Telecom Sector Saudi Arabia Economic and Strategic Outlook
Economic and Strategic Outlook – Saudi Arabia – March 2008- Since 1998, government owned Saudi Telecom Company had been the sole provider of telecommunication services in Saudi Arabia. But recent accord of the Kingdom to join the World Trade Organization (WTO) led the government of Saudi Arabia to approve the opening up of the telecommunication sector to competition in 2002. Following the liberalization decision, the Saudi government invited international operators to bid for the Kingdom’s second GSM license with a requirement that the licensed operator should have at least five local companies as partners.
Table 32: Sector Time- Line
1998 Saudi Telecom Co. Established
1999 Liberalization of ISP Sector
2001 Telecom Act
CITC Formed
2002 Telecom Bylaw
IPO of STC
2003 Liberalization of VSAT
2004 Liberalization of Data & Mobile
Etisalat Wins 2nd Mobile License
IPO of Mobily
2005 Mobily Launches Services
2006 3G Services Launched
MNP Launched
2007 Liberalization of Fixed Services
Allocation of 3 Fixed-line Licenses
MTC (Zain) wins 3rd Mobile License
Source : Communications and Information Technology Commission
In July 2004, a consortium headed by Etisalat of the UAE won the Saudi second GSM license
outbidding seven other operators with an offer of SR12.21bn (US$3.26bn). The 20-year license was complemented in August 2004 with a 3G concession for US$200mn. Etihad Etisalat operating under the Mobily banner launched operations in Saudi Arabia on the 24th of May 2005. In July 2005, STC was awarded the second 3G license for US$201mn to start offering 3G services by December 2006.
Table 33 : Telecom and Internet Indicators
(mn) 2000 2001 2002 2003 2004 2005 2006
Fixed Line 2.96 3.23 3.32 3.50 3.70 3.80 3.95
Fixed Line Teledensity 14.22% 15.41% 15.44% 15.91% 16.30% 16.44% 16.68%
Mobile Phone 1.45 2.53 5.01 7.20 9.20 14.20 19.60
Mobile Density 6.90% 12.06% 23.31% 32.71% 40.59% 61.43% 82.77%
Internet Users 0.20 1.00 1.40 1.80 2.40 3.00 4.65
Source : Communications and Information Technology commission & Global Research
Fixed telephone lines approached 3.95mn at the end of 2006, 75% of which were residential lines (3mn). This represents a population tele-density of 16.68% and a household tele-density (percentage of households with a telephone) of around 70%, or 70 residential phones for every 100 households. Currently, the wire-line market is a virtual monopoly with STC being the only fixed line services provider in the Kingdom. The monopoly of STC is being scrapped as the Kingdom has awarded three newly licenses to Batelco (Bahrain), PCCW (Hong Kong) and Verizon (US).
In the Mobile market, the start of competition in 2005 has resulted in major developments in terms of subscriber growth, service offerings, quality of service, customer care and reduced prices. The number of subscribers has more than doubled in just two years from 9.2mn in 2004 (40% penetration) to around 19.6mn (over 81% penetration) in 2006. The cumulative average growth rate (CAGR) during the last five years (2001-2006) amounted to around 51% annually.
In 2006, Saudi Arabia became the first Arab country to implement mobile number portability, when MNP service was launched at no-cost to all mobile subscribers in the Kingdom.
Internet users grew from around 1mn in 2001 to an estimated 4.65n by the end of 2006 (a penetration rate of around 19.6%). This corresponds to a cumulative average growth rate of around 36% annually. Broadband subscribers have grown from 14 thousand in 2001, to around 220 thousand at the end of 2006. This represents a growth rate of around 85% annually, with 2006 witnessing a big jump of 240%. Despite the high growth, however, broadband penetration rate of around 1% is still very low compared to both the world average of around 5%, and the developed countries’ average of around 20%. As a result, there is still a huge growth potential for broadband service in the Kingdom. A large unmet demand exists because of supply side limitations. This demand is forecasted to grow at a fast rate, offering attractive opportunities for broadband network and service expansion in the Kingdom.
Telecom service revenues have been steadily growing at a cumulative average rate of around 15% annually, increasing from SR19.8bn in 2001 to around SR40bn in 2006. Mobile revenues represented around 75% of all sector revenues (which is in line with trends in other countries).
