Emerging Markets - Country Evolution Report
It was only nine years ago that Saudi Arabia started to liberalise its telecom market beginning with the mobile market in 2004 and then followed by the fixed line market in 2006. The liberalisation of the telecom markets allowed foreign firms to enter the competition fray through forging consortia with local Saudi companies. As of end-2012 four mobile operators (now three after STC’s acquisition of Bravo, a very small iDEN-based provider, in October 2013) two fixed line and more than fifteen fixed broadband providers, including CaTV, VSAT and WiMax operators were active.
Current subscriber trends suggest that Saudi Arabia enjoys a healthy telecoms market with mobile telephony dominating – almost all Saudi subscribe to two mobile services or more translating to 171% penetration per inhabitant. The opening up of the mobile market, which led to the subsequent launch of two alternative mobile operators, Mobily (2004) and Zain (2007), has spurred multi-SIM ownership among mobile users to take advantage of the attractive promotions from the incumbent’s (Saudi Telecom Company) rivals. As a consequence of the regulator’s SIM registration scheme, mobile subscriptions have been declining since 2012 due to the resulting deactivation of inactive prepaid SIM numbers. In 1Q13, mobile client base reached 52m, declining by 1m in a quarter.
Despite the liberalisation, though, the rate of improvement in terms of prices and quality of service remains underwhelming for a developed country and the local regulator allowed the entry of MVNOs in order to increase competition in an already saturated mobile market, particularly in terms of price. The newly minted MVNOs in the country, Virgin Mobile and Lebara, both draw expertise from their extensive experience as budget and ethnic MVNOs, respectively. The MVNOs entry is a significant milestone for Saudi Arabia as it not only opens doors for new competition but also new expertise brought in by foreign firms. Pan-regional MVNO players have an edge as they can leverage their multi-country footprint to provide very competitive international and, possibly, roaming rates. Nevertheless, the Saudi regulator tightly monitors and shapes the local mobile market dynamics, allowing more competition on the one hand and limiting on the other. The regulator, for instance, is considering the ban of third-party messaging apps such as Skype and WhatsApp – unless they partner with mobile operators – a move that would effectively eliminate immediate competition from these providers. Viber has been recently banned in Saudi Arabia as well as in the United Arab Emirates and Iran.