RIYADH, 28 July — Saudi Telecom Company has lost its monopoly in the lucrative domestic telecommunication market as the government yesterday announced new regulations allowing competition.
“The executive bylaws allow new operators in the telecom sector,” Acting Minister of Posts, Telegraphs and Telephones Khaled Al-Gosaibi told a press conference.
“STC will be treated just like other operators when the market is opened up for competition,” he said. The bylaws prevent dominance in the market by any company, harming public interests. The new operators must take the form of public share-holding companies, which should be established through public offerings to expand the ownership base.
The minister said that foreign investments in fixed and mobile telephone services required a “political decision”, adding that local expertise was capable of managing the telecom sector.
Telecommunications is one of 19 sectors made off-limits to foreign investors, but the government is currently reconsidering the list. The Saudi government last year approved a bill, which was passed by the Shoura Council to end the state’s monopoly of the telecom sector without ruling out the participation of foreign investors.
The government has also set up the Saudi Telecom Authority, a regulatory body to supervise the opening up of the market to more companies.
Saudi Arabia, a country of 22 million people, has 3.3 million fixed lines and three million GSM mobile lines. Last year, STC selected Ericsson of Sweden and Finland’s Nokia for a project to expand the GSM network to 5.5 million lines.
In June, Bahrain-based Gulf International Bank was appointed by the Finance Ministry as exclusive financial adviser for the partial flotation of shares in STC. The initial public offering (IPO) is an essential requirement for the listing of STC, which has a capital of SR12 billion ($3.2 billion), on the Saudi stock market. Al-Gosaibi said the IPO for 20 to 30 percent of the shares would take place before the end of this year. STC’s capital is divided into 240 million shares.
Muhammad Mulla, governor of Saudi Telecom Authority, told reporters that STA would restrict STC’s freedom in slashing prices to ensure fair competition. “We’ll provide the new competitors greater freedom than STC in terms of prices in order to restrict the latter’s ability to close the door of competition,” he said.
The authority is currently conducting a survey on the telecom market, which will be completed by the end of this year. “It will determine the ideal number of operators for each sector,” he added.
The minister said STC’s restructuring process was progressing well, adding that the company will take steps to solve its employees’ problems.
“There is a plan to establish a fund to be financed by telecom operators to provide telecom services in remote areas,” he pointed out.
