Saudi Arabia Telecommunications

A temporary setback to the further deregulation of Saudi Arabia's telecoms market, which was due to benefit from the award of new licences in the fixed-line and mobile markets, has not negatively affected the Kingdom's regulatory score in our recent Business Environment Rankings Table - for now. However, while the country continues to offer further room for growth across its industry, BMI has deducted a point for this indicator, given that unlike its fellow Gulf Co-Operation Council (GCC) countries in the table, it has yet to commercially launch 3G services, with STC only just completing a trial. This, alongside its regional peers, which have shown a greater dedication towards the liberalisation of their industries, has meant that Saudi Arabia's overall ranking has fallen to seventh place.

BMI believes that greater market maturity will result when both operators launch their respective services by YE06. Around 225,000 mobile users are predicted to sign on to 3G, or 1.2% of the total mobile subscriber base. Moreover, we project the number of 3G users to rise above 1mn by end-2007, partly on the back of the sophisticated tastes of Saudi users, who are able to afford such services given its existing strong economy. Having said that, much of the success of 3G will also rely on the ability of operators to match service demand with the rollout of better handsets and VAS availability. Furthermore, a third mobile operator, expected to launch services by H107, will also boost future growth in the sector. BMI forecasts predict teledensity rates of almost 80% by YE07, encouraged further with the recent launch of Mobile Number Portability (MNP) in 2006.

Meanwhile, our latest forecasts remain virtually unaltered. The only market to see any change in forecasts has been from the country's internet sector. Here, growth is expected to remain steady, but not as robust as originally thought, attaining some 3.6mn users, as broadband growth shoots up to take over. Such popularity in broadband services will occur with STC pushing its triple-play services, while customers will begin to demand a variety of tariffs and at lower cost as they begin to see neighbouring countries offer their subscribers cheaper rates. One such example is Bahrain's Batelco, which now offers tariffs as low as BHD10.

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