Saudi telco Mobily lacks spectrum to launch mobile LTE

Saudi telco Mobily lacks spectrum to launch mobile LTE

Saudi Arabian telco Etihad Etisalat (Mobily) lacks the spectrum to roll out a highly-touted next generation mobile network, its chief executive told Reuters, hampering efforts to offset falling voice margins with more lucrative data packages.

January 26, 2012 1:49 by Reuters

Other operators in the kingdom face similar constraints, analysts said, just months after they heralded the arrival of long-term evolution (LTE), or fourth generation, technology.

“The regulator is working with different authorities in the kingdom to free the spectrum,” said Khaled al-Kaf, chief executive of Mobily, an affiliate of the UAE’s Etisalat . “We don’t have the spectrum for mobile LTE. Spectrum will be a big issue in Saudi Arabia with the exponential growth in data.”

Data volume on Mobily’s mobile network was 163 terabytes per day at the end of 2011, up from 85 terabytes per day at the start of that year. LTE was tailor-made for data and can provide download speeds more than double that of 3G.

“We expect this number will double year-over-year, so spectrum will be a bottleneck,” al-Kaf said.

Mobily and rivals Saudi Telecom Co and Zain Saudi announced in September that each had started LTE networks in the kingdom. But these services are limited to certain districts and largely over fixed-line infrastructure.

“The operators announced the launch of LTE networks to try and get a marketing advantage, but the practical roll out of 4G services will not happen soon,” said Asim Bukhtiar, Riyad Capital head of research.

The three operators have 3G spectrum of between 1,800 and 2,600 megahertz which is not ideal for LTE. The lack of spectrum has led operators to re-farm 3G frequencies for 4G, leading to the dual problem of slowing 3G services while failing to deliver true 4G speed.

Operators costs would “sky rocket” if they were to try a full roll out of 4G on their existing spectrum allocation, Bukhtiar added.

This would squeeze already under-pressure margins, with operators embroiled in a price war.

Yet operators still see data as the best way to boost revenue — despite falling data tariffs with some operators slashing prices — and are moving into retail to push customers to upgrade to smart phone handsets as subscriber growth stagnates.

Mobile penetration in Saudi Arabia is among the highest in the world, with nearly two phones per person.

“The situation for operators is tricky – if they invest heavily to build LTE or 4G networks, they will ultimately end up offering packages at the same price as today or lower, but with higher speeds, meaning it is difficult to measure the incremental gains they get from their investment,” said Nishit Lakhotia, telecoms analyst at Securities & Investment Co.

“But if they don’t make these investments, then they are likely to lose subscribers to a rival operator that does.” (Reporting by Matt Smith; Editing by Amran Abocar)