Atheeb’s ambition

Compared with its vibrant mobile market, fixed-line and broadband internet have long been laggards in Saudi Arabia's communications sector. But all that could change with the launch of a nationwide WiMAX network. Dr Ahmed Sindi, CEO of Atheeb Telecom, tells George Bevir about his plans to challenge the status quo in the country's telecoms sector.

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By  George Bevir Published  January 7, 2009

Compared with its vibrant mobile market, fixed-line and broadband internet have long been laggards in Saudi Arabia's communications sector. But all that could change with the launch of a nationwide WiMAX network. Dr Ahmed Sindi, CEO of Atheeb Telecom, tells George Bevir about his plans to challenge the status quo in the country's telecoms sector.

A word that dominates Dr Ahmed Sindi's conversations is ‘ubiquity'. He wants his company's broadband services to be ever-present in Saudi Arabia, and he knows that a seamless operation is vital to the success of Atheeb Telecom's WiMAX network, which he says he hopes to launch at some point over the next three months.

"One of the critical aspects is to have a ubiquitous service with uniform coverage throughout the main cities of Saudi Arabia. This is a fundamental issue, and this is something that we have realised early on," he says. "We decided to have a quality, good service anywhere you go in the city."

Once the IPO is out of the way we will be launching full commercial services, hopefully within the first quarter of 2009. - Dr Ahmed Sindi, CEO, Atheeb Telecom

Saudi Arabia has some of the highest mobile penetration levels in the Middle East, in the region of 144% in 2008, according to Business Monitor International. However, fixed-line penetration rates actually decreased from 16.8% at the end of 2006 to 16.4% by the end of 2007, while broadband penetration is estimated to be even lower, at 4%.

"The Saudi Arabia market has a lot of potential growth left, even after more than 100% penetration in mobile," Sindi says. "Although the spending on telecoms in Saudi Arabia exceeds US$10 billion per year, the spending per customer is still low when you compare it to Qatar, UAE and other GCC countries, which means there is still room to squeeze more value," Sindi says.

Fixed-line decline

Figures from Kuwait-based Global Investment House put the rate of decline in fixed-line subscribers in Saudi Arabia at 6.9%, from 5.8 million in 2006 to 5.4 million in 2007. Sindi attributes the decline to competition from mobile that is "spilling over" into fixed, following some "aggressive" propositions in the market. But Sindi says Atheeb Telecom will not be a victim of the decline.

We are not offering only the typical fixed-line services, we're offering these services in addition to a portable broadband service.

"The real focus is on portable, nomadic broadband services - that includes VoIP - and this is where the real growth is, and this is where we see a lot of pent-up demand. The penetration of broadband is still very, very low - less than 4% - and we hope to address a pretty good portion of that demand."

Despite Sindi's assertion that Atheeb will address a sizable chunk of the market, he will not be drawn on Atheeb Telecom's subscriber targets. But he does predict that broadband subscriber rates will "double or triple" over the next year.

The room for growth in the Saudi Arabian fixed-line and broadband market prompted a surge of operators and investors to register an interest in the country's second fixed-line licence when it was put up for auction last year.

Along with Atheeb Telecom, PCCW and Verizon both secured licenses, but bids by Saudi Arabia's second mobile operator Etihad Etisalat, South Korea's KT Corp and China Telecom were discarded.

Verizon has since announced that its fixed-line offering in Saudi Arabia will not launch until 2010, and Sindi says that he is "very hopeful" that Atheeb Telecom will be the first new licencee to challenge incumbent operator Saudi Telecom.

Public offering

Atheeb Telecom has 200 employees based in Riyadh and Jeddah, and is backed by Atheeb Group, a wholly-owned Saudi Arabian company with 10,000 employees involved in shipping, hardware and services for the military, real estate and fund investment. Atheeb Telecom also has the support of Bahrain's Batelco, which has a 15% stake in the company and also provides technical support. A further 35% share in the company will be divided between an initial public offering (IPO) and investment in a Saudi retirement fund.

The timetable of the IPO is subject to the Saudi Arabian capital markets authority, and at the time of going to press, Sindi said he thought that it would take place "in the next few days".

The timing of the IPO will have a big impact on Atheeb Telecom, as it cannot launch until it has been made. But current market conditions may not be favourable to raising the maximum possible amount of funds.

"This is something that all fixed-line operators share," Sindi explains. "There is a decree that service provision must be done by companies that would list their shares to the public before operations, so there is a requirement by the authorities that the company must be listed before commercial operations, so this is the issue."

Sindi says that although the markets in Saudi Arabia have been affected by the global credit crisis "the fundamentals of the telecom sector and the fundamentals of the economy remain very positive and we're bullish on the economy. No sector is immune, but it is a sector that traditionally resists economic contractions. Once the IPO is out of the way we will be launching full commercial services."

WiMAX network

At a time when WiMAX appears to be losing ground to rival next generation technology LTE, Sindi says that the roll out of US network Sprint's WiMAX operation in Baltimore and the reaction it generated provided some "heartwarming" results.

"If WiMAX works in a developed place like the US I think the chances are that in a developing country the returns will be even that much more. And we think that this is going to be cheaper and faster than 3G, thus providing our customers with a better value proposition," Sindi says.

"It shows that mobile, or nomadic broadband, has a lot of value even in countries where the penetration, where DSL exceeded 30% of penetration."

He adds: "I can cite today the press release by the chairman of the WiMAX forum that says the euphoria of the early introduction of LTE is not founded or overstated, this came on the wake of excitement that LTE is coming fairly soon, but the chairman of the WiMAX forum says LTE is a minimum of two years away. WiMAX is the only 4G technology that is delivering results right now."

Atheeb Telecom has so far invested 1.3 billion Saudi Riyals (US$480 million) in its WiMAX network, and that figure is set to be increased, but Sindi is tight-lipped about how much additional funding will be ploughed into the network. Whatever the final figure, in pure investment terms, it will face a stiff challenge from rival licensee Verizon, which last month confirmed that it will spend $3 billion on its network in Saudi Arabia.

The availability of devices has been highlighted as a key area in the potential success of WiMAX networks, and Sindi says there is no shortage of WiMAX-enabled devices to satisfy consumer and business users.

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