New SIM law cuts into telecom firms’ earnings

The Saudi SIM market is expected to continue to decline for the first quarter of the year 2013, according to IT experts and economists.
The decision of the Communication and Information Technology Commission (CITC), issued in August 2012, declared that no prepaid SIM cards can be recharged nor can balances be transferred unless the subscriber enters his or her identity number.
An Arab News report last week predicted a drop in telecom companies’ revenues as a fallout of the recent CITC requiment. The article said that such a drop would show in the first quarter reports of the companies.
But a recent report issued by the CITC said the number of subscriptions in the mobile communications services is estimated to reach 53.1 million by the end of the third quarter of 2012.
The CITC report confirmed that there is a notable decline in the rate of prepaid SIM subscriptions starting from the third quarter of 2012 due to the implementation of the new decision. That is earlier than what was predicted.
“Restrictions that have been imposed by the CITC have affected the sales of prepaid SIM and they will affect it further in the first quarter of 2013. There is a huge number of expat workers who don’t have ID. Those workers are now helpless as they can no longer buy neither prepaid nor postpaid new SIM. In both cases, they will need to have an ID number,” said Tariq Alloush, general manager of NASA Smart Devices.
He added: “I don’t expect any further demand on post-paid SIMs, especially when communication companies are enforcing many requirements for issuing a post-paid SIM line."
Basel Zagzoug, general manger of Internet Solutions company, said the decline in sales of prepaid SIMs could be temporary to include only the first quarter of 2013. Later, he said, customers will succeed in finding solutions to bypass the CITC. “After finding such solutions, the sales of prepaid SIMs will grow again.”
He added: “In the past, sales rates of prepaid SIMs were based on competitive offers presented by the three communication companies in the Kingdom. Each company presented a special offer, which is why the customer buys more than one prepaid card to benefit from as many offers as possible.”
Abed Al-Abdali, economy teacher at Umm Al-Qura University, said the decline in the sales of prepaid SIM cards is expected to continue until the first quarter of 2013. “I am expecting the sales of prepaid SIM in the black market to decline or even stop. In addition, sales of prepaid SIMs will also decline in what is called the ‘Shadow Market’. The shadow market is where old SIMS are resold while they are already registered with the communication company,” he said.
Al-Abdali doesn't expect the CITC’s new law to be implemented strictly. “I believe customers will find out ways to get prepaid SIMs to work without having to input the ID number,” he said.
Al-Abdali expected the prepaid SIM sales to grow again in the long run, especially when the new law will help in shutting down the black market.
“The new law helps in shutting down the black market and encourages customers to get back to the official market. The demands on postpaid SIMs might increase, especially when ID is required in all cases. Furthermore, the customer will be able to get a postpaid line with limited credit of SR 300 or less. I think such a ‘credit limit system’ will help customers to adhere to their budget more than the prepaid SIMs."
Many illegal expats experienced difficulties when trying to purchase a new prepaid SIM card. Some salesmen are now selling SIM cards with ID numbers attached to them while other expats who already have ID sell their ID number of their expat friends at a cost of SR 150 and more. So far, some expats have succeeded in tricking the CITC while others are still unable to decipher the trick.