Saudi Mobily to launch mobile piggyback service

DUBAI (Reuters) – Saudi Arabia Mobily will start leasing its mobile phone network to a new operator to launch a competing service in the first quarter, an executive said, kicking off the world’s biggest shake-up. the kingdom’s telecommunications market in six years.
The Saudi telecommunications regulator, in a bid to increase competition, has asked the three mobile operators – the second largest Mobily, the leader Saudi Telecom Co (STC) and Zain Saudi – to provide wholesale capacity to new operators who do not have their own network.
The successful bidders, announced last June, have yet to receive their licenses. The Communications and Information Technology Commission (CITC), which did not provide further details, declined to comment.
But Karl Michael Henneking, Mobily’s director of corporate strategy and marketing, said the service would start soon with its partner, London-based Lebara Group.
“We expect Lebara to launch its services in the first quarter of 2014. CITC is expected to issue the licenses at the end of January,” he said.
Lebara will help Mobily “gain market share in a segment in which we are not so strong”, Henneking added, declining to say which social or ethnic group Lebara would target. He hinted that this would include expatriate residents, who make up about a fifth of Saudi Arabia’s estimated 27 million people.
New entrants such as Lebara, known as Mobile Virtual Network Operators (MVNOs), typically pay the host company a percentage of their revenue plus fees.
Mobily also sees a business opportunity in developing an internet-based platform to manage Lebara’s billing, operations and technology. It is currently in talks to sell this system to other potential virtual newcomers in the Middle East, Henneking said. Such a system allows them to focus on marketing and customer service. MVNOs are widespread in Europe, but Gulf regulators have been reluctant to allow them because most of the region’s 15 mobile operators are ultimately government-controlled and a major source of revenue for the state.
Oman is the only Gulf state to launch MVNOs, with former monopoly Omantel hosting two on its network. If MVNOs succeed in Arabia, which is by far the largest market in the Gulf, and help boost revenues for its existing mobile phone companies, neighboring countries could follow suit.
“In more developed markets, the entry of MVNOs sparked a price war, but if we take the example of Oman in this region, ARPU (average revenue per user) stabilized within two years. following the entry of MVNOs,” said Karim Yaici, a telecoms. principal analyst at Analysys Mason. “We can expect a similar scenario in Saudi Arabia.”
Analysts expect Saudi mobile companies to retain control of their core networks and spectrum and limit MVNOs to targeting pre-agreed market segments.
This would inhibit price competition and reduce the risk of MVNOs cannibalizing revenue from their hosts.
STC has partnered with Virgin Mobile Middle East & Africa and Zain Saudi with Gulf retailer Axiom. Saudi Arabia’s mobile penetration is around 185%, or 1.85 mobile subscriptions per person, suggesting that MVNOs will face a battle to carve out a profitable market share.
“Not all MVNOs will be successful,” Henneking said.
He said some Lebara customers would use his services as their only mobile account, but a larger share would sign up for Lebara as a second backup service.
In addition to the revenues and royalties they pay to host telecom companies, MVNOs will also pay a royalty of SR5 million ($1.3 million) and 15% of their revenues to the regulator.
Reuters

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