The rise of Saudi Arabian telecoms: Unrivalled promise and opportunity in a vibrant market -...

8/8/2019 The rise of Saudi Arabian telecoms: Unrivalled promise and opportunity in a vibrant market - SEPTEMBER 2010

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September 2010

The Delta Perspective

The rise of Saudi Arabian telecoms:

Unrivad promi and opporuniin a vibran markAuhor Jop Qu - Partner

Vicor Hurado - PrincipalGunih Chawa - ManagerRui Frrira - AssociateDa Parnr Inignc Uni

Key HIGHlIGHts

Saudi Arabia is the largest telecom market in the GCC sized at USD 11.6 bln in

2010, with the growth in telecom revenues expected to be about USD 1 bln from

2009 to 2010. Saudi Arabia alone will grow, in absolute terms, more than the rest

of the GCC telecom markets put together

Riding the wave of the phenomenal telecom growth that began in 2005 with the

liberalisation of the telecom sector, the Saudi Arabian telecom market has now

reached an exciting phase in its evolution well-established with voice and basic

data services, Saudi Arabia is strongly positioned to benefit from the next wave of

growth opportunities

Six key promise pillars are shaping the next wave of growth opportunities:

In the drivers seat: A youth-centric and expatriate consumer generation

bolstering demand

The internet and broadband surge: Unleashing the growth

The smart device: An integral lifestyle choice

Beyond the basic: Innovation in telecom applications and services

Mobile financial services: Banking at your fingertips

The connected corporation: Need for sophisticated ICT services

Each of the promise pillars has strong implications for the industry stakeholders

and they need to act now to seize the relevant opportunities that lie within this

market


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Introduction

Fulfilling the promise of SaudiArabia: Opporunii andimpicaion

The story of Saudi Arabias phenomenal telecom growth began in 2005 with the liberalisation

of the sector. The opening of the telecom market helped the economy at large, by not

only acting as a key enabler of the economic growth but also attracting relevant foreign

investment. The overall impact has been outstanding both from a customer and business

perspective an ever increasing customer base has enjoyed a wide array of innovative

products and services, while at the same time telecom players have posted solid financial

results benefiting their large Saudi Arabian shareholder base as well.

This white paper provides the Delta Partners perspective about the underlying forces and

opportunities that are shaping the next wave of growth in the Saudi Arabian telecom

market, and how relevant stakeholders (such as companies, government, regulatory bodies,

etc.) can act as enablers and benefit from the opportunities.

Saudi Arabia, with six key promise pillars shaping the next wave of growth opportunities

(refer Exhibit 1), is uniquely positioned in the GCC.

Saudi Arabia is the largest telecom market in the GCC

sized at USD 11.6 bln in 2010, with the growth in telecom

revenues expected to be about USD 1 bln from 2009 to

2010. Saudi Arabia alone will grow, in absolute terms, more

than the rest of the GCC telecom markets put together.

EXHIBIT 1: PROMISE PILLARS

Source: Delta Partners analysis


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1. In h drivr a: A youth-centric and expatriate

consumer generation bolstering demandSaudi Arabias population, with around 27 mln people, is the largest in the GCC. The youth

and expatriate segments are an influential part of the consumer dynamics, representing a

large portion of this base. The youth segment (15-24 years) stands at around 5 mln of the

total population, and the expatriate segment is estimated at around 8 mln people (refer

Exhibit 2); both segments are by far the largest in size in the GCC.

These segments are crucial drivers for telecom products and services. The youth segment is

tech-savvy, adopts new products and services, possesses significant purchasing power and

could represent high customer lifetime value for telecom players. The expatriate segment

will continue to be an important contributor to the economic growth in Saudi Arabia inthe coming years and, as such, possesses relevant disposable income to spend. Telecom

products and services that enable contact with families and friends abroad form a large

part of the expatriate segments demand and represent a significant share of revenue for

telecom players.

Saudi Arabian telecom players are well-positioned to benefit from this demographic trend,with the youth and expatriate consumer segments fuelling demand for innovative services.

