Pyramid Analysis

Saudi Arabia Regulatory Outlook

Pyramid Research has released a report covering the regulatory environments of 14 Africa and Middle East markets.  This release provides an update on the main regulatory initiatives being introduced in the region. The aim is to highlight regulatory advances on such key issues as local loop unbundling, VoIP, tariff regulation, number portability and others.

Saudi Arabia will continue to attract strong attention following the mobile market entry of Ettihad Etisalat and the issuance of GSM and UMTS licenses last year, in addition to the issuance of numerous other licenses on the fixed/datacoms side. To be sure, Saudi Arabia will offer strong additional opportunities in the medium term.

Licensing: the year that passed
2004 was a remarkable year in Saudi telecoms. Not only did the regulator finally go ahead with the licensing of a second mobile operator, it also issued licenses for datacoms and VSAT. The former were snatched by local players Bayanat Al Oula for Network Services and Bayn whereas Detecon Al-Saudia won the VSAT license. We expect datacoms to be a growth market given STC's current pricing. As for VSAT we are even more optimistic. Detecon Al-Saudia has already seen strong demand for satellite connectivity due to its reliability and its ability to circumvent the rigid content filtering of the KACST, the Internet regulator. However, VSAT is substantially more expensive than DSL and that differential is likely to increase as bandwidth prices come down. At current prices VSAT will remain as an option exclusive to the top-end segment of the income scale and we forecast long-term annual revenues to reach $20m at most.

2006 set for another liberalization wave
The big news on the license front this year was the regulator’s decision to bring forward the award of a second national fixed license from the initially planned deadline of 2008 to the end of 2006. In addition, the regulator has voiced its ambition to license a third mobile operator, also in 2006. The conditions for the mobile and fixed licenses are not yet determined but if the regulator lives up to its commitments, 2006 may turn out to be at least as eventful as 2005.