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Aug 9 2004

 A consortium led by the UAE telecom giant Etisalat has won Saudi Arabia’s second mobile phone license. The weekly Cabinet meeting, chaired by Crown Prince Abdullah here yesterday, declared the winner for the deal, which brings SR12.21 billion to the public coffers.

The Council of Ministers “licensed Etisalat consortium to establish and operate the second generation mobile phone network using GSM technology... and provide its services at local, national and international levels through its network,” the Saudi Press Agency said.

The Etisalat consortium offered the highest bid of SR12.21 billion to win the highly prized license beating major international contenders including Vodafone of Britain, Bouygues of France, Telefonica Moviles of Spain and MTN of South Africa. MTN offered the second highest bid of SR11.05 billion, followed by SR9.8 billion from Orascom of Egypt.

“The amount shall be paid in advance to the public coffers for the Communications and Information Technology Commission (CITC) to complete licensing procedures,” the agency said quoting a Cabinet statement.

The Cabinet also licensed Etisalat consortium for SR753.75 million to establish and operate the third generation mobile phone network with 3G technology and provide its services at national and international levels.

The meeting also agreed to grant the third generation mobile license to Saudi Telecom if it applies for the license within a year offering the same technical specifications mentioned by Etisalat and paying the required sum as per the Etisalat offer.

SPA said the Cabinet also approved the establishment of a Saudi joint stock company to provide telecommunication services. It also agreed to set up a firm called Etisalat Consortium Company, the agency added.

Twenty percent of the company’s shares will be offered for public subscription within 30 days after the issuance of a royal decree licensing the company. At least 20 percent of the company’s shares owned by founders will be put on the stock market in the third year after its establishment.

Mohammad Al-Suwayyel, governor of CITC, announced last month that his organization was evaluating offers of six consortia — Etisalat Consortium (Etisalat), Kingdom Telefonica Consortium (Telefonica), MTC and Partners Consortium (MTC), MTN Saudi Arabia Consortium (MTN), Orascom Telecom Saudi Arabia Consortium (Orascom) and Samawat Consortium (Telecom Italia Mobile) in the final phase.

Potential bidders were required to form a consortium of at least five Saudi companies and an international mobile operator, with foreign investors allowed to buy up to 49 percent of the joint company to be set up to operate the new GSM.

Although the Kingdom is opening up the mobile sector to competition, Saudi Telecom will retain a monopoly over land lines and Internet services until 2008.

Revenues in Saudi Arabia’s GSM market are expected to soar to SR29.63 billion by 2007 on the back of the partial privatization of state-owned Saudi Telecom and increased competition.

Saudi Telecom recently announced net profits of SR5.14 billion for the first half of this year. The company posted net profits of SR5.14 billion on June 30, a 24 percent increase on profits of SR4.14 billion ($1.106 billion) in the corresponding period last year.

Khaled Al-Melhem, chairman of STC, said the company had more than eight million mobile users “who are getting the best services,” and reported operating revenues of SR14.88 billion on June 30, a 14 percent increase on the first half of last year, “despite major cuts in charges.”

With a new GSM provider in the Kingdom, the market is expected to develop quickly with new value-added services, new technologies, and new types of businesses. It is commonly accepted among IT industry sources here that mobile networks are more than just base stations, telecommunications cables and handset sales: They facilitate the introduction of new services with the potential to reach literally millions of customers.