Your life just got a whole lot easierJuly 26, 2015 8:55
Three’s company on the Saudi mobile phone market starting today. Following the launch of Zain, is there any chance the kingdom’s neighbors might get a clue?
August 26, 2008 8:50 by kippreport
Today’s launch of Zain services in Saudi Arabia marks the first time the Gulf’s Big Three telecom operators – UAE’s Etisalat, Kuwait’s Zain and Saudi Telecom Company (STC) – go head to head. Zain paid a cool $6.1bn for the third mobile phone license last year, giving it access to the Kingdom’s 25 million potential customers and a mobile penetration rate expected to exceed 130 percent by the end of this year.
Zain is expected to market its services aggressively, and competition with its two rivals will be fierce. Growth numbers have already been stronger than expected, even without the entry of a third operator. In 2007, Mobily (the brand used locally by Etisalat) and STC tallied up the largest one-year addition in subscriber numbers so far in Saudi Arabia: 7.4 million subscriptions combined, far in excess of the expected 4.9 million additions, resulting in 27 million SIM cards in use, according to a June report from regional investment bank EFG Hermes.
Analysts expected the Saudi mobile phone market to boom last year. But there’s booming and then there’s booming. What going on here?
Basically, STC and Mobily saw Zain coming. Using special offers and promotions, they rushed to snap up as many new subscribers as possible in advance of the splash the Kuwaiti giant is expected to make. Strong growth is expected to continue this year.
No wonder telecoms are one of the main drivers of the buoyant Saudi advertising industry, especially in the market for the Kingdom’s increasingly dear outdoor advertising space.
The Saudi population also grew a bit faster than expected, and EFG Hermes acknowledges that it underestimated the number of SIM cards each Saudi might be willing to buy. Apparently two is not enough: Saudis are probably ready to have 2.3 SIM cards each.
The number of SIMs in use per person is expected to rise as providers roll out additional services such as data transmission, with some users leaving a SIM in their modem for wireless Internet access.
Zain, formerly known as MTC, now operates in 22 countries, 16 of which are connected by its “One Network” borderless roaming concept, whereby Zain users in 13 African countries plus Jordan, Iraq and Bahrain can call internationally within the network for the price of a local call. Zain Saudi Arabia is expected to join One Network, something the Kingdom’s African immigrants will be pleased to hear.
The African expansion, the One Network strategy and now the Saudi launch are all part of Zain’s stated bid to become one of the top ten mobile operators in the world by 2011.
Much credit should go to Saudi authorities. Their deregulation of the telecom market puts the UAE, the region’s second-largest economy, to shame. “Since its liberalization, Saudi Arabia’s mobile market has never taken the form of a lazy duopoly,” says EFG Hermes.
Those words – “lazy duopoly” – could easily be applied to the situation across the border, where Du, which launched in February 2007 after much delay, is still a fledgling operator compared to the dominant incumbent, Etisalat, which commands a market share of 80 percent or more.
In the UAE, policies requiring mobile number portability, carrier selection and pre-selection have been drafted, but never implemented. There is no telling when that might happen. Dubai investment house Al Mal Capital writes in a July 2008 report on the UAE telecoms market: “Until the solutions to these issues are fully implemented, we do not foresee any material impact to the operators’ respective market shares.”
If the Emirati authorities want a truly competitive telecoms market, they would be wise to model their policies on those of their Saudi neighbors.