Mobile Substitution Hits Saudi Telephony Market

The Saudi Arabian circuit-switched telephony voice market contracted by 4% to just over $2 billion in 2005 and will contract an average of 7.6% annually over the next five years. According to a soon-to-be released IDC study on the fixed-line telephony market, the primary culprit is mobile substitution; the migration to mobile, however, did not stem the growth in connections, which should rise 5% in 2006, according to preliminary data.

"The new lines are a reminder of the under-penetrated nature of the Saudi telephony market but also of the rising demand for Internet access," said Mohsen Malaki, research and consulting director, IDC CEMA. "Fixed-line connections and calls are less expensive to users than mobile subscriptions in the country and also enable the use of VoIP, which is surging along with demand for ADSL, and which will also eat into fixed-line call traffic and spending."

In response to the technological changes affecting the Saudi Arabian market, the government is expected to continue pursuing its telecommunications liberalization process. According to IDC, a new license is likely to be issued in the first half of 2007 and the telecom regulator is likely to open the market to voice over broadband (VoBB), further spurring competition and opportunities for both the incumbent and the new operator.

"ADSL and other broadband technologies will open the door to voice over broadband services in the country, and that will help mitigate the effects of the contracting circuit-switched telephony market," said Said Irfan, research analyst, IDC MEA. "But operators will need to do more to express the value of their services by developing novel offerings for consumers and integrated solutions for the businesses."

Posted to the site on 22nd December 2006