This demand is backed up by growing GDP per capita, which is expected to continue to

grow at a healthy pace (refer Exhibit 3). Saudi Arabia as a country still spends less on telecom

services than several other countries in the region, however, this is expected to change as

the telecom market matures showcasing the Saudi Arabian telecom market potential as

compared to other markets. An increase of 0.6pp in telecom revenues contribution to GDP

(parity with the average benchmark) would lead to an increase of 2.8 bln dollars in annual

telecom revenues in Saudi Arabia (refer Exhibit 3).

EXHIBIT 2: POPULATION BENCHMARK (2010 Est., Mln)

Source: Saudi Arabia census April 2010, IMF, US Census, CIA Fact book


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EXHIBIT 3

Source: IMF, World Economic Outlook Database, April 2010 Source: ITU, IMF, Delta Partners analysis

Given the vast size and potential of the Saudi Arabian telecom market, and in particular

the relevance of the youth and expatriate segments, industry players need to specifically

target these segments. 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. This value

proposition should be based on analysis of customer usage and behavioural insights, and

should cover varied elements such as what to offer (products and services), where to offer

(sales and distribution), at what price (product pricing), which enablers to leverage (devicesand content/applications) and how to communicate (branding and communication).

Several mobi opraor around the world have introduced specific product offerings or

MVNOs targeting the youth and expatriate segments. These specific offerings are widely

present in the GCC, developed countries and emerging markets. In the GCC, Orange Jordan

has a youth package specifically targeting the youth segment with tailored offers such

as free talk at university, mobile internet bundles and free SMS lines. Oman currently

hosts 5 MVNOs offering services for varied segments for example, Halafoni, an MVNO

launched in 2009, targets the youth segment. In developed countries such as the UK, Virgin

Mobile offers specific mobile offers for students offering discounts across voice and mobile

broadband tariffs. Telecoms group Econet Wireless has taken over the UK MVNO operationof IDT Mobile to launch its own services to African communities. In Germany, E-plus has

launched a Turkish focused MVNO targeting the Turkish expatriates by offering them lower

international call rates and a call centre in the Turkish language. In emerging markets such

as Pakistan, Ufone, has introduced the Uth Package specifically for the Pakistani Youth,

offering low SMS rates, preferential F&F and off-peak rates, and targeted content services.

Conn par have a prominent role to play in developing the youth and expatriate

offers. Youth-specific content around social networking, sports, education, celebrity news,

etc. need to be relevant to Saudi Arabia and the Middle East region. Expatriate content

needs to focus on the main international communities in the country, in particular the Asian

and Arab countries.

Implications for stakeholders


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EXHIBIT 4: SAUDI ARABIA INTERNET AND BROADBAND USERS (No. of users, Mln)

Source: BMI Q2 2010, Delta Partners analysis

Dvic par such as Nokia, Samsung, Apple, HTC, etc. need to launch handsets in the

market that are aligned with the needs of these segments. Expatriates in Saudi Arabia are at

both ends of the spectrum, from the smart phone savvy users to low cost handset users.Similarly, the youth in Saudi Arabia lean towards the more brand and fashion conscious

offers, and therefore, the device players need their products to cater to this need. Device

players need to proactively pursue opportunities for partnering with mobile operators and

thereby push uptake of newer and more relevant devices into the market.

2. th inrn and broadband urg: Unleashing

the growth

In Saudi Arabia, there has been a rapid boom in the number of internet and broadband

users over the last five years. From 2005 until 2009, the internet user base has almost tripled

from 3.9 mln to 10.2 mln users, with the broadband base increasing almost ten-fold from

0.25 mln to 2.3 mln users. The rising trend in the number of internet and broadband users

in Saudi Arabia is expected to continue over the next five years with around 4 mln new

internet users and 2.7 mln new broadband users expected by 2014 (refer Exhibit 4). The

growth in these users can be credited to wider internet access and growth in availability of

broadband services, better public awareness and cheaper personal computers.

In Saudi Arabia, growth of the broadband market will further boost telecom revenues,

making data revenues the main growth driver. This follows the trend of developed markets

such as Western Europe, where data has been driving the growth of telecom revenues

with voice revenues showing slow or declining growth. In Western Europe, data revenues

represented 12% of total telecom revenues in 2008, with this figure expected to rise to

21% by 2014. In comparison, in the Middle East region, data revenues only represented 6%

of total telecom revenues in 2008, with this figure expected to rise to 13% by 2014.


