Saudi Arabia’s ICT sector is the largest in the MENA region, with a total value of SR166bn ($44bn) and contributing approximately 4% to the Kingdom’s GDP. Growth is propelled by the widespread digital transformation taking place across government, industry and society. Moreover, the Kingdom is striving to position itself as a regional centre for ICT and draw investors by strengthening data protection regulations, enabling infrastructure cluster development, nurturing domestic skills and attracting international talent while continuing to support the growth of small- and medium-sized enterprises and incubating start-ups.
This evolution is part of the National Transformation Programme, aligned with Saudi Arabia’s Vision 2030, which targets a 19.2% contribution of the digital economy to GDP by 2025, alongside the full digitalisation of 92% of key government services. The Kingdom is already a leader in this area, ranking first in the 2023 MENA Government Electronic and Mobile Services Maturity Index from the UN Economic and Social Commission for Western Asia (ESCWA), which evaluates the accessibility and user-friendliness of government services through mobile apps. Additionally, Saudi Arabia retained its regional leadership for the second year in a row, scoring 93% in the overall digital maturity index.
Structure & Oversight
The Ministry of Communications and Information Technology (MCIT) guides sector policy with an eye to nurturing an ecosystem favourable to entrepreneurship and technological innovation. Under MCIT, the Communications, Space and Technology Commission (CST), which until December 2022 was known as the Communications and Information Technology Commission, is responsible for regulating telecoms, IT and space. The CST’s remit includes developing ICT infrastructure, encouraging digital transformation and fostering an environment that is appealing to foreign investors. Also under MCIT, the Saudi Data and AI Authority (SDAIA) and its sub-agencies – the National Centre for Artificial Intelligence, the National Data Management Office and the National Information Centre – manage the Kingdom’s national data management and artificial intelligence (AI) agenda. SDAIA can be viewed as the AI and big data integration agency, aiming to put Saudi Arabia in an elite group of countries driving data standard setting and technological innovation. The SDAIA Academy is devoted to nurturing the next generation of data scientists.
The National Cybersecurity Authority (NCA), which reports directly to the Royal Court, works closely with public and private entities to improve the cybersecurity posture of the country in order to safeguard its vital interests, national security, critical infrastructure, high-priority sectors, and government services and activities in alignment with Vision 2030. In July 2024 the NCA launched the Cybersecurity Research and Innovation Pioneers Grants Initiative, which is designed to accelerate KSA’s cybersecurity skills development across eight key areas: next-generation cyber defence, cyber resilience, cyber-physical technologies and internet of things (IoT), AI x cyber, cryptography and quantum security, behavioural cyber, future of cyber threats and attacks, and cyber order. The Saudi Information Technology Company serves as the NCA’s technical arm, while the Cybersecurity Operations Centre handles cyber information and threat intelligence sharing, vulnerability monitoring, cyber threat hunting, as well as incident handling and clarification.
Strategic Goals
These oversight bodies’ agenda is now largely informed by Saudi Arabia’s ICT Strategy 2023, a guideline that posits the sector as a key enabler of Vision 2030. Among the milestone performance indicators in the strategy are targets to create over 25,000 quality ICT jobs, increase female participation in the ICT workforce by 50%, have half the jobs in the sector undertaken by Saudis, raise ICT’s GDP contribution by SR50bn ($13bn) and increase its size by 50%.
It is worth noting that while the ICT Strategy has been given a 2023 makeover, it is largely the same as what was laid out in 2018, indicating that while the size and value of the ICT sector have swelled, the other targets have proved more difficult to achieve. That is not to say there has been no progress; the Women Empowerment Initiative, as detailed in the 2023 budget documents, indicates that the female labour force participation rate in the ICT sector stood at 30.5% that year, up from 7% in 2017, marking a significant improvement. Furthermore, the government’s Future Skills initiative has trained some 30,232 women in various technological fields, while a complementary jobs programme has seen half that number take up related roles.
In terms of investment incentives, multinational corporations that choose to base their regional headquarters in Saudi Arabia are eligible for a 0% income tax rate on corporate and withholding taxes for 30 years, as soon as they receive their Regional Headquarters licence, adding impetus to the goal of convincing big corporations to base themselves in the Kingdom. Meanwhile, a Cloud Computing Special Economic Zone (SEZ) serves as a one-stop shop for coordinating with government entities, with a focus on smart mobility, digital health care and industry 4.0 solutions.
