Saudi launch will test Zain’s mettle in mobile phone market

22 August 2008

Success of the fledgling subsidiary is critical to the financial health of the group’s entire operations.

Before the start of Ramadan in September, Kuwait’s Zain will have to decide whether to go ahead with the launch of its Saudi Arabian mobile phone network or postpone it until October.

Zain paid $6.1bn, a regional record, for the right to run the kingdom’s third mobile network and its success there is critical to the financial health of the whole company.

Once it launches its service, Zain Saudi Arabia is likely to sign up a lot of new customers in a short space of time. Saudi Arabia’s mobile market grew surprisingly quickly during 2007 and analysts have upgraded their forecasts for customer growth at the market’s two incumbent operators, Saudi Telecom and Etihad Etisalat.

What continues to divide the analysts is the level of success that Zain will enjoy. However, if the new network is to win a significant share of the market, most of its customers are likely to be drawn from the 63 per cent of mobile customers who currently use Saudi Telecom. For this reason, Zain’s launch is as important for the future of Saudi Telecom as it is for the Kuwaiti company.

The Saudi market will be the first to experience a three-way battle between the Gulf’s three largest telecoms operators. The competition will expose any weaknesses in their marketing, branding and network coverage, and will provide some useful insights to other operators that want to compete with the big three in other markets.

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