Saudi Arabia Telecommunications Q3 2008

In February 2008, Saudi Arabia's newest cellular licencee, Saudi Zain, underwent an initial public offering (IPO). The IPO was reported to be 151% oversubscribed when it 5.05mn investors purchased 952mn shares worth a total of SAR9.52bn (US$2.5bn). Saudi Zain won an auction for Saudi Arabia's third national mobile licence in March 2007, beating off competition from the likes of Orascom Telecom (Egypt), MTN (South Africa), Turkcell (Turkey), Oger Telecom (UAE), Reliance (India), Bharti (India), MTNL (India) and Digicel (Jamaica) with its winning bid of SAR22.91bn (US$6.11bn). Its licence was formally awarded in June 2007 and the firm is expected to launch GSM services in the first half of 2008.

The arrival of Saudi Arabia's third GSM operator, Saudi Zain, should also help to ensure continued growth through the lowering of prices and the increased accessibility of services to a larger segment of the population. Our current set of forecast figures for the growth of Saudi Arabia's mobile market envisages a sector which will grow in size from an estimated 25.753mn subscribers at the end of 2007 to over 29.6mn subscribers at the end of 2008. The continued expansion of Saudi Arabia's population, together with the prevalence of a large number of inactive prepaid users, underscores our belief that growth will continue over the next few years.

In March 2008, it was announced that Mobily, Saudi Arabia's second-largest mobile operator, had entered the country's broadband sector through its SAR1.5bn (US$400mn) acquisition of local broadband operator Bayanat Al-Oula. Bayanat has rolled out WiMAX wireless broadband network in major cities and has a one-third stake in a 12,000km national fibre-optic backbone network. Meanwhile, it was announced at the end of February 2008 that Saudi Arabia's three newest fixed-line licensees had officially been awarded their concessions after gaining approval from the Saudi Cabinet. A consortium led by Batelco of Bahrain, Verizon Communications of the US and PCCW of Hong Kong won an auction for the licences in April 2007. The trio will be providing the first fixed-line competition to the current monopolist Saudi Telecom Company (STC). The Batelco consortium, which also involves Saudi Arabia's Atheeb group, has announced plans to invest US$1bn in its wireline operations over the next five years. The three firms have agreed to sell off 25% of their shares via initial public offers, 10% stakes to a state pension fund and 5% to a social insurance organisation.

Saudi Arabia has fallen by one place in our latest set of Business Environment Rankings for the Middle East. Although the largest of the Gulf Co-operation Council (GCC) member states continues to score relatively well in a number of categories, a lower telecoms market score, and a higher telecoms market score for Bahrain, have resulted in the latter taking pole position from Saudi Arabia.