The continuous positive growth trend for the telecom market in the Kingdom of Saudi Arabia, predicted in the Delta Partners whitepaper “The rise of Saudi Arabian telecoms”, back in September 2010 has been confirmed last week when its three telecommunication operators (STC, Mobily and Zain) communicated their results for the quarter ending in December 2011.
Last quarter results in Saudi Arabia were expected to be good, as the period includes both the Hajj season and Eid holidays; however, not only the last quarter, but also the consolidated results for the year 2011, show double-digit growth both in terms of revenue and EBITDA proving the strength of the Saudi Arabian telecommunications market.
When looking at the individual performance, we can observe that Mobily is the winner of the three players with a significant growth year-over-year (25% in revenues and an impressive 21% in EBITDA). Mobily keeps leveraging on its leading positioning in the data market having quadrupled the number of broadband customers and doubled the daily data traffic; yet, implications of this significant data traffic increase on both, CAPEX and ROIC, will need to be analyzed and understood better.
STC has posted results that show growth in revenues and EBITDA. However, the performance of STC’s mobile business in the Saudi Arabian market cannot be easily read since the accounts per business line are not reported separately. As it seems, STC has been able to mitigate the continuous decrease in market and value share in its home market. As the incumbent, STC is the most likely one to lose, but we are seeing that STC keeps strengthening its key strategic pillars by investing heavily in new technologies (i.e. 4G), solidifying its sales channels by buying its distribution arm (Cell-Co) and keep refreshing its positioning. Let us see if this strategy keeps yielding results in 2012.
Zain as third entrant faces the most difficult position amongst all; despite the competitive market conditions, Zain has been able to post double-digit growth in terms of revenue and EBITDA; 13% and 25% respectively. Zain is starting an important journey in 2012 in which the much awaited capital re-structuring should help to change the perception of the company within the investment community and to potentially become one of the stars in the Saudi stock exchange in 2012.
Looking at the areas of growth described in our whitepaper more than a year ago, we see that operators are delivering results thanks to their:
- Willingness to invest heavily in the market (the launch of 4G is the latest example; KSA is the first country in the MENA region where these services have been already launched not only by one company, but all of them)
- Good levels of product and service innovation
- Improvement of customer service levels
- Focus on the corporate segment
Key question is for how long these three companies will be able to keep posting double-digit growth figures, especially taking into consideration that there have been rumors in the market that new licenses will be granted in the months to come (most probably via MVNOs).
In my opinion, keep delivering on the promise of growth during 2012 will only be possible if:
- All operators behave rationally
- The players keep investing smartly across the country (not only in the main cities)
- The key stakeholders in the Saudi telecommunications sector study carefully the idea to introduce new licenses in the market
What is your opinion: will the 3 players be able to keep delivering double-digit growth figures in 2012?