Legislation & Regulations
The 2022-updated Telecommunications and Information Technology Law underpins sector development by regulating emerging technologies and encouraging innovation. The law streamlined existing regulations and provides a foundation for the rollout of related measures, for instance, by allowing the CST to filter internet access.
In January 2024 the CST unveiled the Data Centre Services Regulations, which encompasses the retail and wholesale data centre markets. The document provides regulatory clarity for cloud service providers and digital content delivery networks and platforms while allowing video streaming services and video game platforms to thrive, all with an eye to establishing Saudi Arabia as the region’s data centre leader. Providers are required to register their data centres with the CST, renew their registration every three years, maintain the physical security of their premises and draft customer contracts in accordance with CST standards.
In another regulatory development, in March 2024 the NCA issued a national policy for managed security operations centres (MSOCs), establishing a framework for private sector and government institutions that operate or host critical national infrastructure. MSOC providers will have to apply for an operating licence via Haseen, the national cybersecurity services portal.
Notably, Saudi Arabia ranked first globally for cybersecurity in the 2024 World Competitiveness Yearbook, published by Switzerland’s Institute for Management Development. The Kingdom’s successful hosting of the Global Cybersecurity Forum (GCF) and its related institute in October that year contributed to this achievement. The GCF underscores Saudi Arabia’s leadership role in regional cybersecurity, as a key member of the GCC Cybersecurity Ministerial Committee and the Council of Arab Cybersecurity Ministers.
The Kingdom is intent on maintaining leadership in the cybersecurity space and understands that data protection and control is the key to achieving this goal. The Telecommunications and Information Technology Law therefore incorporates a personal data protection law which serves to regulate the transfer of data about Saudi citizens and entities outside of the country. Furthermore, the SDAIA has opened a public consultation on four fundamental principles governing data sovereignty: data as a national asset, data protection, data availability and encouragement of local and foreign investment. Consultations on data sharing outside the country and between government organisations are also ongoing as of end-2024.
Saudi policymakers are looking to China’s Cybersecurity Law and Data Security Law as a potential model. This will have costs and benefits for stakeholders; demanding that data relating to Saudi citizens is hosted in-country should better shield citizens and corporations from cyberattacks. However, such stringency will likely impose significant costs on data controllers, potentially mandating investment in new cybersecurity personnel and assets within the Kingdom.
Performance Indicators
In 2023 the ICT sector accounted for more than 4% of GDP and was worth SR166bn ($44bn), having expanded at a compound annual growth rate (CAGR) of 8% since 2018, according to the CST. The International Data Corporation (IDC) estimated that expenditure in the sector would reach $35bn in 2023, with the outlay on software (including cloud) and IT services forecast to rise at a CAGR of 11.4% and 8.7%, respectively, over the 2022–26 period.
The IDC predicts spending will reach $38bn in 2024. Specifically, AI spending is predicted to surpass $720m in 2024 to reach $1.9bn by 2027 at a CAGR of 40%, with half of this spending devoted to interpretative AI. Furthermore, according to the IDC, Saudi Arabia’s IoT market is estimated to reach the $2.9bn mark by 2025, with an annual growth rate of approximately 12.8%.
At the April ICT Indicators Forum 2024 in Riyadh, hosted by the CST and the IDC, the CST said the mobile services penetration rate reached 198%, while IoT machine-to-machine subscriptions touched 12.6m. The average mobile internet download speed was 215Mbps, more than double the global average, with internet penetration at 99% Kingdom-wide, up from 95.7% the previous year and equivalent to 36.3m users. The number of smartphone users in Saudi Arabia grew from 14.3m in 2013 to 33.6m in 2024, which is equivalent to a penetration of 92%, and is forecast to hit 95% by 2028. In 2023 the average revenue per user from carrier billing was $12.50, which compares favourably with the average revenue of $6.80 that China Mobile earns from domestic users.
More specifically, mobile services earnings are predicted by UK-based data analytics company GlobalData to grow from nearly $13bn in 2023 to $17bn by 2028, marking a 6.3% CAGR predicated on the steadily rising uptake of mobile services. Revenue from mobile voice services is expected to decrease at a 3.2% CAGR from 2023 to 2028, correlating with a reduction in mobile voice. Conversely, revenue from mobile data services is projected to record a 9.6% CAGR, driven by an increased uptake of 5G services, according to GlobalData.
