Mobile phones transform the Kingdom’s telecom market

According to the company’s corporate sales manager Hassan Al-Sawwa the company, a joint venture of Saudi interests and the UAE telecoms operator Etisalat, also intends to offer a range of third generation mobile services covering the whole of the Kingdom.

Mobile phones have hugely altered the Kingdom’s telecommunications market. The explosion in services began in 1994 with introduction of the Global System for Mobiles (GSM) services. Since then, from a low base of a few thousand subscribers, the number has soared to more than 8 million comprising nearly 70% of all telephone subscribers in Saudi Arabia.

Ettihad Etisalat is competing with Al Jawal, the cellular arm of Saudi Telecom Company, which has been spurred to fast track introduction of the Kingdom’s first multimedia messaging service able to transmit video, pictures, voice, sound as well as text messages.

Fastest growing Middle East market

Saudi Arabia with a population of 23 million already comprises the largest telecommunications markets in the Arabian Gulf and is one of the fastest growing in the Middle East. The sector which has some 4 million fixed lines and eight million mobile lines has been expanding at a rate of 30% a year.

A little over 30 years ago the Kingdom had barely 80,000 lines. However, a series of five-year development plans have made modernisation of telecommunications a major priority. The seventh plan (2000-2005) called for an increase in line density from 25 lines per 100 people by the end of this year compared to a density of 15.54 in 2003.

The acceleration in services has been boosted by deregulation and partial privatisation of the national telecoms provider Saudi Telecommunications Company. This was sealed in a 2003 initial public offering of 30% of the latter’s shares. Prior to this the government had liberalised the sector and opened it up to foreign investment and competition.

A regulator was established and designated the Saudi Telecommunications and Information Technology Commission (CITC) in April 2003. The STITC is responsible for awarding licenses to investors and for the regulation of telephone and Internet services as well as other media in addition to tariffs, competition, interconnectivity and equipment standards.

Room to upgrade services

There is considerable scope for further improvement however, even after such extraordinary achievement and a third cellular GSM licence is expected to be awarded in the next twelve months. Healthy competition is the watchword; CITC says it is intent on promoting this in the mobile market by ensuring that all users in the Kingdom can keep their existing telephone numbers when changing providers.

The cold douche of competition is also going to impact on the fixed line market. CITC governor Mohammed Al Suwayel has said that the commission intends to bring the date forward for liberalising land line services to 2006 from 2008 as part of efforts to meet entry criteria for membership of the World Trade Organisation (WTO).

Suwaiyel has also said that the criteria for the award of a third cellular licence will “open up more than it is now.” The last licensing round insisted on bidding consortiums to be made up of at least five Saudi firms and an established mobile cellular operator.

Whatever the outcome of future entrants to the market may be there seems to be a considerable potential subscriber base for all to aim for. The recently licensed Mobily service says it aims to acquire seven million customers within the next five years.