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Saudis opt for multiple connections

Fixed line subscriber growth continues to slow

Over a third of cellular users in Saudi Arabia have more than one mobile phone connection and often select a different network operator for the second, according to a new report by the Arab Advisors Group.

Research into the mobile phone use of residents in the kingdom found that 39.6% of people had more than one mobile connection, with the need for separate business and personal connections being cited as the main reason for having multiple connections.

Cost savings was another factor, the survey showed.

The report was compiled by face-to-face interviews in various parts of the kingdom, which counts around 16 million mobile subscribers in a population of 25 million.

The report’s release coincides with growing speculation in local media that a third mobile operator is set to licensed. Egyptian telecommunications company Orascom is understood to be amongst a number of operators including Kuwait’s MTC Group said to be interested in participating for the concession.

Jawad Abbassi, general manager of Arab Advisors Group, said the report indicates that actual penetration rates for mobile usage are lower than reported by mobile operators.

“A good one-fifth of individual subscribers are subscribers of both operators, and over 39% have multiple mobile lines,” Abbassi claimed. “This trend seems to stem from the ongoing promotions in the Saudi market that include free credit, no connection fees and lengthy validity periods for prepaid numbers.”

By strict definition of the number of individuals using a mobile service, Saudi Arabia’s cellular penetration rate at 3Q06 is likely to be nearer the 60% mark, rather than the 74.5% indicated by subscriber number estimates offered by Mobily and Al Jawal.

Meantime, a recent report on the state of the kingdom’s fixed line business by telecoms research firm IDC revealed that the Saudi Arabian fixed line voice market shrank by 4% to US$2 billion in 2005 and is set to contract on average by 7.6% annually over the next five years.

The decline of the fixed-line market is primarily due to consumer migration to mobile services. However, due to the low cost of fixed-line calls in comparison to mobile and the momentum gathering behind VoIP, the growth of mobile telephony has not stemmed the growth in fixed-line connections, which are set to rise 5% in 2006.“The new lines are a reminder of the underpenetrated nature of the Saudi telephony market but also of the rising demand for internet access” said Mohsen Malaki, research and consulting director, IDC CEMA.

In response to the technological changes affecting the Saudi Arabian market, the government is expected to continue pursuing its telecommunications liberalisation process.

According to the IDC’s Saudi Arabia Telephony Services 2006-2010 Forecast and 2005 Analysis study, a new licence is likely to be issued in the first half of 2007 and the telecoms regulator is likely to open the market to voice over broadband (VoBB), further spurring competition and opportunities for both the incumbent and the new operator.

“ADSL and other broadband technologies will open the door to voice over broadband services in the country, and that will help mitigate the effects of the contracting circuit-switched telephony market,” said Said Irfan, research analyst, IDC MEA. “But operators will need to do more to express the value of their services by developing novel offerings for consumers and integrated solutions for the businesses.”