In 2023 Saudi Arabia ranked second in the G20 under the International Telecoms Union’s ICT Development Index, up 10 places on the previous year. Key success factors were the largest and fastest-growing ICT market in the MENA region, a 99% internet penetration rate and capital investment in digital infrastructure totalling SR93bn ($25bn) between 2018 and 2024. Saudi Arabia has emerged as a prominent cloud centre, ranked fourth among 15 regional cloud markets in the MENA Cloud Competitiveness Index 2023. It is investing a forecasted $2.4bn in cloud services in 2024, rising to $4.7bn by 2027, according to the IDC. Software-as-aservice is forecast to represent over 50% of sectoral spending in 2024, while spending on cybersecurity will surpass $1bn in 2024 to reach $1.6bn in 2027.
Elsewhere, Saudi Arabia is considered a key digital gaming market in MENA. Almost 20m people play mobile games, with 10m on PCs and 7.4m gaming on consoles, ranking 19th in the world in terms of market size. In the mobile games segment, the average revenue per paying user is a $270 (compared with $32 in China). The mobile gaming population is notable for its diversity, with 42% of players being women. Vision 2030 is set to catalyse the sector, with the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, investing billions to establish Riyadh as an international games development and publication centre. The market size of smart cities, meanwhile, is poised to reach $15bn by 2027, according to US-based Allied Market Research, as Saudi Arabia’s urban population approaches 90% of the total ahead of 2030, including smart cities like NEOM.
Private & Public Sector
Local private sector ICT revenue achieved a CAGR of 6.5% from 2018 to 2023, reaching SR100bn ($26.7bn), according to Saudi investment bank Aljazira Capital. Overall, listed ICT companies’ assets reached SR250bn ($67bn) in 2023, or about 37% of the total across the GCC. The combined revenue of those companies was approximately SR119bn ($32bn), or 41% of the GCC total, with market value rising to SR379bn ($101bn), up from SR294bn ($78bn) in 2022, and taking 57% of the GCC share.
In 2023 government spending on ICT surged 20% year-on-year (y-o-y) to reach SR42bn ($11bn), according to the Digital Government Authority (DGA), which oversees the Kingdom’s digital transformation aligned with a National Digital Government Strategy. DGA data shows that in the five years to 2023 the health and social development sector and the military accounted for public sector ICT expenditure of around SR20bn ($5.3bn) apiece, or a combined 34% of the total.
Innovation
Meanwhile, the DGA’s Innovation and Emerging Technology Centre drives its transformation agenda. In 2022 Saudi Arabia claimed 31st place in the UN’s ranking of 193 member states’ digital government programmes, a notable jump from 52nd in 2018. More recently, the DGA has pioneered a number of innovative programmes, such as drone delivery of blood- and biological-sample transfer between hospitals.
Drones have also been deployed to capture images for street mapping and maintenance. Overall, the centre’s work focuses on five key technologies: IoT, robotics, AI, blockchain and immersive technologies such as augmented reality and virtual reality. In a related agreement, in March 2024 MCIT and its Qatari counterpart agreed to extend their digital government capabilities, focused on research and capacity building.
ICT-related tenders can be located across a number of government and non-government procurement portals, including STC Group, the largest telecoms provider; National Unified Procurement Company, the centralised health care procurement organisation; the Ministry of Energy; Saudi Power Procurement Company; Saudi Electric Company; Saudi Aramco and the General Authority for Military Industries.
Aside from the GCF, Riyadh hosts another annual technology event that lures capital to the country. In March 2024 the LEAP conference welcomed over 215,000 attendees, 1800 exhibitors, 1000 speakers and 600 start-ups. Financial commitments announced at the conference totalled more than $13bn, up from $9bn in 2023, including significant investment from US giants Amazon Web Services, IBM and ServiceNow.
Much of this investment hinges on overseas companies establishing a foothold in Saudi Arabia to serve the wider region effectively. For example, Finland’s Nokia announced it would develop a regional 5G logistics and repair centre at King Abdullah Economic City in Thuwal. Meanwhile, Advanced Communications & Electronic Systems, a Saudi-based provider of managed ICT solutions and equipment innovation, revealed plans to invest $618m in localising special global systems for smart communication and smart towers. Meanwhile, Aramco Digital and US multinational Intel Corp teamed up to establish Saudi Arabia’s first open radio access network (ORAN) development centre.
