JEDDAH, 12 June 2007 — The Council of Ministers yesterday licensed Kuwait’s Mobile Telecom Company (MTC) to operate the Kingdom’s third mobile phone network. The MTC-led consortium won the bid with an offer of SR22.91 billion ($6.11 billion).
The weekly Cabinet meeting, chaired by Crown Prince Sultan, approved the setting up of the Saudi Mobile Telecom Company (SMTC), a firm established by MTC and its partners including Almarai. The new joint stock company will sell 700 million shares or 50 percent of its capital within 30 days of winning approval from the Ministry of Commerce and Industry.
Speaking to the Saudi Press Agency after the Cabinet meeting, Culture and Information Minister Iyad Madani said the new mobile company, with a capital of SR14 billion, would allocate 140 million shares each to the Pension Fund and the General Organization for Social Insurance (GOSI).
“The new company is licensed to establish and operate a mobile telephone network and provide its services at local, national and international levels,” the Cabinet said. It will pay the charges for the license and for extending commercial service, using frequencies and allocating numbers.
Dr. Mohammed Al-Suwaiyel, governor of the Communications and Information Technology Commission (CITC), said the Cabinet approval for the new mobile service provider would boost competition in the Kingdom’s telecom market, improve the quality of service and reduce charges. He said that 30 percent of SMTC’s shares worth SR560 million would be given to Saudis through an initial public offering.
“The investment is part of our strategic plan to become a true global company,” MTC’s Chief Executive Officer Saad Al-Barrack said. He said MTC and its partners aimed to use the Saudi license to create a company that will invest between $6 billion and $8 billion over the first five years of operation. The company plans to raise its customer base to 70 million and its capitalization to $30 billion by 2011.
Saudi Arabia is the Middle East’s fastest growing telecom market with total revenues from mobile and land phones reaching SR34.2 billion ($9.1 billion) in 2005. Forecasts indicate that the number of mobile phone and Internet subscribers will virtually double in the next five years.
According to one study, total expenditure within the sector could reach SR225 billion ($60 billion) by the year 2020. At present there are 18 million mobile phones and four million fixed line phones in the Kingdom. Etihad Etisalat (Mobily), a consortium led by UAE telecom giant Etisalat, won the second GSM license in 2004 paying SR12.21 billion. State-owned Saudi Telecom claims 14 million users and Mobily 6.5 million users.
Many international telecom companies were vying to win the Kingdom’s third mobile license. These included Samawat-Bharti (which offered SR17.25 billion), Tawasul-Digicel (SR16.125 billion), Oger Telecom (SR15 billion), Kingdom Turkcell (SR11.25 billion), Abdullah Abdul Aziz Al-Rajhi-Reliance (SR11.25 billion) and MTN Saudi Arabia (SR8.4 billion).
Analysts predict that the entry of a new service provider will increase competition in the Kingdom’s mobile phone market. MTC intends to market quality products in the Kingdom, which has a population of 27 million, including nearly eight million expatriates. The company will begin providing services early next year and is expected to get four million subscribers in the first year of its operation. It is also seeking to grab about 40 percent of the market.
According to one market expert, MTC, which has investments in 20 markets, will make its largest investment in the Kingdom, considering the high purchasing capacity of its subscribers and the strength of its economy. “MTC will not enter any market except after conducting detailed feasibility studies,” the expert said.
MTC was the first company to introduce 3G technology in the Middle East. According to informed sources the setting up of the third mobile network would cost the new company SR7.5 billion.
Addressing the Cabinet meeting, which was held at Al-Yamamah Palace in Riyadh, Prince Sultan emphasized Saudi Arabia’s determination to go ahead with its anti-terror campaign. He commended Saudi security forces for their pre-emptive operations to stamp out terrorism.
