JEDDAH, 21 March 2004 — Some seven consortia involving international and Saudi companies are competing for the Kingdom’s second mobile license. The Communications and Information Technology Commission (CITC) will announce the winner in July. An eighth consortium is rumored to be planning to submit an application today, the last day.
The CITC gave Saudi and foreign firms until March 21 to apply for the highly prized license. Candidates for the license must be “a consortium of at least five Saudi companies and an international cellular mobile operator,” according to conditions set by the commission.
Mohammed Al-Suwayel, governor of the commission, said foreign investors could buy up to 49 percent of the new joint stock company to be set up to operate the new GSM. “The foreign investor can own a minimum stake of 15 percent and a maximum of 49 percent in the company,” he said.
The Supreme Economic Council has already lifted a ban on foreign investment in the telecommunications sector. The CITC launched the formal licensing process for the new mobile operator and two new data telecommunications service providers recently by issuing a request for pre-qualification. Many investors here and abroad the Kingdom have expressed a keen interest in the project. Prince Alwaleed ibn Talal, chairman of Kingdom Holding, said recently he was in the process of setting up a consortium of Saudi investors and an international cell phone provider to win the the license. His partner is thought to be Spanish mobile operator Telefonica. Other bidders are said to include Etisalat of the UAE, Vodaphone, Kuwait-based mobile operator MTC and Deutsche Telekom.
Stringent criteria have been set for the operator. The operator must control and run a mobile network (or networks) serving at least 1.5 million subscribers, and it must have at least two years’ experience in deploying and operating a greenfield mobile phone system. It must be listed on its national stock exchange and have a market capitalization of at least $1 billion.
The requirement for at least five Saudi partners to be involved in each bidding consortium appears to reflect a concern to spread the benefits of the deal around several local business groups. Most of the leading private Saudi business corporations have said they want to be involved in the business ever since the government started the process of ending the state monopoly over the industry.
Analysts say the emergence of the new mobile company would not affect Saudi Telecom Company much as the former would take years to build infrastructure required for providing the service throughout the Kingdom. In the meantime, it has to depend on STC’s infrastructure and will not be able to influence the current price structure.
Saudi Arabia is the largest telecom market in the Gulf region with four million landlines and seven million mobiles. The sector is growing at the rate of 30 percent annually. The STC has decided to issue nine-digit numbers to its mobile subscribers from April 1 in a bid to provide 100 million lines in the future.
