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Saudi Arabia to issue 3 MVNO licences

Dubai, December 7, 2011

Saudi Arabia will issue three mobile virtual network operator (MVNO) licences in 2012, the country's telecoms regulator told Reuters.

The move, analysts say, makes it unlikely the kingdom will award a fourth conventional mobile licence.

MVNOs are mobile service providers which lease excess network capacity from telecoms operators and are common in Europe. In the Gulf, only Oman has issued MVNO licences, with other governments seemingly keen to protect existing operators.

A spokesman for the Saudi Communications and Information Technology Commission (CITC) confirmed by email it would sell the MVNO licences next year, but did not provide more details.

The regulator's move to allow MVNOs instead of granting a fourth telecoms licence is a sign Saudi operators are moving towards competing on service rather than focusing on building their own infrastructure.

For example, Etihad Etisalat (Mobily) has designed products customised for target groups such as fans of Al-Hilal soccer club and Filipino expatriates and is in talks to merge its tower operations with those of Saudi Telecom Company.

"Stagnating subscriber growth and falling margins mean telecoms operators must use their resources more efficiently," said Matthew Reed, a senior analyst at Informa Telecoms and Media in Dubai.

"Operators tended to think allowing MVNOs would just mean more competition, but that perception is changing with a realisation that hosting an MVNO can give them advantages over other operators who do not."     

Conventional operators hosting MVNOs gain revenue and can count the latter's subscription numbers as their own, yet they remain wary.

"The Saudi market has proved very difficult for new entrants to prosper," said Asim Bukhtiar, Riyad Capital head of research, citing a court case filed by Atheeb Telecom against STC alleging the breach of anti-monopoly laws as an example.

Nevertheless, MVNOs Friendi and Renna, which between them service about 11 percent of Oman's pre-paid mobile subscribers, are interested in acquiring licences in Saudi Arabia and other Gulf markets.

"It will be opportunistic for us -- it all depends on which regulators allow new markets to open up," said Joakim Klingefjord, chief executive of Renna.

"To get people to switch providers, you need to either come with a strong brand -- which is not the case if you are a newcomer -- or you can target a segment that's more likely to churn, which is usually the cost-conscious segment."     

In Oman, both Friendi and Renna target lower-income expat residents, allowing their host network operator Oman Telecommunications Co (Omantel) to focus on higher-end subscribers.

Friendi has made a beginning in Saudi Arabia with a branding and consultancy deal with third-ranked telecoms operator Zain Saudi.

"The telecoms industry will develop from today's one-size fits all," said Mikkel Vinter, chief executive of Friendi Group.     "Our vision is that you will have consolidation at network level, but have a flourishing of brands at a service level.          

"The next wave of growth will come from providing customers with different services that fit their lifestyle for which they will be willing to pay for beyond the basic voice and data." - Reuters




Tags: Saudi Arabia | Mobile | Telecom | Network | MVNO |

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