Mobily's US$5.9bn Investment Targets Data Market


Etihad Etisalat (Mobily), Saudi Arabia's second biggest telecoms service provider, plans to invest SAR22bn (US$5.9bn) over the next five years in network and product development. This was disclosed in an interview by the company's CEO, Khalid al-Kaf, with Saudi newspaper Al-Eqtisadiah. BMI expects this move to enable the operator sustain its strong performance in the Saudi telecoms market amid market saturation across most services and increasing competition in the mobile sector.

Saturation Calls For High-Value Services
Saudi Arabia Telecoms Penetration (%)

Mobily has largely outperformed its rivals in most financial indices in recent years, a development we attribute to robust investments in network infrastructure development. Al-Kaf disclosed that the company had been investing SAR4-4.5bn annually in network infrastructure development since its inception in 2004. This translates to a total investment of SAR36-40.5bn in its nine years of operation. The proposed investment plan will take the company's overall spend to more than SAR55bn by 2017.

A significant proportion of Mobily's investment has gone towards building high speed data networks. In addition to the company's 3G and 4G networks, which cover 92% of the population and 45 cities respectively, according to al-Kaf, Mobily claims that its fixed broadband network covers around 450,000 residential houses and businesses across the country.

BMI expects Mobily's future investment drive to focus on deploying next generation fibre-optic networks and enhancing its corporate solutions portfolio. In July 2013, Mobily signed a deal to build, operate and maintain communication networks within King Abdullah Economic City (KAEC). According to the deal, Mobily is expected to spend SAR600mn (US$160mn) during an initial period of eight years, with the option of an extension. The company will also provide data centre and smart city services, such as IPTV, as well as Ethernet VPN (L2), IP VPN (L3) direct internet access (DIA), IP transit, Broad Band at Work, and Business Connect. In August, Mobily secured a controlling stake in Etihad Atheeb, giving it access to the latter's extensive WiMAX and fixed-line infrastructure and subscriber base.

Mobily's data and corporate solutions-driven strategy is already paying off in the form of strong revenues and profit margins compared to its two main rivals STC and Zain. Mobily recorded net profit of SAR1.61bn in Q213, an increase of 13.4% y-o-y. The company attributed the increase to higher data revenues, increased numbers of corporate customers and improved efficiency. Revenue for the same period was at SAR5.97bn, up from SAR5.63bn (US$1.50bn) in Q212.

This article is tagged to:
Sector: Telecommunications
Geography: Saudi Arabia