Total revenue for mobile and fixed enterprise IT services in Saudi Arabia fell last year for the first time in a decade, but the kingdom remains the largest telecoms and enterprise IT market in the Middle East and Africa region (MEA), with plenty of opportunities for Middle East tech startups, finds a new report by Pyramid Research.
Last year’s drop was only one percent, so it didn’t affect the country’s number one ranking. Saudi Arabia’s total mobile and fixed services revenue in 2014 was US$16.2 billion, followed by South Africa at $13.4 billion, and Turkey at $13.0 billion.
Last year’s drop was in large part a result of Saudi telco Mobily’s restatement of financial results, according to Pyramid. Mobily – the second largest operator in the country – saw revenue decline by 20 percent in 2014. In late October of 2014 the company was suspended from the Saudi Stock Exchange for failing to produce quarterly financial statements. Once Mobily did release them, the company attributed the delay to an 18-month accounting cover-up of earnings that removed over US$2 billion from its books. After the telco came clean about the scandal, its stock fell 40 percent over the following week.
Fiber connectivity for high demand areas is key
Over the next five years, annual growth of the Saudi telecoms market will average three percent per year, reaching US$18.7 billion by 2019. “Operators have invested in upgrading network infrastructure and systems to handle growing data traffic volumes,” says Pyramid’s Hussein Ahmed. “The need in the short-term is for swift deployment of fiber connectivity in high demand areas such as Riyadh, Jeddah, Mecca, Medina and Al-Ahsa. This will improve the competitive landscape in the fixed broadband services segment, where historically the incumbent operator, STC, has led.”
Meanwhile, enterprise adoption of new services is increasing, with STC reporting revenue from its enterprise business unit growing by 12 percent in 2014, says Ahmed. Uptake in private connectivity, VoIP, M2M and fiber is supported by operators’ diverse IT service portfolios which include cloud computing and managed services. Further growth in B2B services will be achieved through tailoring IT services to specific industry sectors.
Middle East tech startups and MVNOs
Saudi Arabia’s more developed telecommunications network infrastructure should be a strong attraction for more Middle East tech startups. A number of venture capital funds have already launched in the country, including Alkhabeer Capital, Mobily Ventures, STC Ventures and the government’s own tech start-up fund. Meanwhile, the market entries of Virgin Mobile and Lebara will add a fresh impetus to the mobile market with new promotions for data and voice services, says Pyramid Research.
“Towards 2019 we will see the potential for improvements in the competitive landscape, while operators remain persistent in identifying new revenue streams,” adds Pyramid’s Ahmed. “Saudi Arabia continues to evolve towards a truly digital economy, demonstrating to the entire Middle Eastern region the realizable benefits of investing in the telecoms sector.”
