Operators Will Focus on Mobile Network Enhancements and Enterprises to Drive Growth with qualitative & quantitative insights on the changing trends and key issues within telecom market. An insightful analysis of key market trends, near-term opportunities & risk factors, leading telecom players, distribution trends and regulatory framework within telecom market. The analysis of the aforementioned trends has been done across key segments within the market: fixed telephony, broadband, Pay-TV, mobile voice and mobile data services including evolution of service providers. Also, the report includes historic and forecast figures for key indicators.
Economic Environment
Saudi Arabia’s economy is majorly an oil-based economy. With oil reserves almost one-quarter of the world oil reserves, it ranks second in the world. It is the second largest producer of oil and leading exporter of oil.The petroleum sector accounts for the more than 90% of both budget revenue and export earnings as well as contribute around 50% of the GDP. To diversify the economy, the govt. is encouraging the private sector growth. After experiencing surging affluence on account of rising oil prices, the economy is at an inflection point today, exploring opportunities for more dynamic economy through productivity & investment led transformation.
Looking at key economic snapshot of the country home to 30+ million people. With 1.6 trillion USD, Saudi Arabia’s global ranking is seventy eighth as per nominal GDP. The two main sectors contributing to the GDP is oil and service sector. Govt. is focusing on expanding and developing service sector to diversify the economy and to provide employment to the Saudi people leading to sustainable future growth of the country. Consumption and investment has expanded although with a declining rate. The country has admirably very low level of inflation from a long period of time. Foreign investment in many sectors is either prohibited or capped. Currently, FDI inflows amount to 8 billion USD. Gradually, the financial sector has undergone transformation, with restrictions on foreign investment in financial sector being eased.
Brief Overview of Telecom Market
Saudi Arabia’s telecom sector is the largest in Middle East both in value and volume terms. The market accounts for more than half of the market share in GCC. The contribution of telecom sector in national GDP has been significantly growing in the last few years. The telecom market in Saudi Arabia was dormant until 2000; however it experienced spectacular growth after 2000, owing largely to the liberalization of the market in 2003.The fixed-line, internet and mobile communication market are all liberalized today in Saudi Arabia. Also, as a step further towards liberalization, three MVNOs licences were put up for auction. All this transformed the market from govt. owned monopoly to aggressively competitive market.
Looking at the current scenario of the Telecom market, the market posted positive growth. The voice market has approached maturity with extremely high mobile penetration. Largely owing to this maturity, the Data segment has emerged as new growth area, driven by the young and tech-craving demography along with rising crave for smart devices. Apart from this, the market is characterized by aggressive competition among service providers.
To survive this competition and eventual decline in profits from it, operators are investing in LTE, LTE-A and fibre to enable additional revenue streams including IoT, cloud services and M2M services. Also, emerging focus on enterprise services is offering profitable opportunities to these operators, mainly driven by strong macroeconomic performance coupled with demand for operational efficiency. Thus, the increasing operators’ focus on enterprise segment and mobile network enhancement will set the growth trend for Saudi Arabia’s telecom sector in near future.
Major Market Players in the Telecom Market
Owing to liberalization in 2003, with the introduction of MVNOs, along with reduction in MTRS; the competitive landscape of the Saudi Arabia’s has improved. There has been influx of international telecom service providers in the kingdom. Some of the major market players include: STC, Mobily, Zain KSA, CITC, Virgin Mobile, Lebara, Go Telecom, Juniper Networks, Huawei, Integrated Telecom Company (ITC), Cisco, beIN Sports and OSN.
STC is the largest market player with international presence in eleven countries and strong presence in the rapidly growing data and enterprise segment; followed by Mobily, and Zain KSA. However, with increasing competition, the market players are fighting aggressively through tariff cuts, which are eventually affecting their profits. Hence, they have turned to exploring additional revenue streams.
Telecom Market Prospects
In the recent years, the Saudi Arabia’s telecom market has shown robust performance in terms of both value and volume growth. In coming years, the market posts a promising growth picture. From 2019 onwards, the telecommunications market saw service revenue increasing on an annual basis. Among various segments in the market, mobile and fixed data segments are expected to emerge as the largest revenue-contributing segment soon, boosting growth in the market. However, Mobile data revenue is anticipated to account for a greater proportion of total telecommunications revenue in future.
Looking at the position of major service providers, Saudi Arabia’s telecom market is led by few major players including STC, Mobily and Zain KSA. Due to increasing competition in the market, operators will be investing in network infrastructure and venturing into enterprise-focused services such as IoT/M2M and cloud computing. Growth in the market is expected to be driven by high demand for smartphones and high-speed networks as well as boosted by govt. policies aimed at developing the ICT industry.