Connect it in Saudi
Saudi Arabia has become a huge market for digital technology. The young population is always on the lookout for the latest digital fads and gadgets – and their buying power is equal to none. From 3G to 4G or from Mac-Air to iPads, the urge of both individual consumers and the government to keep up to date has propelled the country to the top of the list in IT sales. Their appetite is so consuming that the market has shown annual two-digit growth for most of the first decade of this century. As a whole, the sector is worth $3.3 billion, a figure expected to rise to $4.6 billion by 2014.
However, as in many other fields, in communications technology too Saudi Arabia has been a latecomer. The traditionally conservative approach of Saudi Arabia to new developments and especially to the window on the world presented by the internet has slowed the rise of the sector, which is now finally picking up, and much faster than expected too. In addition, the Saudi market was monopolised by one single player – imposing high prices and outdated telecom infrastructure – until the turn of the century. As a result, internet penetration in Saudi Arabia is still lagging behind the rest of the region: the International Telecommunications Union (ITU) recently published figures showing that only 40% of the population has internet access, as compared to 65% in regional leader UAE. PC ownership, considered one of the drivers for ICT growth globally, remains very low at 24% and it is expected to rise to a mere 30% in 2014, according to a 2010 report published by the Arab Advisers’ Group.
However, these figures must be put in their historical perspective: Internet use has spread from one million people in 2001 to 11 million in 2010. “This rapid growth can be attributed to increased public awareness, increased broadband availability, decreasing costs of personal computers and internet access and enhanced usefulness of the Internet brought about by increased availability of local content, of websites in the Arabic language and of services such as online banking, e-commerce, and e-government applications,” states the Ministry of Information and Communications Technology.
Mobile phones, essential to Saudi life
This may sound like bad news for the ICT sector but Saudi Arabia, as always, has its own ways. The growth in Internet penetration is increasingly driven by wireless broadband and mobile high-speed packet access technologies. Third-generation (3G) and fourth-generation (4G) mobile phones are widely preferred to personal computers. As a result, mobile phone penetration currently stands at 175%, up steeply from a mere 12% in 2001, and markedly higher than the world average of 67%. Prepaid subscriptions constitute the majority (85%) of all mobile subscriptions, in line with the trend in other similar markets around the world.
Only two years ago, broadband subscriptions in the Kingdom virtually doubled to 2.7 million. Again, the growth was due to the consolidation of relatively new wireless services that rose from 25% of connections in 2008 to over 50% today. These facts are a clear indication that the space for growth is immense, especially given that some 80% of the kingdom's population is under 40 years of age and are technology-oriented consumers likely to support ICT expansion. This is more than a mere assumption: the average Saudi is expected to spend $173 per year on ICT products and services by 2014.
In the coming years, billions of dollars will be invested in developing content for the under-served Saudi population. Development of content in Arabic specifically is likely to increase significantly. Internationalisation of domain names in applications (IDNA) was only implemented in 2010. Like other non-ASCII scripts, Arabic characters were not supported by many Internet applications before that date. Currently, only 1% of online content is in Arabic although Arabs make up 5% of the world population.
But it is not only individuals who are driving the rapid ICT expansion. The understanding that investing in ICT is directly proportional to the performance of the economy in terms of productivity and efficiency has prompted a very aggressive ICT expansion in KSA since the beginning of the century. The Saudi government has designated transforming the oil-based economy into a knowledge society through the development of ICT industries a top priority and is propelling demand by offering e-government services itself. Meanwhile, thousands of kilometres of cable are being laid to update and expand the country’s telecom infrastructure and entire smart cities are built to promote new technological breakthroughs and help the country make the shift.
The ICT revolution really took off in 2003 when a royal decree established an e-government programme and the Ministry of Post, Telegraph and Telephony changed its name to the Ministry of Information and Communications Technology. “This is not just a name change,” says the minister of ICT, Engineer Mohamed Jamil Bin Ahmed Mullah. “It addresses the core issues and stresses the importance of this vital field in modern times. It also reflects the significant concern given by the government to the ICT sector. Moreover, it shows that the government is doing its utmost to develop and update the ICT infrastructure to meet the ambitious goal of constructing a knowledge society.”
