Saudi Arabia has awarded the three virtual telecom licenses, with Virgin Mobile Middle East & Africa (VMMEA) obtaining a virtual telecom license, the industry regulator said on Sunday, in the latest step to liberalize the Kingdom’s communications sector.
Five companies had bid for the Saudi mobile virtual network operator (MVNO) licenses. MVNOs do not own the networks they use to provide communications services but instead lease capacity from conventional operators, usually paying them a percentage of their revenue as well as fees.
VMMEA, part-owned by British entrepreneur Richard Branson’s Virgin Group, will launch an MVNO on Telecom Co’s network, the Communication and Information Technology Commission (CITC) said in statement on its website.
Jawraa Lebara has joined with second-biggest operator Etihad Etisalat (Mobily), while Dubai-based retailer Axiom Telecom will team up with Zain Saudi.Local companies FastNet and Safari were the losing bidders.
“The aim of these licenses is to improve the level of telecommunications services and information technology … and to contribute to lower their prices, improve customer care, increase job opportunities for citizens and to stimulate competition,” CITC said in the statement.Saudi will become the second of the six Gulf Cooperation Council members after Oman to allow MVNOs.
Such virtual networks are widespread in Europe and other developed markets, but Gulf regulators have been reluctant to open their markets to more competition because most of the region’s 15 mobile operators are ultimately government-controlled and are often a key source of state revenue.CITC did not state when the MVNOs would launch services, only that the winners now had 90 days to provide the necessary documents to move to the next phase of obtaining their licenses.
VMMEA has MVNOs in Jordan, South Africa and Oman. London-based Lebara Group has operations in the UK, Germany, France, Denmark, The Netherlands, Spain, Switzerland and Australia, according to its website.Saudi Arabia’s market continues to grow at a steady pace, with mobile continuing to underpin domestic market growth as the fixed line market languishes. Fixed line incumbent operator STC is focusing on international expansion, broadband, financial performance and customer experience as part of its 2011-2013 strategy.
Broadband services are available via ADSL, fiber and wireless. Infrastructure-based competition in the FttX market is increasing as STC competes against deployments by alternative fixed line operator Etihad Atheeb and mobile network operator Mobily, with end users able to access speeds of up to 1Gb/s.Faster speeds and increasingly affordable broadband access has fostered development of a digital economy, encompassing government services (e-government), e-health, e-education and e-commerce.
The Ministry of Health has devised a 10-year e-health strategy with a road map of specific projects to fulfill strategic objectives. E-education holds much promise given Saudi Arabia’s young population and its desire to diversify and develop a knowledge-based economy. From its 2013 budget the government allocated SR204 billion to education, 25 percent of its entire budget and the single largest spending item. E-commerce holds much promise given demographic and economic factors but faces the challenges of access to payment gateways, lack of clear regulations, cultural, trust and privacy issues.
Digital media development in Saudi Arabia is underpinned by high broadband penetration and a young population, among others. Nearly half all estimated Internet users watch online videos daily.Four mobile network operators and availability of mobile number portability underpins intense mobile competition. All three GSM/WCDMA based operators have launched LTE networks and have shifted focus towards expanding coverage and improving the quality of services. Mobile Internet and broadband subscription levels indicate widespread acceptance, with over a third of the population subscribing to such services.
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