Talking Telecoms

Late last month Saudi Telecom hosted an occasion marking the milestones it has achieved as a network operator and celebrated having added more than 11 million subscribers to its Al Jawal mobile business. In his final interview as president of STC, Khalid Al Molhem tells CEO Middle East about the challenges of managing the largest telecoms operator in the Gulf

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By  Tawanda Chihota Published  February 16, 2006

|~||~||~|Perhaps it is the lack of foreign investment, or 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 Middle East’s largest telecoms provider. A recent eremony sought to slowly turn the situation full circle with the operator keen to communicate its achievements and highlight the significant progress it has made in adding over 11 million mobile subscribers to its Al Jawal mobile phone 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 our mobile customers has exceeded 11 million and the growth base rate remains very high,” explained Khalid Al Molhem, the long-serving president who was speaking in his final interview as president of STC. Al Molhem, who says he is taking up a fresh challenge, estimates that the operator was recently able to add around 1.4 million mobile phone lines within a 45-day period as it progressed towards the 11 million subscriber mark. The injection of competition into the Saudi Arabian communications market has also made STC move with the times and adapt to more current methods of managing a large mobile network. For example, prices have been reduced in recent months, the number of services it offers has increased and a greater focus on customer satisfaction and retention has been introduced. In June last year, a month after new mobile operator Mobily had exploded onto the KSA market, STC launched a major promotion drive designed to provide all pre-paid and post-paid subscribers with 56 free minutes and 56 free text messages every month for one full year when calling from one Mobily to another. It was offers such as this that forced the incumbents to formulate value-driving offers of their own, a situation that has helped KSAdevelop into a 14 million plus mobile subscriber market, with Mobily counting over three million users less than nine months since it first came into play. “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 advantages to it in respect of the company,” says Al Molhem. “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 makes customers determine the company they intend to deal with.” Al Jawal has not sat idly and waited for competition to take its best shot. The incumbent operator has worked hard to re-invent 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 4th June, having ‘soft-trialled’ the service over a number of months. Picture messaging, however, has been something of a contentious issue in the kingdom due to cultural sensitivities that prohibited the capture of certain images, such as women who were deemed to be inappropriately dressed. However, these issues have since been resolved and the operator is gaining greater confidence in the use of ‘non-voice’ services. STC was awarded a 3G licence in July last year, at a cost of US$200 million, and is expected to launch 3G services later on in 2006. “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. 3G possesses unique characteristics that allow callers to view real pictures of one another while simultaneously talking,” Al Molhem says. Mobily has also been looking to leverage technology. Shortly after the launch of the network last May, the company’s chief executive, Khalid Al Kaf, said that despite the expense, Mobily planned to use the opportunity to test High-Speed Downlink Packet Access (HSDPA); the so-called 3.5G technology that Al Kaf said 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. Al Jawal is also set to face competitive pressure from another angle. The Kingdom was formally preparing 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 Communications and Information Technology Commission (CITC) 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 close to four 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 the telco 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, set to be installed in 23 sites aiming to 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 is set to start in Riyadh, Jeddah and the Eastern Provinces in the early part of this year and cover the whole of the Kingdom by the end of 2006. “STC has extended 25 000 kilometres of the fibre-glass and inter-city connections with about 35 000km in addition to establishing more than 5000 mobile base stations and covering more than 25 000km of roads with the mobile networks,” explains 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 the video conferencing services. Given the sheer financial size of STC employing 22 000 people domestically, one of the biggest questions is why the operator 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 bidder in the list of companies interested in acquiring a 35% stake in the Tunisian state incumbent, with interest in the investment being the first of its kind since STC was linked to the second licence 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, over the coming period to focus on this market, which can still absorb more investment as the service coverage ratio compared to the population is expected to continue to rise.” However, the president’s argument that his company’s resources are overstretched due to the heavy usage of the domestic market, therefore denting foreign investment, somewhat justifies his company’s interest in Tunisia. “There are still big prospects for growth and STC views all the opportunities in foreign investments seriously. He adds: “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.”||**||

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