Saudi Arabia’s telecommunications sector is to get a major shake up this year, with up to three new operators entering the mobile phone segment, though the route they will be taking will be very different from that followed by the three existing service providers.
On December 7, a spokesman for the Communications and Information Technology Commission (CITC) – which serves as the Kingdom’s telecommunications regulator – told the Reuters news agency that three mobile virtual network operator (MVNO) licences would be issued in 2012.
The move heralds a different approach for the Saudi telecoms industry, one that is seen as marking a new era in competitiveness and maturity instead of the sector’s focus being on rolling out infrastructure. Under the MVNO model, operators lease excess network capacity from existing telecoms service providers, rather than investing in their own dedicated infrastructure.
Generally, MVNO operators target specific niches of a wider market, rather than seeking to carve out a large segment of the whole. While the model has been in use for some time in other parts of the world, notably in Europe, to date Oman is the only Gulf state that has licensed MVNOs in operation.
The CITC statement confirmed comments made by Muhamed Jamil bin Ahmed Mulla, the minister of communications and information technology, in mid-November, when he said his ministry was looking at making three MVNO licences available in early-2012, while also all but ruling out any opening for a new mainstream mobile operator.
“Virtual communications services do not require any new network,” he said. “We don’t have any plan to license a new company to provide cell phone service.”
According to Matthew Reed, a senior analyst at Informa Telecoms and Media in Dubai, there will be benefits for existing operators quite apart from revenue generated by leasing their excess capacity.
“Stagnating subscriber growth and falling margins mean telecoms operators must use their resources more efficiently,” Reed told Reuters. “Operators tended to think allowing MVNOs would just mean more competition, but that perception is changing with a realisation that hosting an MVNO can give them advantages over other operators who do not.”
There are already two likely candidates for any MVNO licence tender: the Dubai-based Friendi Group and Renna of Oman, both of which operate in the Omani market. Between them, the two firms account for some 11% of the Sultanate’s pre-paid mobile subscribers.
Friendi is already active in Saudi Arabia, though only in a limited capacity, working in association with mobile operator Zain KSA to offer a pre-paid mobile package that specifically targets international clients. The venture has been described by the partners as an outsourcing agreement rather than an MVNO, though it does give Friendi a stake in the local market.
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