Telecoms Performance
Telecoms services are the backbone of national ICT infrastructure and development. With four listed companies competing for market share, Saudi Arabia has successfully nurtured a competitive sector that offers consumers and ancillary businesses a significant degree of choice. In 2023 those listed companies – STC, Mobily, Zain Saudi Arabia and Etihad Atheeb Telecommunications Company (GO) – booked combined profit of SR17bn ($4.5bn), up 16.8% compared to SR14bn ($4bn) in 2022. According to data presented at the 2024 ICT Indicators Forum, telecoms revenue is expected to grow by 5.9% and 4.6% in 2024 and 2025 to SR106bn ($28bn) and SR111bn ($30bn), respectively. Net profits are forecast to decline by about 5.3% to SR16bn ($4.3bn) in 2024 on higher infrastructure costs before rebounding to grow by more than 10%, to reach SR18bn ($4.8bn) in 2025.
These robust results can be attributed to telecoms companies broadening their footprints to include the provision of cybersecurity services, live broadcast over the internet and financial technology (fintech). Saudi Arabia’s telephony market is distinguished for the high concentration of mobile virtual network operators – companies that utilise network operator infrastructure to offer their own mobile services. Lebara KSA, for example, is leveraging a partnership with Mobily to invest heavily in data analytics services to better service business-to-business customers.
In terms of infrastructure, Saudi Arabia is very much in a period of 5G expansion, having largely secured its lower-level connectivity networks. In Riyadh, the 5G coverage exceeded 94% in 2024, partly as a result of a $25bn rollout of digital infrastructure from 2018 to 2024, resulting in a significant improvement in the quality of services, with the Kingdom now one of the top-10 countries for mobile internet speed. Additionally, mobile subscription rates have increased to 172% of the population and exceeded the global average by 36%. Indeed, in the GCC, the number of 5G subscribers is anticipated to increase by around 78m between 2022 and 2027, with Saudi Arabia contributing more than 60% of these new subscribers.
ORAN developments are also to the fore. In May 2024 STC announced an ORAN deal with US firm Mavenir to launch what it claims to be the first commercial ORAN network in the Kingdom. This deal follows a successful initial deployment by Mavenir for a multi-layer 4G and 5G NSA Access Network on the ORAN platform to STC. Meanwhile, Swedish firm Ericsson and Saudi carrier Mobily signed a memorandum of understanding, which is aimed at adopting ORAN principles with a focus on boosting network flexibility.
Listed Telecoms Breakdown
STC remains the major national telecoms player, offering landline and fixed infrastructure, mobile and data services, and broadband and cloud computing services. The company leads the market share with 55%, followed by Mobily and Zain, holding 24% and 16%, respectively. The remaining market share is distributed among other players.
STC posted 2023 net profit of SR13bn ($3.5bn), up 9.2% y-o-y, as revenue rose 7.3% to SR72bn ($19bn). Topline growth was aided by investment in new domains, albeit incurring higher operating costs, especially given STC’s proactive investment in start-ups. In 2023 the company reported over 26m mobile subscribers, 5.6m fixed-line subscribers, 3m signed up to its play service and 3.6m STC TV subscribers. It achieved 47.5% 5G coverage in populated areas, boasting a total of 21,000 towers under management in five countries.
STC operates 25 data centres and has a submarine cable network that includes 16 cables connecting three continents. In 2023, Center3, STC’s regional digital centre initiative, signed a strategic commercial deal with Chinese firm Huawei to provide hosting and data services, announced the landing of the longest subsea cable project in the world, 2Africa, at Jeddah and Yanbu, and signed an agreement with Alcatel Submarine Networks to connect Saudi Arabia with Europe by building the EMC West subsea and terrestrial data cables. Center3 further completed a 9.6-MW expansion of its hyperscaler data centre, Khurais, in Riyadh. STC will also partner with Korean firms KT and Hyundai E&C to build new data centres and smart cities in Saudi Arabia.