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Fixd opraor have the obvious advantage of capacity and speed on their networks when

compared to mobile operators. As content and applications that require heavy bandwidth

(e.g. IPTV) become more popular, fixed broadband networks will be better positioned. Tocapitalize on this, fixed operators need to drive the use of their networks as the standard for

bandwidth hungry content/applications. A key area of focus for fixed operators is coverage

fixed operators cannot deploy at the same speed as mobile operators, and therefore need

to make smart choices in terms of coverage deployment.

equipmn vndor/manufacurr also have an important role to play in the current

broadband environment. The role of PC manufacturers is critical in providing a boost

to broadband growth in Saudi Arabia. An increase in penetration of both desktops and

laptops within the Saudi population will contribute to an increase of broadband users. PC

manufacturers need to ensure a wide range of choices of PCs and easy access through a

vast distribution network. In addition, network equipment manufacturers need to partnerclosely with the telecom operators in Saudi Arabia on topics such as technology selection

(LTE, WIMAX, etc), coverage deployment (urban/rural) and network optimization. Network

equipment manufacturers need to proactively suggest to telecom operators the latest

technologies and innovations that can be brought to Saudi Arabia.

The govrnmn of Saudi Arabia launched the National Communications and Information

Technology Plan (NCITP) in order to boost economic development and growth. According to a

2009 World Bank report, for every ten percentage points increase in broadband penetration,

the GDP growth in developing countries can be expected to increase by 1.38 percentage

points. Under the umbrella of the NCITP, the government of Saudi Arabia has launched several

projects with the aim of facilitating access to the internet and improving its performance. Therole that the government of Saudi Arabia has played so far in increasing broadband penetration

has been very encouraging; however, there is scope to play an even more prominent role. In

other international markets such as the Republic of Korea and the UK, governments have

played a very active role in promoting broadband development. The result has been that

the broadband take-up has been much faster than at other leading broadband economies,

therefore helping to reduce the digital divide. Complementing the role of the government in

Saudi Arabia, it is essential that the rguaor also promotes technology neutrality and fair

competition within the telecom market. An important part of the regulatory framework is

granting operators unbundled access. Local loop unbundling will increase competition and

technical innovation through provision of additional operator services.

Inrn par such as Google can also contribute significantly to the broadband

development across the Middle East region. In developed countries such as the United

States, Google has launched the Google Fiber for Communities project with the aim to

build experimental ultra high-speed broadband networks. This project aims to improve

internet access and experience by delivering faster internet speeds, facilitating deployment

of next generation apps and offering an open access network. Similarly, Google has joined

a consortium that will offer internet access to several billion consumers across emerging

markets. The project, named O3b Networks, aims to create a gobal internet backbone and

is targeting those people for whom internet access is not commercially viable. Projects such

as these are mutually beneficial for internet players and consumers. Consumers benefit from

access to their content of choice. Internet players benefit from more eye balls on the web

leading to additional revenue generation.


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3. th mar dvic: An integral lifestyle choice

For a typical Saudi customer, a consumer product is an extension of the person, and thesmart device is no exception to this. Since the arrival of Apple iPhones in Saudi Arabia,

the market now has devices such as the Apple iPad and eReaders that are expanding the

range of smart devices. With enhanced user experience, superior technical capabilities

and support for numerous mobile applications and services, smart devices, and in particular

smart phones, form a very attractive proposition for customers in Saudi Arabia. Smart

phones are an important part of the social fabric in Saudi Arabia, and lend to status and

recognition. This characteristic makes smart phones a significant part of the opportunity pie

within the telecom arena.

The smart phones segment has seen solid growth in sales in 2009 globally, despite the

overall decline in global handset sales. The sale of smart phones to end users in SaudiArabia is expected to jump from 3 Mln units in 2009 to 7 Mln units in 2013. With increasing

demand for data services from consumers and increased smart device penetration in Saudi

Arabia, data revenues are expected to increase significantly in the coming years.

