Taming a Giant

Late last month Saudi Telecom hosted an occasion marking the milestones it has achieved as a network operator and celebrating having added more than 11 million subscribers to its Al Jawal mobile network. CommsMEA speaks to the STC's president Khalid Al Molhem regarding the pressures of managing the largest operator in the Gulf.

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By  Tawanda Chihota Published  January 30, 2006

|~|STC200.jpg|~|STC's president, Al Molhem sees substantial continued growth in the Saudi telecoms marke|~|Perhaps it is the lack of foreign investments, or perhaps it is a question of marketing and public relations in a conservative nation, but Saudi Telecom does not often appear to receive the plaudits it deserves for being the Midldle East's largest telecoms provider by way of subscriber numbers. A ceremony held at the end of last month sought to slowly start turning this situation around, as the operator sought to communicate its achievements and highlight the significant progress it has made in adding over 11 million mobile subscribers to its Al Jawal network. This is quite an achievement given the aggressive rollout strategy employed by the kingdom's second operator Mobily, backed by the UAE's Etisalat. "The number of mobile customers has exceeded 11 million and the growth rate of the base remains very high," explained Khalid Al Molhem, STC president, who estimates the operator was able to add around 1.4 million GSM lines within a 45-day period as it progressed towards the 11 million subscriber mark. The energy with which competition has been introduced into the Saudi Arabian mobile communications sector is reflected across all the traditional indicators of this development, from a reduction in prices, an increase in services, and a greater focus on customer satisfaction and retention. In June last year, a month after Mobily had exploded onto the Saudi market, the operator launched a major promotion designed to provide all prepaid and postpaid subscribers with 56 free talking minutes and 56 free SMS every month for one full year when calling Mobily to Mobily. Such innovative offers forced the incumbent to formulate value-driving offers of its own, and it is a situation that has helped Saudi develop into a 14-million plus mobile subscriber market, with Mobily counting over 3 million users in less than nine months of operation. "It is clear that STC has been and will continue to be affected by competition, however this impact will not be entirely negative as there are some advantages to it in respect of the company," Al Molhem commented. "The reason is that any competitor will be one of STC's biggest clients, and even in the face of competition, price and quality of service will remain the main criteria that customers determine which company they intend to deal with." Al Jawal has not sat idly by and waited for competition to take its best shot. The incumbent operator has worked hard to reinvent itself over the past two years and has been leveraging technology in mobile, fixed-line as well as data businesses to a large degree. Al Jawal launched MMS commercially on June 4, having been soft-trialling the service for a number of months. Picture messaging has been something of a contentious issue in the kingdom due to cultural sensitivities that prohibited the capture of certain images. However these issues have since been resolved and the operator is gaining greater confidence in its use of non-voice services. STC was awarded a 3G licence in July last year, for example, at a cost of US$200 million, and is expected to launch 3G services later this year. "The company has already obtained the approval of the telecoms authority to offer 3G services and it is worth mentioning that 3G represents a real revolution in the telecoms world as it possesses unique characteristics that allow callers to view real pictures of each other while they talk," Al Molhem said. Mobily has also been looking to leverage technology to a large degree. Speaking to CommsMEA shortly after the launch of the network last May, the company's CEO Khalid Al Kaf said that despite the expense, Mobily planned to test high-speed downlink packet access (HSDPA); the so-called 3.5G technology that Al Kaf forecast would allow Mobily subscribers to download content from the internet at speeds of 2Mbps when introduced. "For too long in Saudi Arabia, the access network has not been that impressive," Al Kaf said at the time. "We believe that Saudi Arabia is a very promising land for value added and broadband services due to its structure, due to its population, due to its income and due to the economic structures of the companies in Saudi Arabia. [Our plan is] not just to go to 3G but also to go to 3.5G and put Saudi Arabia at the cutting edge of technology. It is a land of opportunity for us, and we just want to grab it at the right time," he added.||**|||~|saudi200.jpg|~|STC was awarded a 3G licence in July last year, for example, at a cost of US$200 million, and is expected to launch 3G services across the kingdom later this year.|~|Al Jawal is also set to face competitive pressure from another angle. The kingdom was formally set to implement mobile number portability from the beginning of this year, although it has had a form of number portability in place since the launch of Mobily. The second operator and the incumbent came to a commercial agreement whereby customers who wanted to switch to the new entrant without changing their old number could do so, albeit with the addition of the prefix '56' onto the number. The telecoms authority has stated that this was a commercial agreement between the two operators and was not requested or enforced by the commission; and that the programme for the official launch of number portability is set to take place this year. STC also has a significant fixed-line and data operation, with the number of fixed-line users estimated at approaching 4 million. The telco has been investing in its fixed-line operation and like many incumbent operators across the region, is enjoying a resurgence in the business through the rollout of broadband. Last December, STC commissioned Alcatel, Lucent Technologies and Cisco Systems to deploy a further 250,000 DSL lines by the middle of this year, extending to 75% of the kingdom and offering more network capacity. French supplier Alcatel is set to deploy a total of 170,000 DSL ports nationwide this year that will enable STC to meet growing customer demand. Cisco is implementing its IP/MPLS (MultiProtocol Label Switching) solution to build the core of STC's new wireless broadband service, which will be installed in 23 sties and will cover the kingdom by the end of this quarter. Lucent has been contracted to integrate its AnyMedia Access System and WiMax solution, which is expected to bring more value-added features to STC's data services subscribers. The implementation was set to start with Riyadh, Jeddah and the Eastern Provinces early this year and by the end of 2006 it will cover the whole kingdom. "STC has extended 25,000 kilometres of the fibre-glass and inter-city connections with about 35,000 kilometres, in addition to establishing more than 5,000 mobile base stations and covering more than 25,000 kilometres of roads with the mobile networks," explained Al Molhem. "By launching this project (with Cisco, Alcatel and Lucent), STC will pave the way for internet users in the kingdom to enjoy and make use of a host of new services and technologies in the near future. There will be much more room for more value added services and characteristics for the data services subscribers with STC." With regards to the business sector, Al Molhem believes the expansion of STC's expanded data network will offer compelling features including faster access to the internet, intranets, VPN and video conferencing services. Given the sheer financial clout of STC, employing 22,000 people domestically, one of the biggest questions the company faces is why and how it has not participated in the mergers and acquisition bonanza that has swept through the Middle East in the last three or four years. Late last year, STC was a surprise entry in the list of companies interested in acquiring a 35% stake in Tunisian state incumbent, Tunisie Telecom with interest in this investment being the first of its kind since STC was linked to the second licence opportunity in the UAE. Al Molhem's reasoning for STC's absence from the international fray is a simple one. "The Saudi market is still in its early development stage and is attractive for further investment. Thus we will continue, during the coming period to focus on this market, which can still absorb more investments as the service coverage ratio compared to the population is expected to continue rising." However, the president's argument that his company's resources are too busy being utilised in the domestic market for them to be chanalled towards foreign investment is dented somewhat as he justifies his company's interest in Tunisia. "There are still big prospects for growth, however, and STC views all the opportunities in foreign investments seriously,” Al Molhem explained. "Whenever we identify that there is a good return and there are some opportunities that are better than the opportunities available in the Saudi market, we will consider them," he added, without disclosing where else is of interest.||**||

3871 days ago
meeee

do u think that aljawal and mobily should be considered as a competitive market or oligopolistic

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