RIYADH, 13 August 2004 — The award of the license for a second mobile phone network to Etisalat Telecommunications Co. will open up the market for GSM-based value-added services, software and hardware companies, as well as IT professions, with the GSM market set for 30 percent rate next year and beyond.
“It will break the monopoly of the Saudi Telecom Company, trigger competition, and improve the quality of service,” Zahid Badshah, general manager and Mohammed Asif Malik, channel marketing manager of Zajid Telecom, a leading ISP, told Arab News in an interview.
And Mohsen Malaki, a senior analyst of a telecommunications group, IDC CEMA, pointed out that “due to the impending liberalization of the mobile services market, Saudi Telecom is expected to focus on retaining and expanding its market share through streamlining of costs, improvement of services and tariff reductions.”
An immediate impact of Etisalat’s entry into the Saudi market is the steady shrinking of the prepaid phone cards market for mobile phones. Asif Malik said that of the eight million prepaid cards that are currently in circulation, the share of Sawa cards was 4.5 million, with Al-Jawwal accounting for the remaining 3.5 million.
The situation will now be reversed with the arrival of Etisalat.
Malik said it will also provide impetus to value-added services in terms of mobile phone applications. In a strategic move, the Saudi Telecom Co. launched an aggressive marketing campaign offering free upgrade of Sawa cards to Al-Jawwal. “That’s because Internet-based GPRS services are not accessible via Sawa cards,” Asif Malik explained.
Pointing out that there will be a growing market for GSM-based applications, Zahid Badshah said that they include Multimedia Messaging Services (MMS) that allows subscribers to send and receive “rich” content, including picture messages, sound files and short video clips and is intended to build on the popularity of the SMS (Short Message Service) texting supported by standard GSM networks.
The General Packet Radio System, or GPRS technology, he pointed out, allows mobile users to exchange information using the Internet Protocol, or IP, over GSM mobile networks.
According to IDC’s new study, the launch of mobile prepaid services in 2002 fueled an unprecedented increase in subscriptions. In both 2002 and 2003, the growth in the number of subscriptions was accompanied by equally rapid growth in voice traffic. On the other hand, the addition of new value-added services has lagged behind, mainly Saudi Telecom has been slow to introduce and market these services.
Nevertheless, Saudi Telecom has started to adapt its marketing strategy to the impending entry of a second mobile operator in 2005. Over the past 18 months, STC has been focused on rapid subscriber acquisition through the introduction of its prepaid service, which has lowered the entry barrier for low-spending subscribers and customers without a credit history.
By contrast, Etisalat is expected to have a dual focus upon entering the Saudi mobile services market. “It is likely to leverage the expected high subscription growth rate in the early years of its launch by endeavoring to attract a large number of new customers via prepaid services,” said Malaki. “The new entrant will also attempt to churn high-spending subscribers from Saudi Telecom in order to avoid being described as a low ASPS (average spending per subscription) operator.”
Malaki points out, however, that the option of national roaming is not likely to be offered to the new entrant. This means it will have to focus on rapidly building out its infrastructure to expand its geographic coverage — a critical competitive advantage that should help attract high-end subscribers.