Since the launch of the first Blackberry in Saudi Arabia in 2006 by Mobily, several new models

from Research In Motion have made an appearance in the market. 2009 was the year of the

first appearance of Apples iPhone 3G, again launched by Mobily. Google Android smart

phones, currently led by Samsung and HTC products, have also entered the Saudi Arabian

market in recent months, stiffening competition to Apple and Research In Motion smart

phones. STC, in particular, has launched in the market with HTC magic.


Consumers are currently paying much more attention to the device as a whole rather than

to the network operator (look and feel, content and applications, interface and the brand

of the device being the most relevant elements). Due to the shift in the customers purchase

decision patterns where network loses relevance versus devices and supporting content,

device players, mobile operators and software solution providers will need to adapt their

strategies to be the preferred choice for customers.

Dvic par have a strategic decision to make in Saudi Arabia: remain hardware-

focused or expand into the services market by linking devices to services. Recent global

industry trends show a number of device vendors and operating system providers, such as

Apple, RIM, Nokia, Palm, Android and Microsoft, creating an ecosystem around devices

and services. For the Saudi Arabian telecom market, linking devices to services requires

device players to have a clear plan to address potential challenges such as how to manage

interaction with customers for services and applications (selection and de-selection of

products and services, billing, etc), how to support a strong developer community around

the services aspect, and what partners to collaborate with (e.g. mobile operators, software

solution providers, etc).


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On the hardware side, device players need to be equally proactive in developing and

launching new handset models in Saudi Arabia. Mass-market phones are no longer

adequate on their own. With certain segments such as the youth segment exhibiting highsocial networking usage behaviour, specific feature phones that are Facebook or Twitter

friendly could be very relevant in the current context. Additionally, given the relevant size of

the Saudi Arabian market, device players could use this market as the main hub for Middle

East device launches across multiple segments such as enterprise, SME and low-end (refer

Exhibit 6 for range of potential devices).

While in developed markets leading mobi opraor are considering devices as a core

element of the value proposition to drive business goals, in emerging markets operators

are starting to evolve from a do nothing perspective to considering devices as a relevant

strategic element. In Saudi Arabia, mobile operators need a clear device strategy that includes

the selection of preferred devices, supporting content and applications, and logistics.

With consumer demand for smart phones increasing in Saudi Arabia, mobile operators need

to take strategic decisions on their relevant choice of device vendors. Apple and Android-

based phones offer two diverse ecosystems in terms of devices and supporting content

and applications. Additional players such as Nokia and Microsoft are likely to offer their

own ecosystems. Mobile operators need to assess their role and involvement, and adapt

their strategies accordingly as the handset becomes a key facilitator of services. Additional

decision points for mobile operators include understanding their role in offering device

subsidies to increase adoption rates and ensuring an efficient supply chain in delivering

these handsets to the end-consumer.

EXHIBIT 6: DEVICE MAP



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4. Bond h baic: Innovation in telecom applications

and services

In recent years, competition within the telecom application market has heated up. From

its early origins, where it was mostly the domain of operators with the early portals, it has

undergone a notable change with the entry of handset vendors and internet players such

as Apple and Google. Consumers now have the benefit of user-friendly devices such the

iPhone, fast and reliable 3G connections, and highly relevant content, all of which have

contributed to a rise in user activity and acceptance of telecom application and services.

There are clear signs of a fundamental shift, with consumers using their mobile phone as a

social networking and multi-media device. The outlook for mobile social networking users

remains optimistic, with the number of mobile social networking users worldwide expected

to reach around 700 mln in 2013 from 140 mln in 2009. This should help drive data and

value-added services revenues upwards.

Saudi Arabia has been no exception to this trend. There has been significant growth in the

number of users of value-added services and the contribution of value-added services to

data revenues is estimated to significantly increase reaching 38% in 2014 from 25% in 2010

(refer Exhibit 7).

With the forecasted growth of broadband and the increasing proliferation of smart

devices, there is an opportunity for players across the telecom value chain to fill the gap

with products and services that meet the Saudi customers needs. In Saudi Arabia, the

relatively small-sized data market is still dominated broadly by messaging services such

as SMS. With a highly competitive voice market, telecom players are looking to expand

their offerings of value-added services in order to maintain a steady revenue growth and

healthy operating margins. There is room in the market for Middle-East focused Apple-style

stores that provide customized content and applications catering to the specific needs of

the Middle East customers. Location based services and social networking are expected

to post the strongest growth among VAS services in the region, the latter fuelled by the

new social networking habits of internet users being moved from fixed to mobile devices.

