Investments in new technology drive ICT sector expansion in Saudi Arabia

Telecommunications companies in Saudi Arabia are continuing to invest in new generations of technology that will enhance the user experience for mobile broadband customers. Both Saudi Telecommunications Company (STC) and Zain have partnered with China’s Huawei to introduce systems that have produced network throughput speeds of 1 Gbps. As 4G LTE technology improves, the two companies intend to offer customers so-called 4.5G services that will enable the internet of things and machine-to-machine devices to operate more effectively.

Mobile Broadband Penetration

Recent data from the Communications and Information Technology Commission (CITC) shows a reversal in the strong growth trend of mobile broadband posted in recent years. In 2011 the teledensity of mobile broadband was 39.6%, and after two years of moderate increases, to 41.1% and 47.6% in 2012 and 2013, respectively, growth took off in 2014, when teledensity hit 94.5%. However, while teledensity rose to 106% in 2015, the figure dropped to 83.5% in the first half of 2016. Mobile broadband subscriptions, meanwhile, rose from 14.3m in 2013 to 29.1m in 2014 and then to 33.4m in 2015. In the first half of 2016 this figure also decreased to 26.62m.

In its most recent ICT indicators report the CITC notes that these decreases are due to the new fingerprint requirements for all subscriptions, which were enacted to respond to concerns about cybersecurity. The commission also expects the trend to continue in the near term. In the past the rapid adoption of mobile broadband was fed by the growing prevalence of smartphones – with CITC data showing 82% of consumers owned such a device in 2014 – and by investment in enabling technology made by the telecommunications companies.

International Comparisons

Research from management consultancy Arthur D Little conducted in 2015 showed that monthly average revenue per user for mobile data in Saudi Arabia was $16.65, while in the US it was almost three times higher, at $47.72. In the World Economic Forum’s 2016 Network Readiness Index, Saudi Arabia ranked 33rd out of 139 countries overall, while the US was in fifth place. However, the two countries were much closer in rank and performance when mobile services were compared, with the US ranked 14th for mobile broadband subscriptions per capita, just ahead of Saudi Arabia in 15th place. Moreover, Saudi Arabia ranked third for mobile phone subscriptions, well ahead of the US in 79th position. According to the CITC, mobile data users in Saudi Arabia are expected to consume 1.1bn GB of mobile bandwidth by 2017, representing a compound annual growth rate of 75% between 2013 and 2017.

Broadband Adoption

Mobile network operators (MNOs) STC, Mobily and Zain launched their 4G LTE networks in 2011, offering faster connections and improving the mobile broadband experience by allowing users to download rich mobile content and apps. A Google study of 500 smartphone users in Saudi Arabia in 2012 found that, on average, each user had 36 apps on their handset, 11 of which had been used in the previous month. Saudi Arabia has the highest per capita usage of YouTube, with 90m views per day, and 91% of smartphone users watch videos on their devices, with 58% watching at least one video per day, the CITC reported.

The business community has been slower to harness the potential of mobile broadband, with only 36% enabling access for employees and just 20% of ICT budgets directed towards supporting mobile broadband. The adoption of mobile broadband in the public sector is estimated at 43%.

New Investment

Both STC and Zain announced fresh investment in their 4G LTE offering in recent years. In June 2014 Zain launched its network reload project, signing agreements with five international technology companies to make improvements to its network’s speed, coverage and capacity over three planned phases. By November 2015 the company reported that it had completed phase one of the project, and that increased LTE coverage had been delivered to 90 cities and high-speed connectivity had been installed along 14 highways in the Kingdom. According to the company, data traffic had increased by 400%, and the use of voice services had risen by 60%, partly as a result of these measures.

Carrier Aggregation

In 2014 Zain announced it was adopting technology supplied by Huawei of China to use carrier aggregation in the 1800-2100-MHz frequency band to offer LTE-advanced ( LTEA). The result for users was download speeds of up to 150 Mbps, double the previous speed. Huawei announced the use of the technology as a world first that allows Zain to offer very fast speeds with high bandwidth and compatibility with its existingLTE network. In addition, the move has doubled the capacity of its network. On Huawei’s website, Zain Saudi’s CEO, Hassan Kabbani, said the solution would meet customer needs. “As market trends continue to move towards high-speed mobile data and video communication, along with the proliferation of social apps, mobile broadband networks face unprecedented challenges, and we recognise LTE-A technology as the future of connectivity.”

In a June 2015 press release Ramadan Ding, CEO of Huawei Saudi Arabia, said, “The latest innovative solutions in mobile broadband connectivity are shaping the future of Saudi Arabia’s telecom market. These technologies are increasingly viewed as enablers of continued economic and social development that support the government’s vision of a knowledge-based digital economy.”

In addition to the carrier aggregation development, Zain ran a pilot project in conjunction with Nokia Networks using frequency distribution duplex LTE in the same 1800- to 2100-MHz frequency. This technology offers a chance to improve customer experience while also reducing expenses. Nokia Networks utilised its single radio access network advanced platform, carrier aggregate software and Flexi Multiradio 10 Base Station in the pilot project.

LTE Solutions

STC also has a long-term working relationship with Huawei and has been offering a LTE-A service since January 2014. In December 2015 the two companies announced they had demonstrated new 4.5G technology, enabling STC’s network to offer new company record throughput speeds of 1.5 Gbps. In February 2016 STC announced it had used licensed assist access (LAA) solutions with both Huawei and Ericsson to show it could deliver what it described as “the fastest 4G LTE data rates in MENA”. The company explained that the LAA breakthrough had been achieved by using free unlicensed spectrum in the 5-GHz band. STC’s senior vice-president of technology and operations, Nasser Al Nasser, explained the significance in a press statement on the company’s website. “Using unlicensed spectrum for LTE is a very smart way to maximise the efficiency of the available spectrum. It will lead to successful deployments of advanced technologies, providing better-quality services.”

Regulator's Role

However, while Saudi Arabia’s three MNOs are all working to improve the speed and quality of service they can offer to a growing number of data customers, they are also having to make substantial investments in technology at a time when voice revenues have dwindled and data income has eased due to stiffer competition. In a speech to the Mobile World Congress in Barcelona in February 2016, Khaled Biyari, CEO of STC, predicted that the development of the internet of things, where devices as well as people connect to the internet, would force telecommunications companies to revisit their business models to find a more sustainable solution. Biyari suggested that regulators could also play a key role in ensuring that MNOs are able to invest in order to benefit the societies they serve. He compared the regulatory model in the US, which encouraged investment that so led to a boom in the telecoms industry and an increase in the level of service, to a second model, which encouraged competition and drove down prices, thereby impeding the growth of mobile companies. Although Biyari did not mention Saudi Arabia or the CITC directly, the report on his speech carried on STC’s website said, “Biyari stressed the necessity to build a regulatory framework that fosters investment, caters to the demands of the new digital economy, which, to a large extent, depends on the ability of telecommunication companies to build the necessary infrastructure and offer high-quality services at fair prices.” If the CITC heeds these words, consumers in Saudi Arabia may find themselves paying more for their mobile broadband services, and MNOs may find it easier to invest in new technology while still returning a profit to their shareholders.

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