The successful launch of the initial public offering (IPO) for 20 per cent of Saudi Telecomhas opened the door for the liberalisation of the kingdom’s telecoms sector. By 2008, SCC plans to open up fixed-line services to competition. Fixed-line penetration is relatively low in the kingdom, leaving significant room for another operator to generate further growth. ‘From our perspective, the telecommunications sector in Saudi Arabia is strong, with an incumbent operator that provides a range of services and has a very profitable operation. But at the same time, market expansion opportunities exist in the fixed-line, mobile and data markets,’ Mulla said.
There are about 3.4 million working fixed lines in operation at present, which equates to a teledensity of 15 per cent. On the mobile side, which has a penetration of 23 per cent, prospects for growth are also encouraging, according to Mulla. ‘Mobile subscriber growth has been very strong, but significant opportunities exist for further growth because current penetration is low in comparison with other countries. There are about 5 million subscribers, including post-paid and pre-paid market segments,’ he said.
However, entrants into the market for fixed, mobile or data networks will have to compete head-on with Saudi Telecom, which already enjoys a commanding position in the market. For SCC, the major challenge will be to safeguard and nurture a competitive environment, which is considered essential for a second operator to succeed. ‘If entrants are to have a fair chance to establish themselves in a new market, it is critical that the incumbent has no opportunity to cross-subsidise services in competitive markets by services in monopoly markets to the detriment of new entrants and the process of competition,’ said Mulla.
In addition to the challenges presented by the liberalisation programme and the development of effective mechanisms to regulate the incumbent service provider, the commission is also looking to ensure that remote areas of the kingdom have adequate access to telecoms services. ‘Although the fixed network is fully digitalised, the service coverage has been focused mainly on urban areas. Approximately 92 per cent of the fixed lines are in predominantly urban areas, whereas the population in these areas accounts for only 86 per cent of the total. So the commission needs to recognise this current market reality and develop policies to ensure that customers in rural areas have access to networks, equipment and services,’ said Mulla.