectrum, existing operators must also pay to build a nationwide fibre telecom network allowing higher bandwidth and network speeds than existing copper wire infrastructure.
In October, the head of Batelco's domestic operations called on the government to subsidise this, with the current fibre network largely limited to new commercial and residential areas. (Editing by Dan Lalor)