Saudi Arabia may cut call-termination rates for telecom
operators in 2013, the chief executive of Etihad Etisalat (Mobily) said, in a
move that would spur increased competition in the kingdom.
Termination rates are fees that one telecom operator charges
another for terminating calls on its network. The fees tend to favour more
established operators because they terminate a greater portion of calls.
“Next year, I think you will see a reduction in
termination fees, unless the regulator foresees a more accelerated termination
[reduction] rate to be introduced,” said Khaled al-Kaf, chief executive of
Mobily, an affiliate of the UAE’s Etisalat.
“I want to stay neutral in that area,” added
al-Kaf, when asked whether he would favour a cut in termination rates.
Saudi termination fees have been unchanged for more than
four years at SR0.25 ($0.07) for mobile-to-mobile and fixed line-to-mobile
calls and SR0.1 for mobile-to-fixed line calls, effectively setting minimum
call prices.
Termination fees only apply on cross-network calls, while consumers
pay the same rate regardless, so operators have a higher margin on calls within
their own network.
“Termination charges tend to fall as competition increases.
Usually, operators pass on part of any cut in termination fees to
consumers,” Marc Hammoud, Deutsche Bank telecoms analyst, said.
As the former monopoly, Saudi Telecom Co could have the most
to lose from a fee cut, but this would also aid its aggressive push to sell
fixed-line bundles.
STC competes with Mobily and third mobile operator Zain
Saudi, with STC dominant in fixed-line calls.
“Cutting termination fees would probably benefit Mobily
and Zain Saudi to the detriment of STC, but STC would gain wholesale revenues
as well seeing inter-connection fees decline,” said Asim Bukhtiar, Riyad
Capital head of research.
“Zain Saudi uses Mobily’s network in some areas – it
doesn’t have full population coverage – so it could see some benefit from lower
termination fees. But this would be a short-term benefit, with Zain Saudi
trying to expand its network.”
STC has tried to claw back lost domestic market share by
offering aggressively-priced fixed line bundles.
These typically offer unlimited internet access and
unlimited domestic phone calls, yet STC remains liable for termination fees to
other operators, so lower rates would boost margins and potentially spur it to
cut bundle costs further.
The Saudi regulator declined to comment. Analysts said its
reluctance to cut termination fees in recent years is in part to prevent
operators slashing prices to uncompetitive levels.
“Termination fees in Saudi Arabia are on the high side,
but not radically so – when they look out of step with other markets then the
pressure on the regulator to act will increase,” said Credit Suisse telecoms
analyst Richard Barker.
Saudi operators pay royalties of 15 percent on mobile
revenue, 10 percent on fixed line and 7 percent on data, analysts said.
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