In 2004, the e-government project came online at http://www.saudi.gov.sa, accompanied by the launch of the official payment system SADAD. A number of other initiatives followed suit. In the following year, Saudi Arabia opened its mobile telecom market to competition, allowing new companies to provide services. About 20 licensed Internet providers are now competing in the market, bringing prices down and increasing penetration. The largest of them is the Saudi Telecom Company (STC). In 2007, the government licensed three fixed line operators: GO (an alliance between Atheeb Trading Company, Al Nahla Trading Company, Batelco of Bahrain and Traco Company), Al Mutakamilah (a consortium headed by PCCW of Hong Kong), and Optical Communications Company (owned by US company Verizon). To date, GO is the only one to have begun commercial operations. According to the Arab Advisors' Group, “the widespread deployment of wireless broadband networks by the three new national fixed-line consortia will help to drive increased broadband take-up.” In 2008, the state budget gave “special emphasis” to e-government projects and more public initiatives were launched. The Saudi Electronic Data Interchange (SaudiEDI) was launched as an electronic portal for import-export transactions, providing a one-stop shop for paperwork including customs declarations. In 2009, the Saudi Council of Ministers approved the establishment of a new joint stock company, the Saudi Electronic Information Exchange Company (Tabadul) to invest in ICT and take advantage of opportunities generated by government-driven e-projects. Other projects included the authorities investing $3.1 million to equip schools with new computers and other ICT technology. Meanwhile, the Medical Services Division (MSD) of the Ministry of Defence and Aviation (MODA) implemented a nationwide unified medical system to link all 26 MSD hospitals and 68 medical centres and clinics.
Despite the economic downturn in July 2009, a report released by Arab Advisers’ Group ranked Saudi Arabia first among Arab countries for e-commerce growth, valuing e-commerce transactions in Saudi Arabia at SR 12 billion with 14.26% of the population already engaged in them. The government expects broadband penetration to rise to 31% by 2013 and the ICT industry to contribute 20% of GDP by 2020. The Arab Advisers' Group's annual CITC Report predicts a compound annual growth rate of 13.4 per cent over the next three years in the ICT market, with investment increasing by 17% in 2010 alone, and rising to nearly SR 37 billion by 2013. Furthermore, the GCC ICT Infrastructure Report recently released by the Kuwait Financial Centre Markaz predicts that 50% of total GCC investment in the ICT sector over the next three years- $90 billion - will be made in Saudi Arabia.
ICT businesses revenues (2010)$4 billion
ICT growth rate (2010 to 2013 est.)10%
ICT expenditure (2010 to 2013 est.)37 billion
ICT investments (2010 – 2012)$90 billion
Licensed Internet Providers (2010)20
Fixed-line revenues (2008)SR10 billion ($2.66 billion)
Number of fixed telephone lines (2009)4.1 million
Household broadband penetration (2009)31%
Wireless broadband subscriptions (2008)330,000
Wireless broadband subscriptions (2009)745,000
PC penetration (2010)24% (30% by 2014)
Computer hardware sales (2010 estimate)$1.8 billion
Software market (2010)$611million
IT services market (2010)$971 million
E-commerce transactions SR12 billion
Broadband subscriptions (2005) 64,000
Broadband subscriptions (2009) 2.7 million
Broadband subscriptions (2010) 3.2 million
Broadband penetration rate (2010)11.9% of population
Broadband household penetration (2010) 34%
Wireless broadband subscriptions (2010)1.85 million (or 56% of broadband connections)
Digital subscriber lines (DSL) (2010)1.35
Internet users (2001) 1 million
Internet users (2010)11 million
Mobile Phones Subscriptions (2001)2.5 million
Mobile Phones Subscriptions (2010) 47 million
Access to the Internet31%
Domain names (2009)17,500 (75% commercial com.sa)
Fixed telephone lines (2010) 4.3 million (3.2 million residential)
Household teledensity 68%
Population teledensity 15.7% (global average: 17.8%)
Internet penetration (2010) 40%
Telecom services revenues (2009) SR 52.5 billion (mobile: 77%)
Source. Arab Advisers’ Group / Communications and Information Technology Commission (CITC)
ICT HISTORY IN SAUDI ARABIA
1926 Twenty-two wireless stations are installed providing telegraph connections to towns of the kingdom.
1934 854 manually operated telephone lines are in operation.
1952 The Ministry of Communications is established. Prince Talal is appointed minister.
1975 The Ministry of Post, Telegraph and Telephone (PTT) is established. The number of telephone lines has risen to 130,000. Revenues total SR 250 million.
1984 The first fibre-optic network is installed.
1986 King Fahd Satellite Communications City on the Mecca-Jeddah Road starts to operate.
1995 Mobile services come into operation
1998 King Fahd issues a royal decree establishing the Saudi Telecom Company (STC) as a joint-stock company to provide telecommunications services.
2001 King Fahd issues a royal decree approving the Statute of Telecommunications and the establishment of the Saudi Communications Commission (renamed in 2001 to the Communications and Information Technology Commission, CITC) to regulate the affairs of the sector.
2003 The Ministry of Posts, Telegraphs and Telephones (MoPTT) changes its name to Ministry of Information and Communication Technology.
2005 Saudi Arabia opens its mobile telecommunications market to competition
2007 Three fixed line operators are licensed.
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