In 2023 STC was particularly active in overseas markets, keeping with a strategy to buy assets in sustainable growth markets. For example, STC bought a 9.9% interest in Spain’s Telefónica for SR8.5bn ($23bn) and picked up Netherlands-based United Group’s tower assets in Bulgaria, Croatia and Slovenia via its TAWAL infrastructure arm. At home, the PIF picked up a 51% stake in tower company TAWAL, seeking to merge the PIF-majority-owned Golden Lattice Investment Company, another infrastructure provider with over 8000 towers under management, into the new entity. Furthermore, Center3 entered into a definitive agreement to acquire CMC Networks, a global service provider offering market-leading networking solutions across the African continent and the Middle East.
Mobily ranked second-largest on the Saudi Exchange in terms of profit, registering SR2.2bn ($595.5m) in 2023, compared to SR1.7bn ($442.6m) in 2022, an increase of 34.7%. Net profit of Zain Saudi Arabia rose to SR1.3bn ($346.6m) in 2023, compared to SR550m ($146.6m) in the previous year, an increase of 130.4%. In May 2024 Zain said that it would invest SR1.6bn ($426.6m) to almost double its 5G network to 122 cities.
Tech Development
Aramco Ventures stands out as one of the most influential players in the start-up ecosystem, having launched a $1.5bn sustainability fund in 2022, which significantly boosted its total investment capital to around $7bn. A large portion of these funds is dedicated to advancing clean-carbon solution technologies. For example, in July 2024, Wa’ed Ventures, a $500m subsidiary of Aramco, led a $6.5m pre-Series A funding round for aiXplain, an AI platform based in California. This investment aims to fast-track the company’s mission to democratise AI by enabling the development of sophisticated AI solutions via natural language prompts, thereby making it accessible to users who do not have coding expertise.
Investment in climate technology has remained largely underutilised, with funding in the sector in the Middle East dropping by over 80% in 2023, falling to $152m from approximately $1bn in 2022. Investors’ demands for rapid returns and a regional skills shortage are critical barriers to climate tech sector growth. That said, the Kingdom has plans to invest $187bn targeting net-zero emissions and boosting job creation, harnessing skills across 65 digital innovation labs to deliver sustainable ICT innovation across industries.
Fintech is another area of rapid ICT sector growth, epitomised by the likes of local payments provider Tamara and financial fraud prevention platform Payllion. Overall, mobile payments now account for 45% of point-of-sale transactions by volume and 35% by value, buoyed by the entrance of about 150 fintech firms into the market, many of which offer their own mobile wallet services. The government hopes to have 70% of payments processed digitally by 2025.
This is all positive news for digital consumption spend, which displays significant growth potential. According to the Saudi Central Bank, the share of electronic payments in the retail business was almost 57% of transactions in 2021, exceeding the 55% target set out by the Financial Sector Development Programme – a main objective under the Kingdom’s flagstone Vision 2030.
Education technology (edtech) is another growth market, catalysed by Vision 2030’s commitment to digital transformation. The ubiquitous penetration of mobile handsets in the Kingdom, a digitally savvy and young internet population, and government backing for promising initiatives have ensured that three of the top-10 most-funded edtech start-ups in the MENA region emerged from the Kingdom.
Saudi-based LEORON is one example of edtech growth, providing learning and development solutions in areas including corporate finance, human resources, procurement and supply chain management, technology, quality, operations and engineering. Meanwhile, Noon, a social learning platform company, raised $41m in Series B funding in November 2024 and claims to have enrolled 12m registered users.
Outlook
Saudi Arabia’s digital transformation is progressing rapidly, supported by robust infrastructure development aimed at benefiting both businesses and consumers. Key initiatives include the launch of the Saudi Cloud Strategy in 2019, the Cloud Computing SEZ in April 2023, and policies like the Cloud First Policy and Cloud Cybersecurity Controls, placing cloud technology at the core of public sector operations and driving digital service adoption across sectors.
Cloud-based platforms are now supporting essential services in finance, government and education, creating substantial opportunities for investment. These are reinforced by cybersecurity, network providers and data centres to support sustained digital growth, with ICT sector forecasts indicating strong growth potential throughout the decade to 2034.
Although the ICT Strategy’s target of 50% Saudi employment in the sector remains a challenge, initiatives by MCIT, the Saudi Digital Academy and the National eLearning Centre are aiming to upskill some 100,000 graduates through the Fuel programme. This measure will go a long way to ensuring a skilled workforce to support the digital ambitions of Vision 2030.
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