In a country which has 3 MNO’s, over 50 million subscribers, and huge margins of profit in billions of Saudi Riyals, Saudi Arabia’s Mobile ecosystem seems to be perfect on the outside. The market is sexy, appealing, and profitable to any MNO or MVNO. The market is still underutilized in several fields of technology but not in network resources (overloaded). M2M, cloud, Mobile Financial services, & data are among these yet to be utilized efficiently in such market.
Last year, CITC (regulator) in KSA has awarded 3 MVNO’s licenses to operate all over Saudi Arabia; however, there is a twist:
- Number of MVNO’s is limited to 3
- Each MNO is to host only 1 MVNO
- Each MVNO is to partner with international MVNO with solid history in the sector
- Each MVNO can sell the products of only one MNO (wrong move in my modest opinion)
With such mentioned rules, three MVNO licenses have been awarded:
- Virgin Mobile for STC
- Lebara Mobile for Mobily
- Axiom Telecom for Zain
The main focus of these MVNO’s will be voice calls and data but supposedly would not tap into any niche segments, M2M, or mobile financial/health services. They will try to target bottom line of the pyramid, thus they will compete with their own MNO’s. These subscribers of low ARPU will put more pressure on the radio networks of the MNO’s. This will deteriorate the quality of service for the high-end subscribers, if not catered for by the MNO’s. Packaging & bundling fairly inexpensive packages will be the aim of the MVNO’s in order to get the low ARPU subscribers. This in turn would put the already started price war on fire!
In a quick glance at the near future, MVNO’s would cannibalize their MNO’s subscriber base not adding much more revenue. The most affected MNO would be Zain since it is delaying its MVNO launch and it already is targeting the bottom-liners. On the other hand, STC & Mobily would start focusing on mid-end to high-end subscribers while leaving Virgin Mobile & Lebara Mobile to focus on low-end subscribers.
If I was the strategist for MNO’s, I would:
- Focus on enterprise subscribers (huge potential still there, especially in SME’s)
- Not be dragged into a price war with the MVNO’s
- Focus on high value & mid value subscribers (especially postpaid & hybrid)
- Keep up with the network expansion
- Fix up & enhance the KPI’s of call centers & walk-in centers (which are already at very low ratings)
As for MVNO’s, I would:
- In addition to bottom liners, I would find untapped niche segments (youth, women, ethnic groups, etc)
- Enter the M2M field with full support from MNO
- Focus on selling data, especially bundled with voice packages
- Target SME’s & SOHO’s especially if MNO’s are not utilizing such segments
In a nutshell, the current setup of MVNO’s is not going to introduce any changes to the ecosystem in KSA. In a market with a heavy price war and penetration over a 100%, the prices are increasingly lowered every month and revenues are dropping year-over-year.
Subscribers should not expect any enhancement in quality of service or customer care handling. But that is another story I will talk about in another blog!