Kingdom of change

zoom

Dr Marwan Al-Ahmadi, CEO of Zain Saudi Arabia, believes the intervention of the CITC has enabled the company to accelerate the rollout of its network.

Saudi Arabia represented 15% of all telecommunications connections in the Middle East midway through 2007, according to a joint study by the GSM Association and research firm Ovum. Analysts further predict the number of mobile and internet subscribers will double within the next five years.

The high purchasing power of the Saudi population, combined with the comparatively low levels of telephony penetration and high ARPU levels of around US$35, have all attracted interest from regional players to enter the market.

Saudi Arabia's telecom regulator, the CITC, has dedicated much time to channeling this commercial interest to the benefit of the kingdom's ICT sector with a particular interest in safeguarding the public interest and shoring up investment in Saudi Arabia's national infrastructure.

This programme was set in motion after the CITC introduced market liberalisation in the mobile segment in 2004, when UAE-based Etisalat paid a $2.4 billion entry-fee for a 20-year 2G/3G concession.

The acquisition of a 3G licence by incumbent operator Saudi Telecom Company (STC) 12 months later was further evidence that the regulatory body's strategy was starting to reap rewards for the kingdom's telco market.

The compound effect of these developments has been the addition of 1.5 million mobile subscribers per quarter in the 18 months to August 2007, according to figures published by KPMG.

A further report released by HSBC predicts that mobile penetration rates in Saudi Arabia are expected to rise 48%, to reach 130% before 2012.

The Arab Advisors Group estimates that almost 40% of mobile users had more than one SIM card in 2006 but HSBC estimates the number to be closer to 30%.

The kingdom's third mobile licence was auctioned-off for $6.11 billion to Kuwait's Zain Group earlier last year, giving the operator the right to offer 2G and 3G services for a period of 25 years.

The amount paid by Zain is easily the highest ever offered across the entire Middle East for a greenfield opportunity and surpasses the $5 billion figure analysts expected the eventual winner to bid.

This signifies the responsibility being faced by the CITC in ensuring market conditions are such that the investments being made in the sector prove viable.

Dr Marwan Al-Ahmadi, CEO of Zain's Saudi operations claims that the company has presently invested $1.2 billion in its network rollout.

He is also at pains to point out that despite the massive market entry fee, the $6.1 billion payout amounts to one of the shrewdest investments in the Middle East telco space last year.

"The Saudi Arabian telco space is the least-saturated market within the GCC and has the most potential," says Al-Ahmadi.

When comparing the acquisition to other high profile licences, Al-Ahmadi highlights the 25-year duration of his company's operating licence, which is substantially longer than standard 15-year concessions.

"If you take that into consideration, what we paid for the third licence in Saudi Arabia is less than what it cost Etisalat to pay for the third licence in Egypt. Just a simple comparison, I'll leave the maths to those who want to do it, but we have done it already, and the conclusion is that our Saudi investment is a much more lucrative opportunity than the one in Egypt.

He also claims that given the scale of the Saudi market, Zain's investment in the kingdom poses far greater value than that of STC's recent acquisition in Kuwait.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM