Saudi Arabia: Mobile Industry Set for Massive Investment With 3G

 JEDDAH, 14 August – Mobile markets across Saudi Arabia and the rest of the Middle East are opening up to a fierce competition with the introduction of 3G or 3.5G services. Saudi Telecom CompanySaudi Telecom Company and MobilyMobily (Etihad Etisalat), the Kingdom’s two mobile service providers, have already announced the introduction of third generation services thus reflecting their ongoing investment policy. A third mobile service operator is also widely expected to enter the market in due course.

Current GSM (global system for mobile communication) services are expected to keep dominating the revenue forecasts for telecom operators in the region for several years to come.

Further investment in the current GSM technology is set to continue over the next five to eight years by way of new deployment and network upgrades and during this period gradual deployment of wireless broadband technologies is expected to take place, consulting firm Booz Allen Hamilton (BAH) said in a report yesterday.

More than four countries in the region have deployed 3G, EDGE and WiFi (wireless Internet) technologies, and the number is increasing.

Although deployment has been limited to specific areas, coverage is set to increase with new entrants. WiMax (4th generation communication technology) is entering the region through specific initiatives and trials.

The future is not a question of which technology will dominate the market place. It could very well be a mixture of all of them. A lot depends on the availability of practical user devices. Full mobility will always remain a key factor, and wireless technologies that do not cater for the practicality of small and easy to carry devices will face difficulties breaking into the mass market.

Mobile broadband provides freedom of movement and practical access to entertainment, information and other individuals, whereas wireless broadband offers ‘portability’ and high-speed connectivity for applications requiring slightly larger devices such as laptop.

"As competition increases, new operators are looking to expand their subscriber base while those already established are defending their market position and minimizing losses of their traditionally high revenues, said BAH’s Senior Associate Hilal Halaoui. "In a drive to defend the home market, the incumbent operators are looking to enhance their network infrastructure and develop new services to reward their customers" he added.

"Some of the schemes have proved popular with subscribers and could be effective in slowing if not stopping the damage caused by new competition," he said, adding that loyalty programs, for example, have become popular with operators.

New technology is also allowing operators to introduce services that could play a major part in customer choice. As mobile devices become more sophisticated, the user experience is changing.

Operators are evolving their services to deliver entertainment and information to mobile phone screens. In the last four years, SMS traffic has increased significantly on mobile networks in the region. As more bandwidth becomes available on networks following the introduction of GPRS, more complex messaging can be supported, hence the introduction of MMS (multimedia messaging).

Today, most networks in the region have introduced GPRS standards and a large number of successful operators offer MMS services. "Many thematic TV broadcasters have emerged recently to offer music content with continuous SMS-based message boards and downloads, along with MMS. Traditionally, content providers commanded a significant share of the revenue in return for their copyrights, but telecom operators are now realizing the importance of their role as the ultimate owner of the relationship with the end user," BAH’s Vice President Karim Sabbagh, said.

As messaging and interactivity services become more widely spread, revenues to mobile operators will become more significant. Many are increasingly sourcing content directly from the developers, while others are looking at entering the content development industry themselves and producing their own libraries to capture a larger portion of revenues.

Interactive television in the region is highly successful, with shows creating significant revenue opportunities for TV broadcasters, beyond traditional advertising income.

This is made possible by the Telecom operators, who may at some point in the near future also investigate the possibility of expanding their operation into the media part of the value chain.