Saudi Arabia’s fixed lines growth stalls as the GSM market booms.

February 15, 2006

Propelled to new heights by competition, GSM lines in Saudi Arabia grew at a high 44.8% rate in the first eleven months of 2005 to reach 13.3 million. Fixed line, however, grew at a meager 2.5% in the first nine months of 2005. A new comprehensive report from the Arab Advisors Group offers deep insights into Saudi Arabia, the Arab World’s largest telecommunications market by revenues.

The Ministry of Communications and Information Technology (The Ministry) and The Communications and Information Technology Commission (CITC) are responsible for the regulation and supervision of the Telecom sector in Saudi Arabia.

The Council of Ministers, as planned in its Decision No. (171) dated September 9, 2002, opened the GSM market for competition in the last quarter of 2004, when CITC granted the second GSM license to Etihad Etisalat consortium, while competition in the PSTN market is set for 2007. Furthermore, the Commission granted several licenses for the establishment, administration, operation and maintenance of VSAT systems within the boundaries of the Kingdom in addition to two data licenses.

A new report “Saudi Arabia Communications Projections Report 2006” was released to the Arab Advisors Group’s Telecom Strategic Research Service subscribers on February 8, 2006. This report can be purchased from the Arab Advisors Group for only US$ 950. The 83- pages report, which has 87 comprehensive exhibits, provides detailed analysis on the Saudi Arabia telecom market and all the major operators in the market.

Any investment in this report will count towards an annual Strategic Research Service subscription should the service be acquired within three months from purchasing the report.

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During the period between 2002 and 2004, Saudi Telecom’s mainlines subscribers grew at a low CAGR of 5.5%, reaching around 3.695 million subscribers. After witnessing a slight increase in the growth rates in 2003 and 2004, The first nine months of year 2005, showed the mainlines growth rate is to decline again, as the mainlines grew by 92 thousand translating into a 2.5% growth in the first nine months of 2005.

“Arab Advisors Group analyzed the mainline distribution by region. The Eastern and Central and Western regions had the highest penetration rate compared to other regions (19%, 18% & 17% respectively). This was mainly due to the high number of businesses found in these two regions compared to the other regions in the kingdom. Coming fourth is the Northern region (12%), then Southern region with 10% penetration rate.” Mr. Ahmad Assad, Arab Advisors Sr. Research Analyst wrote in the report.

Through 2004, ALJAWAL, STC’s GSM arm, was the sole cellular operator in the kingdom. During 2005, two new cellular operators entered the market; Mobily entered as the second GSM operator on May 25, 2005, followed in less than two months by an iDEN operator under the brand name Bravo. The fresh competition in the market boosted the number of postpaid and prepaid plans, from a lowly three postpaid and one prepaid plans up to eleven postpaid and four prepaid plans.

Consumer choice, offers and lower rates propelled a boom in subscribers’ uptake. The three cellular operators introduced diversified offers appealing to different segments, which helped increase the total number of cellular subscribers to around 13.3 million subscribers by November 2005, up from 9.2 million subscribers in 2004 (44.8% growth in 11 months), translating into a penetration rate of around 57.1%.

The Arab Advisors Group projects mobile CAPEX to substantially grow in 2007. This is mainly due to the introduction of a third GSM operator, which will set up its network. Mobile CAPEX has witnessed a 57% growth in 2005 compared to 2004. This was due to the entrance of the second GSM operator.

The Arab Advisors Group’s team of analysts in the region has already produced close to 520 reports on the Arab World’s communications and media markets. The reports can be purchased individually or received through an annual subscription to Arab Advisors Group’s (www.arabadvisors.com) Strategic Research Services (Media and Telecom). To date, Arab Advisors Group has served close to 355 global and regional companies by providing reliable research analysis and forecasts of Arab communications markets to these clients.