RIYADH, 17 February 2003 — The Saudi authorities will accept applications for a new mobile phone company to be licensed in the fourth quarter of 2004. The new company, however, will not break Saudi Telecom Company’s (STC) monopoly.
In an interview with Arab News, Michael J. Parkhouse, head of Investment Banking at the Gulf International Bank (GIB), and Jean Khederian, manager of investment Banking, said the new company would still have to rely on STC for infrastructure.
“The licensee will have to use STC’s infrastructure. Though it will provide competition for STC, it will at the same time generate income for STC,” said Parkhouse.
GIB acted as exclusive financial adviser during the run-up to STC’s Initial Public Offering (IPO). The IPO netted more than SR37 billion and was oversubscribed 350 percent. The GIB executive said that with the launch of a second GSM company, the Saudi Communications Commission (SCC) would decide whether licensing another company was warranted.
Khederian confirmed that any newcomer to the Saudi telecom sector would have to use STC’s network.
“Should they choose to roll out their own network, it will take longer to set up.” The dominance of STC in the telecommunications market is expected to continue till 2008, when the government will issue another license for land-line services.
Asked about the future status of the Saudi Electricity Company (SEC), Parkhouse said that the government was examining the feasibility of breaking it down into three different companies for power generation, transmission and distribution. While these operations are now under government control, independent power projects will be set up on a build-operate-transfer (BOT) basis.
Parkhouse said many industries in the GCC were suffering from a production over-capacity. They are prime candidates for restructuring and consolidation in line with the international trend.
In the Kingdom’s context, insurance and health care industries should consider moves in that direction, Khederian observed. That step would help them survive once WTO membership opens the door to foreign competition.
