Mobile phone market in Saudi Arabia looks more promising than ever as competition heats up amid increasing demand. JEDDAH: As the mobile telecom market heats up in Saudi Arabia, more price cuts are seen in five years, a new report said Tuesday. The study also said Saudi operators are looking to convergence in search of a competitive edge, according to the report from Pyramid Research (www.pyr.com). "Pyramid expects the market to grow from $11.3 billion in 2009 to $14.3 billion in 2015, fueled mostly by growth in mobile data as all three GSM operators have launched 3G services," said Hussam Barhoush, senior analyst at Pyramid. The report entitled "Saudi Arabia: Mobile Competition Heats Up" said "the next five years will see further price cuts on mobile voice services due to additional competition, but these cuts will be largely compensated for by a dramatic rise in mobile data usage. We are projecting mobile data to grow at a 2010-2015 CAGR of 17 percent, to reach $2.9 billion in 2015," he noted. "We expect the number of mobile subscriptions to grow at a CAGR of 4 percent, from about 42.5 million forecast in 2010 to more than 51.8 million in 2015. However, Saudi Arabia's comparatively low user penetration rate - only 77 percent in 2009, placed in contrast to its subscription penetration of 146 percent - further demonstrates the market's potential for more growth," Barhoush added. In 2009, 42 percent of handsets in Saudi Arabia were 3G-enabled, and we expect that share to reach 79 percent by 2015. "We expect the introduction of 4G in 2011, as all three GSM players conducted LTE trials in 2009 and 2010. Due to the popularity of mobile broadband, we expect all three mobile operators to roll out LTE networks in the long term and for adoption to be comparatively rapid," Barhoush further said. To help differentiate themselves, operators are looking toward convergence to give them an edge. "The two biggest operators, STC and Mobily, already have networks and licenses permitting them to offer both fixed and mobile services and are looking to convergence, both as a cost-saving mechanism and as a way to gain a competitive edge," he noted. Another report said over the last 5 years, the Saudi Arabian telecom market has seen phenomenal growth to become a $11.6 billion industry in 2010, contributing to around 3 percent of GDP. "The growth in Saudi Arabia's telecom market has been solid, with an extra $1 billion revenue expected to be added this year - more than all the remaining GCC market growth in 2010 together," said Josep Que of Delta Partners. "Growth historically has been driven by voice and basic data services. Going forward, we believe six promise factors will drive the majority of the growth in Saudi Arabia's telecom market." The first factor is the large youth and expatriate population that are an influential part of the consumer dynamics in Saudi Arabia. They are currently underserved but offer vast potential if directly targeted. This does not mean creating products or services in isolation, but rather creating a holistic value proposition that fulfils in a unique way their needs. The surge in broadband represents the second pillar. Broadband users have grown 10-fold since 2005 and are expected to nearly double from 3.2 million users in 2010 to 5.9 million users in 2014. Industry stakeholders such as telecom operators, equipment vendors, internet players and the government are all expected to play a significant role in pushing broadband penetration and thereby benefiting from the uptake of broadband services. The third factor is the smart device. Apple's Iphone and RIM's Blackberry have caused a stir in Saudi Arabia. It has caused many consumers to pay more attention to the device rather than to the operator (device brand, interface and applications) giving competitive advantages to operators with the best line-up. This will require operators to carefully design their device strategy in order to capture the growth opportunity. Additionally, device players will have a strategic decision to make: remain hardware-focused or expand into the services market by linking devices to services. Innovative telecom applications and services is the fourth factor. Value-added services are already popular in Saudi Arabia, contributing today 25 percent of total data revenues. It is expected to reach nearly 40 percent of total data revenues in 2014. Telecom applications and services with a focus on innovation and adaptation to local needs will drive this opportunity. Both the government and regulator can also play an important role by establishing an enabling environment, and promoting Saudi Arabia as the main hub for content and application development within the Middle East. The fifth factor is mobile financial services (MFS). MFS can place Saudi Arabia at the forefront of mobile commerce in the region through the creation of a standardized and large enough ecosystem that is attractive for all players. MFS, if implemented properly, could bring important benefits to multiple stakeholders such as the government, operators and banks. Corporate need for sophisticated ICT services is the sixth factor. As Saudi businesses' communication needs expand, the business segment will become increasingly sophisticated in their need for ICT services. Here, in particular, telecom operators and vendors will have to deliver solutions for verticals such as networking solutions, cloud services, data centers and Machine-to-Machine (M2M), which are seen to have strong growth potential in the market.
