Saudi Arabia - increased fixed line competition

Cabinet OKs 3 Phone Companies

JEDDAH, 26 February 2008 — The Council of Ministers yesterday licensed three new companies to provide land-line telephone services in the Kingdom, ending the Saudi Telecom Company’s monopoly in the sector.

The new firms will sell 25 percent of their shares in initial public offerings and offer 10 percent to two state-owned funds.

The three companies were licensed earlier by the Communications and Information Technology Commission (CITC) in March 2007 and were awaiting a final Cabinet approval.

Culture and Information Minister Iyad Madani said yesterday’s Cabinet meeting, chaired by Custodian of the Two Holy Mosques King Abdullah, named the three licensed firms as Optical Communications Company (Verizon), Al-Mutakamilah (PCCW-Hong Kong) Telecom Company and Atheeb (Batelco) Telecom Company.

Madani said the new joint stock companies are licensed to establish and operate land-line services across the Kingdom. “The three companies will sell 25 percent of their shares in initial public offerings within 30 days after their establishment,” the Saudi Press Agency quoted the minister as saying.

The state-owned Pension Fund and the General Organization for Social Insurance (GOSI) will each have a 5 percent stake in the three companies, the Cabinet said. “If the two organizations do not desire to have a share in the firms, the 10 percent would be either sold to the public or subscribed by the founders,” it added.

The arrival of the three new service providers augurs well for the national telecom and IT plan that aims to provide land-line services to 25 percent of the population, mobile phone services to 80 percent of the population and promote personal computers and the Internet among 30 percent of the population.

“The plan also envisages including computer and Internet studies in both general and university education, providing all schools with Internet access, setting up websites for individual schools and other educational institutions, and having a gateway for each level of education,” said Minister of Telecommunications and Information Technology Muhammad Jameel Mulla.

Batelco-Atheeb plans to invest $1 billion in its fixed-line operation in the first five years of business.

It also intends to roll out broadband Internet, and voice and data services using WiMAX technology.

Among the three, only Al-Mutakamilah and Batelco-Atheeb have applied for radio spectrum technology.

CITC’s board of directors, chaired by Mulla, selected the three companies from a consortia of 10 that were vying for the much-sought-after licenses. Bids by Etihad Etisalat that operates the Kingdom’s second mobile-phone service, South Korea’s KT Corp. and China Telecom were among those that failed to qualify.

Madani added that the Cabinet meeting took a number of other important decisions: It approved a memorandum of understanding (MOU) with South Korea in higher education; and endorsed accords with Italy and South Africa on avoidance of double taxation and prevention of tax evasion.

It also instructed the concerned agencies to quickly complete the five seaport projects, including those in the Eastern Province, Tabuk and Jizan.