THE NEXT WAVE OF GROWTH IN SAUDI ARABIA'S TELECOM MARKET WILL BE DRIVEN BY A LARGE YOUTH AND EXPATRIATE CONSUMER BASE AND A SURGE IN BROADBAN
October 5, 2010
Delta Partners, the leading telecom advisory and investment firm in emerging markets, released its latest White Paper today, "The rise of Saudi Arabian telecoms: Unrivalled promise and opportunity in a vibrant market". The publication discusses Saudi Arabia's telecom market and the next wave of growth drivers based on six 'Promise Pillars'.
Over the last 5 years, the Saudi Arabian telecom market has seen phenomenal growth to become a USD 11.6 bln industry in 2010 that contributes to around 3% of GDP.
"The growth in Saudi Arabia's telecom market has been solid, with an extra USD 1 bln revenue expected to be added this year – more than all the remaining GCC market growth in 2010 together." said Josep Que, Partner. "Growth historically has been driven by voice and basic data services. Going forward, we believe six promise pillars will drive the majority of the growth in Saudi Arabia’s telecom market."
The six promise pillars to drive future growth in Saudi Arabia's telecom market
The first pillar is the large youth and expatriate population that are an influential part of the consumer dynamics in Saudi Arabia. They are currently underserved but offer vast potential if directly targeted. This does not mean creating products or services in isolation, but rather creating a holistic value proposition that fulfils in a unique way their needs.
The surge in broadband represents the second pillar. Broadband users have grown ten-fold since 2005 and are expected to nearly double from 3.2m users in 2010 to 5.9m users in 2014. Industry stakeholders such as telecom operators, equipment vendors, internet players and the government are all expected to play a significant role in pushing broadband penetration and thereby benefiting from the uptake of broadband services.
The third pillar is the smart device. Apple's Iphone and RIM's Blackberry have caused a stir in Saudi Arabia. It has caused many consumers to pay more attention to the device rather than to the operator (device brand, interface and applications) giving competitive advantages to operators with the best line-up. This will require operators to carefully design their device strategy in order to capture the growth opportunity. Additionally, device players will have a strategic decision to make: remain hardware-focused or expand into the services market by linking devices to services.
Innovative telecom applications and services form the fourth pillar. Value added services are already popular in Saudi Arabia, contributing today 25% of total data revenues. It is expected to reach nearly 40% of total data revenues in 2014. Telecom applications and services with a focus on innovation and adaptation to local needs will drive this opportunity. Both the government and regulator can also play an important role by establishing an enabling environment, and promoting Saudi Arabia as the main hub for content and application development within the Middle East.
The fifth pillar is mobile financial services (MFS). MFS can place Saudi Arabia at the forefront of mobile commerce in the region through the creation of a standardized and large enough ecosystem that is attractive for all players. MFS, if implemented properly, could bring important benefits to multiple stakeholders such as the government, operators and banks.
Corporate need for sophisticated ICT services is the sixth pillar. As Saudi businesses' communication needs expand, the business segment will become increasingly sophisticated in their need for ICT services. Here, in particular, telecom operators and vendors will have to deliver solutions for verticals such as networking solutions, cloud services, data centers and Machine-to-Machine (M2M), which are seen to have strong growth potential in the market.
All industry stakeholders have an active role to play in making Saudi Arabia's promise of growth a reality. The real winners in the Saudi Arabian telecom market will be those who can smartly capitalize on these pillars and continuously adapt their chosen strategies to relevant changes in the economic environment, industry context and competitive dynamics.
About Delta Partners
Delta Partners is the leading TMT advisory and investment firm in emerging markets. With more than 160 professionals the firm operates across 50 markets in the Middle East, Africa, Eastern Europe and Emerging Asia. Delta Partners provides three synergistic services: management advisory, corporate finance and investments from its offices in the UAE, Bahrain, South Africa, Spain and Singapore. Delta Partners delivers tangible results to its clients and investors through its exclusive sector focus on telecom, media and technology, and a unique approach to services, combining strategic advice and a hands-on pragmatic approach.
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