However, entertainment (e.g. music download and streaming) and games (both download

and online playing) are expected to remain as the largest slices of the Saudi VAS market in

the following years, with Islamic services also showing good potential in Saudi Arabia.

EXHIBIT 7



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Players such as Apple and Google have advanced from their more conventional roles intodeveloping a network that brings together hardware, software and content, in particular

using content and application stores as the vehicle to link devices to services. The ability

of content and application stores to generate sufficient revenues and to be technically

compatible across different platforms and devices still needs to be fully demonstrated.

However, with the need for industry players to increase differentiation, enhance brand

equity and promote customer loyalty, the option to consider content and application stores

as part of their strategy either on their own or through collaboration is unavoidable.

In an effort to compete with players such as Apple that have built critical mass in the

provision of telecom application and services, mobi opraor need to be bold and

decisive. Traditionally, mobile operators have offered content and applications to subscriberswithin their own network. Mobile operators increasingly need to consider opportunities

enabling them to go to market with applications and content services that are accessible

by other operators subscribers not just their own network subscribers. This increases the

size of the revenue pie for both operators and content players. An example of this strategy

comes from the UK, where Vodafone UK has test launched an iPhone web application,

which essentially contains a link to a website for iPhone users to download the Vodafone

app to their devices, and through which they can then access the Vodafone portal. Once

on the Vodafone portal, users can access content from other content providers aggregated

by Vodafone, for example, BBC News and CNN. This is an interesting move for Vodafone

that has given access to iPhone subscribers across all networks, removing the traditional

barrier imposed by an operators own network, increasing the intrinsic value of the portalfor application / content providers and hence, its own customers.

In the world of telecom applications and services, fixd opraor hold the edge over

mobile operators when it comes to capacity and speed. This becomes relevant for bandwidth

hungry applications such as IPTV and data heavy web content. Fixed operators will need to

consider investing in such applications and services, and invest in infrastructure required to

support these.

Recently, there have been some initiatives in the region to make Arabic content available,

for example, Rotana as the local TV distributor in Saudi Arabia providing more than 2,000

Arabic movies. However, of the top 20 websites viewed in Saudi Arabia, only 30% are inArabic with the remaining in English. Saudi Arabia still does not possess the full breadth

and depth of Arabic online content, and this provides an ideal opportunity for conn

par to make a play through provision of specific Arabic content, leveraging on online

partnerships where possible.

Both the govrnmn and rguaor can also play an important role in developing the

market for telecom applications and services in Saudi Arabia by establishing an enabling

environment. This needs to include an appropriate legal framework, e.g. content rights, and

foster innovation of applications including local content possibly through the creation of

incubators and incentive programs. Additionally, the government can promote Saudi Arabia

as the main hub for content and application development within the Middle East, serving asan additional mechanism to generate GDP.


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5. Mobi financia rvic: Banking at your fingertips

Mobile Financial Services (MFS) are getting more and more popular in emerging as wellas developed markets around the world. In developed markets, MFS are more prominent

as a means to enhance cashless transactions, for example, online shopping and balance

enquiries. In Japan, mobile operators such as NTT Docomo offer subscribers a portfolio

of mobile financial services such as online shopping, ticketing and finance. Similarly, in

the Netherlands, Rabobank delivers to its customers m-banking services such as balance

enquiry, loan enquiry, stock price enquiry, electronic transfers, bill payments, arranging

overdrafts and automated alerts. In emerging markets, MFS are used more to access

financial services previously unavailable, for example, money transfers. Kenyas Safaricom

MFS initiative, M-Pesa, has attracted 11.9 mln users since its launch in 2007. M-Pesa includes

functionalities such as person-to-person money transfers, airtime top-up, bill payments,

ATM withdrawals and balance enquiries.

