BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications sector of Saudi Arabia

The biggest talking point in Saudi Arabia's telecoms market this year will be the arrival of a second fixedline and third mobile operator, as the Kingdom moves towards greater liberalisation as part of its commitment to the World Trade Organisation (WTO). The government is currently fielding applications for the country's second fixed-line licence, with the deadline date set for March 10 2007, a delay from the original date of January 27 2007. One operator to have gone public over its wish to participate in the tender is Mobily, the Kingdom's second mobile operator. Should the licence be won by Mobily, it would give the operator an equal standing to that of STC, offering services across fixed, internet and mobile. Mobily has already spoken of its intentions to begin offering converged services, if it is provided with a fixed-line licence. This would enable the operator to take advantage of economies of scale, thereby reducing its own costs, and ultimately those of the consumer, which would see its market share increase. However, whether the regulatory body, the CITC, will be willing to offer a licence to an operator already present in the market remains to be seen.

As for the mobile market, the deadline for applications was February 24 2007 (after publication date) from January 20 2007. STC has been clearly concerned here, already having lost considerable market share to Mobily since the second operator made its entrance in 2005. As of Q306 (latest figures), STC had an estimated market share of 73%. In line with this, the market leader has begun to target specific segments of society, through diversifying its product portfolio. Included in its latest services to come out has been a prepaid package directed at the youth market aged between 18 and 25. The tariff offers one of the lowest 3G charges. Clearly aware that younger people are more in tune with new technology developments, the operator is keen to attract this new segment. STC has offered a range of services attached to its 3G tariff, made available to younger people, such as Mobile TV, internet access over mobile and video calls. However, this may not be sufficient to raise STC's revenues, and the operator is looking towards the international telecoms market, and to bring its own operations in line with other international operators. At the time of going to print, STC was reported by Trade Arabia to be in talks to borrow SAR6bn (US$1.6bn) to finance its first acquisition. Its regional peers such as Kuwait's MTC and Wataniya and UAE's Etisalat have all undergone a prolific period of international M&A activity, which has remained ongoing. In line with this, STC has said that in order to provide its customers with global connectivity, it had signed an agreement with Navlink and AT&T to deploy an AT&T Global data node in Saudi Arabia. The advanced data node from AT&T, scheduled to be operational in H107, will enable AT&T and Navlink customers to interconnect directly to STC's nationwide Multi-Protocol Lab Switching (MPLS) network. In turn, STC customers will be able to access AT&T's global network.

While we have not changed any of our forecasts for this quarter, there is growing concern among some local industry analysts over multiple SIM card ownership. A recent survey conducted by the Arab Advisors Group suggests that almost 40% of Saudi mobile users have more than one mobile subscription. Reasons for multiple SIM card ownership could be due to the increased competition (as outlined above), which, given an increase in attractive deals and promotions, is likely to have lead customers to sign up, taking advantage of the cost savings to be had. Furthermore, it is thought that some mobile users prefer to retain two lines, one personal and the other for business. In view of this, actual penetration rates could be closer to 60% as of YE06, rather than the 70% which BMI has forecast. However, given that we follow figures as provided by the market operators, BMI has retained its existing forecasts to remain in line with company data. Further, there now appears to be a crackdown on registration rules, with mobile operators seeking to tighten up the sale of unregistered prepaid SIM cards. Operators such as Mobily have stated that they now want a customer’s personal details to be documented each time a SIM card is sold.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment Rankings

Middle East & Africa

Saudi Arabia

Chapter 3 - SWOT Analysis

Saudi Arabia Telecommunications Industry SWOT

Chapter 4 - Industry Forecast Scenario

Fixed-Line

Table – Saudi Arabia Telecoms Sector – Fixed-line – Historical Data & Forecasts

Internet

Table Saudi Arabia Telecoms Sector – Internet – Historical Data & Forecasts

Mobile

Table – Saudi Arabia Telecoms Sector – Mobile – Historical Data & Forecasts

Chapter 5 - Macroeconomic Climate

Private-Sector Growth Flourishing

Table: Economic Activity

Chapter 6 - Country Snapshot: Saudi Arabia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Chapter 7 - Competitive Landscape

Market Structure

Competitor Analysis

Table – Key Players: Saudi Telecoms Sector

Key Players

Fixed-Line

Table: Regional Fixed-Line Penetration Overview

Internet

Table: Regional Broadband Penetration Overview

Mobile

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Internet

Mobile

Table: Saudi Arabia Wireless Market (FY05)

3G

Industry Developments

Chapter 8 - Company Profiles

Regional Case Study – Huawei Technologies

Table: Huawei Technologies – Contract Sales (US$bn)

Major Contract Wins For Huawei Technologies in MEA

Operators

Saudi Telecommunications Company (STC)

Etihad Etisalat (Mobily)

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Chapter 10 - Appendix: Regional Demographic Data

The Long View: Data Over The Economic Cycle (2000-2007)

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Middle East & Africa Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of Middle Eastern and African Telecommunications Sources

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BMI's Middle Eastern and African Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include: