When Wataniya Telecom debuted on the Palestine Exchange last month, investors cheered.
It was a red-letter day for regional telecommunications companies. Wataniya's popular listing helped to boost the sector, and at the end of its first trading day the company and the rival PalTel were the highest valued companies on the exchange.
Although the market capitalisations of Wataniya and PalTel are relatively small compared with those of their regional peers - about US$335 million (Dh1.23 billion) and $950m, respectively - the companies' performance is symbolic of the recent success the telecoms sector has had in the Middle East.
While telecoms is typically a desirable investment sector because of its growth potential and the rapid development of operators, Middle East companies in particular are beginning to seem a cut above the rest.
Telecoms operators in emerging markets have outperformed their developed-market counterparts in 10 of the past 11 years. The only exception was 2008, when the global economy slowed dramatically, according to figures from Datastream, a Thomson Reuters statistical service.
"Emerging markets including the Middle East is where the growth is," says Matthew Reed, a senior research analyst with Informa Telecoms and Media.
"Many companies and operators from more developed markets, such as France Telecom, they're not seeing growth in their domestic markets. It's a reason why they're entering these markets," Mr Reed says.
France Telecom, which provides mobile and internet services under the Orange brand, is the second-largest mobile operator in Jordan and is in final negotiations to acquire a minority stake in Iraq's Korek Telecom. France Telecom is also one of five operators on a shortlist to acquire a mobile licence in Syria.
Another bidder for the Syrian licence is Etisalat, the largest telecoms operator in the UAE. Etisalat has embarked on an aggressive international expansion over the past few years, highlighted by its recent bid to acquire a 51 per cent stake in Kuwait's Zain for $11bn. The acquisition would make Etisalat one of the largest telecoms operators in the world by subscribers, with about 162 million.
Qatar Telecom (Qtel) is also an active player in the market. Wataniya, in which Qtel owns a 53 per cent stake, raised $50.3m when it went public in the Palestinian Territories. Qtel also boosted its investment in Tunisiana, Tunisia's largest mobile phone operator, to 74 per cent for $1.2bn.
Meanwhile, Orascom Telecom is in the process of merging its assets with Russia's VimpelComin a $6.6bn transaction. The deal stalled over the past few months after uncertainty involving Djezzy, an Algerian operator owned by Orascom.
The Algerian government is attempting to nationalise Djezzy, but Naguib Sawiris, the chairman of Orascom Telecom, has said he intends to seek arbitration after deciding that earlier bids from the Algerian government for the unit were undervalued. The Orascom-Vimpelcom entity would become the fifth-largest operator in the world by subscribers, with 174 million.
Bahrain's Batelco remained quiet until yesterday, when it made an offer to buy Zain Group's 25 per cent stake in the Saudi operator Zain KSA.
The main driver of all this activity is huge consumer demand for data services.
Faster networks, including the 4G-capable infrastructure employed by Etisalat and du in the UAE, are a sign that operators are responding to consumer demand.
While data usage is minimal with regular mobile phones, the surge in smartphone adoption has re-accelerated revenue growth in more mature markets, says Martin Mabbutt, a telecoms analyst with Nomura.
"Data growth is the common theme across [operators] globally, and the major question mark dominating discussions surround whether it can be monetised. To date the signs are not good," he says.
"But we do believe the outlook for leveraging data is somewhat better in many of the emerging markets thanks to the lack of competing fixed infrastructure, and we see the GCC operators in the sweet spot in the near term."
The amount of consolidation among Middle East operators is a necessity to maintain lofty profit targets, Mr Reed says. Generally, larger operators are able to get better rates when buying telecoms hardware and mobile devices.
"Very broadly speaking, the rate in growth in terms of subscription numbers is slowing," Mr Reed says.
"Scale can help, but the best way operators can build up their revenues is from their experience and know-how. Operators can build up an understanding of how to work in difficult environments and transfer their knowledge to riskier markets."
The absence of significant competition in Middle East markets will allow operators to keep prices for wireless broadband services up without feeling much pressure on profits, Mr Mabbutt says.
"There was a case to be made for Middle East operators being able to leverage broadband growth to create value in a way that was not as accessible for their European counterparts, and that this ultimately justified an upwards re-rating of those companies operating in the GCC. Less aggressive competition and higher price points drove this view," he says.
Challenges remain, however, for the region's telecoms operators. Despite the success seen on the Palestine Exchange, the overall stock performance of telecoms companies has suffered over the past year. Etisalat, Omantel, Vodafone Qatar, Saudi Telecom and Batelco all experienced a stock price decline of more than 10 per cent last year, while Zain and Qtel, which made notable gains, were investors' best friends.
"The differential between emerging-market operators and their global peers last year has shrunk to 3.5 per cent, a result of the growing maturity of several developing regions and the fact that multiple differentials are small," Mr Mabbutt says.
There is also a flip slide to the boom in the rise in mobile and broadband data usage in the region. The rise of popular online services such as Google, Facebook and Twitter now represent significant traffic over telecoms networks, but the websites do not contribute to the investments needed to keep the lights on.
Senior executives at telecoms conferences now frequently point out that this phenomenon needs to be dealt with sooner rather than later if revenues are not to be impaired.
A solution that other operators and companies have suggested is to charge more for preferred access to websites or services. The concept has been a lightning rod of debate in the US and UK, with an unsurprising backlash from consumers.
But in the Middle East, regulators may be inclined to adopt a stance to appease telecoms companies' concerns if their operational costs begin to skyrocket.
"I think they are changing the rules of the game," says Mohamed al Ghanim, the director general of the UAE's Telecommunications Regulatory Authority.
"They are operating in an unregulated market and they are growing much faster than any single operator in the world. Their profitability is increasing, which is good for them … but there is a change … in the communications environment and we have to begin to look at this phenomenon."