Saudi Arabia has the opportunity to meet both needs:

For the mid-high end society, develop solutions similar to the developed markets for the

banked people

For the low end segments of the population, develop solutions for unbanked people

For both, create an ecosystem of services to foster cashless transactions and other

advanced services

The banked majority of Saudi Arabias population profile lends itself to MFS uptake given

its degree of sophistication and technological knowledge. Saudi Arabias unbanked market

exhibits characteristics that are similar to other markets with successful implementations:large expatriate population of Asians of whom the majority are un-banked (as well as a

significant percentage of locals). The high Expatriate population is reflected in the value

of annual remittance outflows from Saudi Arabia, worth over USD 16 bln in 2007, most of

which are being sent to Asia.


Saudi Arabia is well positioned to implement and capture greater potential from the MFS

opportunity compared to other markets. It has a solid foundation with established common

electronic platforms (e.g. SADAD payment system). In addition, the market exhibits traits that

would facilitate adoption, across both banked and unbanked populations. From the markets

that have successfully implemented MFS, a common characteristic emerges the presence

of a strong stakeholder. In the case of Saudi Arabia, there is a strong regulatory body that

can act as the driver for the creation of a large enough and standardized ecosystem that is

attractive enough for all players. There is a clear opportunity here for the rguaor to play

the leading role in shaping the MFS industry and supporting frameworks in Saudi Arabia,

and the widespread use of MFS, if implemented properly, can bring important benefits to

all stakeholders (refer Exhibit 8).


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From the perspective of the govrnmn, MFS can present very strong benefits through

the stimulation of economic and technological development. According to Global Insight,

e-payment networks create cost savings of 1% of GDP annually over paper-based systems.

Furthermore, increasing share of e-payments by a margin of 10% generates an increase of

0.5% in consumer spending.

In a competitive mobile market such as Saudi Arabia, with a large percentage of multiple

SIM users, mobi opraor are looking to complement and expand current offerings with

novel services to differentiate themselves, and mobile banking could play an important role

in this differentiation. In the short term, MFS are more likely to be a customer acquisition

and retention tool rather than a driver of new operator revenue streams.

For bank, MFS could represent several benefits in Saudi Arabia such as access to a larger

share of remittance transactions, increased customer base, enhanced market reach with

cost efficiency and increased float. The overall MFS proposition could become significantly

attractive for banks, especially those with limited reach and smaller subscriber bases.

6. th conncd corporaion: Need for sophisticated

ICT services

According to the IMF, the outlook for Saudi Arabias economy is positive as it confronted the

global financial crisis handily, with non-oil GDP expected to grow by 4.5% in 2010. A large

contributor to this growth has been the business segment, of which Saudi Arabias listed

companies have a 47% growth rate in their half yearly net income in the first half of 2010,

reflecting encouraging prospects for the business environment.

As the economy diversifies from a more traditional oil based economy to a services oriented

economy, the business segment will increasingly become more sophisticated in their need

for infrastructure, and in particular, ICT services. Businesses will need sophisticated ICT

solutions as a driver to improve efficiency and competitiveness.

EXHIBIT 8: MFS BENEFITS TO STAKEHOLDERS



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The number of firms in the business segment in Saudi Arabia has increased by 16% over the

last five years. With increased investment levels and strong economic growth, the number of

businesses is expected to increase by another 11% over the next five years (refer Exhibit 9).The growth is spread across the different sizes of businesses, with SME and Micro enterprises

posting outstanding growth, and larger corporations also experiencing good growth.

The business segments requirement for ICT services is strongly supported by government

initiatives that have boosted the development of the ICT sector. Under the National

Communications and Information Technology Plan (NCITP), the government has launched anumber of government driven e-projects that require major development of the ICT sector,

which is regarded as a national priority. Examples of other significant projects launched by

the government that will also contribute to the growth of the ICT sector include the King

Abdullah Science Park (KASP), Information & Communications Centre (ITCC) and King Saud

University Science Park (KSSP).


The high demand for ICT services across multiple areas comes at a time when there is a

need for simplicity and efficiency in managing sophisticated communication needs, and

businesses are looking for ways to outsource non-core areas. tcom opraor need to

provide solutions that meet their varied requirements such as:

Networking solutions:

Global area networking seamless, guaranteed international networking services

ranging from carrier grade voice quality networking to tier-one internet services

Wide Area Networking connectivity services across metropolitan, regional, or

national boundaries

Local Area Networking management and maintenance of corporate networks.

Associated services include design, implementation, management and security

Unified communications providing real-time communication services such as instant

messaging , presence information, IP telephony (including IP telephony) and integrating

them with non-real-time communication services such as e-mail, SMS, fax etc.

EXHIBIT 9: SAUDI ARABIA NUMBER OF BUSINESSES (000)



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Cloud services/computing: offering cloud services/computing with the best solutions for

hosting and storage that fit business needs

Data centre and managed services hosting scalable data centres with accelerated

application performance and managing IT resources such as network and applications

Machine to machine (M2M): enabling businesses for whom the machine to machine

environment is highly critical, for example, means of payment (terminal point of sale),

tele-management (management of fleets), tele-medicine (remote doctors), and tele-

maintenance of vending machines

The challenge for telecom operators is to invest in the right set of infrastructure capabilities

and organization competencies to be able to deliver effectively in the ICT space, essentially

a new field for most telecom operators. There is a need for action by the business segment

to adopt new technologies as an enabler for a more efficient and competitive organization, and

for this purpose the business segment needs to demand from telecom operators cutting-edgeICT solutions.

Additionally, quipmn and rvic vndor within the ICT space in Saudi Arabia need to

focus on establishing presence, pursuing innovative financing mechanisms for infrastructure

investment and partnering with other relevant industry stakeholders to capture market growth.

The govrnmn in Saudi Arabia needs to maintain momentum with respect to its agenda

of industry diversification by ensuring new businesses are created through government-

led initiatives such as free zones, funding, incubators, financing mechanisms, public-private

partnerships, promotion of innovation through R&D programs, etc. The government

also needs to provide a regulatory framework to foster competition and the emergenceof ICT service providers. The scale of implementation of the government ICT initiatives

requires exceptional programme management and prioritization of projects by the relevant

government organizations.

ConclusionThe Saudi Arabian telecom market due to its vast size and potential is on the radar of most

industry stakeholders. In the coming period, the focus needs to be on the creation of an

ecosystem that brings together, in a mutually beneficial way, telecom operators, deviceplayers, hardware/equipment vendors, software solution providers and content players. The

real winners in the Saudi Arabian telecom market will be those who can smartly capitalize

on the promise pillars and continuously adapt their chosen strategies to relevant changes

in the economic environment, industry context and competitive dynamics. The government

can play a vital role in ensuring the creation of Saudi Arabia as a hub for telecom industry

innovation and development, both as a mechanism for diversifying the economy and

boosting economic growth.


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Delta Partnersis the leading TMT advisory and investment irm in emerging markets. With more than 160 proessionals the

irm operates across 50 markets in the Middle East, Arica, Eastern Europe and Emerging Asia. Delta Partners provides three

synergistic services: management advisory, corporate inance and investments rom its oices in the UAE, Bahrain, South Arica,

Spain and Singapore.

Advisory: Delta Partners advisory proessionals partner with C-Level executives in telecom operators, vendors and other TMT

players to help them address their most challenging strategic issues in a ast-growing and liberalising market environment in over 50

markets.

Investments: As a und manager, Delta Partners manages a $80M private equity und, targeting investment opportunities in

the TMT space in high growth markets. The ocus is the Middle East, Arica, Eastern Europe and Emerging Asia. Delta Partners

private equity und leverages the frms unique TMT industry expertise to create value or its investors throughout each stage o the

investment cycle, rom deal sourcing to supporting portolio companies in driving value extraction.

Corporate Finance: Delta Partners provides corporate fnance services and has been involved in several buy-side and sell-side

telecom transactions in the region. As true industry specialists, the frm oers a dierentiated value proposition to investors

and industry players in the region. Delta Partners actively leverages i ts close link to its private equity arm to access the investor

community as well as top-level fnancial talent.

Delta Partners delivers tangible results to its clients and investors through its exclusive sector ocus on telecom, media and

technology, and a unique approach to services, combining strategic advice and a hands-on pragmatic approach.

Copyright 2010 Delta Partners FZ-LLC. All rights reserved.

For a list o all Delta Partners white papers please visit:

hp://www.daparnrgroup.com/our_inigh/whipapr

For more inormation about Delta Partners please visit:

www.daparnrgroup.com

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