Saudi Arabia saw a new mobile phone operator launch this month, when Virgin Mobile went live with its service in the kingdom.

This was the first step in the country’s efforts to open up its telecoms market, and will be followed soon by a second new operator going live, called Jawraa, which is launching in partnership with UK-based Lebara Group.

Virgin Mobile is working with Saudi Telecom (STC), having won the rights to launch the network following a tender process last year in which five companies bid for three licences. That is now two licences.

The difference with these launches is that both companies are Mobile Virtual Network Operators (MVNO). This is where a company launches a mobile operating service, but does not own the network infrastructure, such as phone masts. It operates as a wholesaler, buying access which it then offers as its own to customers, but running them across the licence holder’s network.

To the customer, the MVNO is the licence holder, as they have access to a full range of services on offer. But the advantage for the MVNO is that without the huge capital outlay or the need to build the network, it can launch faster.

“[Being an MVNO] allows for entry into a market that would otherwise be closed. In a number of markets, there are no new licences available, so in many cases it is the only option,” says Mikkel Vinter, CEO at Virgin Mobile Middle East and Africa.

With fewer network licences available to bid for, virtual networks are a growing trend globally, but have been slow to take off in the Middle East. Several were offered a few years ago, and following a pause, that is happening again. Lebanon and Egypt have both recently awarded forms of MVNO licences and the process is under way in Tunisia, with an award expected next year.  

And it is a big market to tap. According to the Jordan-based Arab Advisors Group, there were more than 400 million mobile lines by the end of last year, with Saudi Arabia the second-biggest market, behind Egypt. The kingdom has almost 51 million lines and a penetration rate of 169 per cent.

Vinter says Virgin Mobile has set realistic targets for Saudi Arabia, due to the competiveness of the market. “We’re looking at single-digit market share, but that will give us sizeable customer numbers and a market share that is attractive and profitable.”

In the Middle East, Jordan and Oman both have MVNOs, with Virgin Mobile in both. The markets combined have just under 16 million mobile lines at the end of last year, and both with penetration rates of more than 140 per cent.

Virgin Mobile has been in Oman since 2009 and in Jordan since 2010. With a market share of about 8-9 per cent, Oman is its biggest market, but the company has not publically stated its penetration in Jordan. “[Oman] is the most mature market. [Jordan] is a smaller business, but doing reasonably well. It’s a market we see as having good opportunities.”

In some parts of the world, such as countries in Northern Europe, MVNOs have a market share of 20-25 per cent. These markets launched far earlier than in the Middle East, and it is unlikely this region will hit those penetration numbers.

But in Oman, MVNOs have about a 10 per cent share of the market, and Vidder thinks that is a reasonable target for the Middle East overall. “[Northern Europe] is on the high side compared to what’s likely in the Middle East. But the obvious benchmark [for the Middle East] is Oman. Five to 10 per cent is still a very sizeable operation.”