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Saudi Arabia Telecommunications Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: April 2008 Product Code: R302-2810 Description With an estimated total of 25.753mn subscribers at the end of 2007, Saudi Arabia’s mobile penetrationrate appears to have finally surpassed 100%. Based on this estimate, which is derived from the limiteddata released by the Saudi operators, the sector grew by 31% during 2007, compared with the 37%growth seen in 2006. Although we expect subscriber growth to continue for the duration of our five yearmobile forecast for Saudi Arabia, we envisage much slower rates of growth from 2008 onwards. Anumber of factors support our belief that growth will continue, not least demographic change, with SaudiArabia’s population expected to continue expanding over the next few years. We also believe that thesubscriber figures published by the operators contain a number of inactive users which, if discounted,would reduce the real penetration rate. Finally, it is highly likely that there is already a multiple SIMownership trend established in Saudi Arabia, with this trend also being seen elsewhere in the region.The anticipated launch of services by Saudi Arabia’s third GSM operator, Kuwait-based Zain, will alsohelp to ensure sustained growth in the coming years. It was announced in January 2008 that Zain hadawarded a US$935mn 2G and 3G turnkey network rollout contract to Nokia Siemens Networks. Zainplans to launch its Saudi operations in the first half of 2008, competing alongside existing operatorsSaudi Telecommunications Company (STC) and Mobily. In addition to the launch of services by Zain, the next few months are expected to be characterised by theintroduction of increased fixed-line competition and the launch of services by Verizon of the US,Bahrain’s Batelco and Hong Kong’s PCCW. These three companies, whose successful bid for fixedservice licences was announced in April 2007, respectively plan to build networks based on cable andfixed-wireless infrastructures. We believe that the building of these new infrastructures, which will allowthe new operators to bypass STC’s fixed-line network, will lead to falling prices and more choice withinthe Saudi fixed-line and broadband internet sectors. Just as STC continues to face increased domestic competition, it was announced in January 2008 that theSaudi incumbent was set to acquire a 35% stake in Oger Telecom, a Lebanese firm which has interests invarious telecoms operators in South Africa (Cell C), Turkey (Türk Telecom) and Romania (Zapp), plusinternet operations in Saudi Arabia, Lebanon and Jordan. STC made its first foray into the internationaltelecoms market in 2007 with its purchase of a 25% stake in Malaysia’s Maxis. The Saudi incumbent alsoholds Kuwait’s third national mobile concession and hopes to launch its first services there later in 2008.Finally, in our latest and newly revised set of Business Environment Rankings for the Middle East, SaudiArabia continues to sit in first place ahead of Qatar, Bahrain, Kuwait and Israel. The country benefitsfrom having the highest telecoms market and country structure scores in the region, reflecting thepotentially fewer limits which the country is seen as presenting to returns on telecoms sector investments. Table of Contents
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