Saturday, Apr 21, 2007
(Recasts an article published at 0906 GMT with more comments from officials and details of bids.)
RIYADH/DUBAI (Zawya Dow Jones)--Saudi Arabia, the last significantly untapped telecom market in the Gulf, Saturday granted initial approval to three consortia led by Hong Kong's PCCW, Bahrain Batelco and U.S. Verizon Communications to provide fixed-line services in the kingdom.
The PCCW and Batelco consortia made 52 separate bids each for spectrums in 13 regions.
Verizon didn't go through the bid phase because it didn't apply for a spectrum, said Mohammed Al Suwaiyel, governor of the Saudi Communication and Information Technology Commission. Verizon will operate an optical wire fixed-line service in the kingdom.
The new licenses, which require the approval of the council of ministers, will break Saudi Telecommunications Co.'s monopoly over the fixed-line sector in the country. STC currently has 4.2 million subscribers.
Ten consortia, including Etihad Etisalat, China Telecom and India's MTNL, had applied for the fixed-line license, and the commission last week shortlisted Verizon, Batelco and PCCW.
The commission is yet to provide the exact value of the bids, but it was way below the amount offered for the country's third mobile license.
"The attractiveness of mobile phone licenses for investors in all countries is much higher than fixed-lines," Al Suwaiyel said at the commission's headquarters in Riyadh where the bids were opened.
The regulator said March 24 that Kuwait's Mobile Telecommunications Co. bid SAR22.91 billion for the third cell license. The government is currently finalizing the procedures to award the contract.
The commission said it will start talks Sunday with Batelco and PCCW to decide on the spectrum allocation to the consortia.
"We hope that the new arrivals in the fixed-line sector will help to increase the broadband penetration in the kingdom to 12% of the households by 2010 from the current 1%," Abdullrahman Al Fehaid, Deputy Governor for Licensing Affairs at the commission, told Zawya Dow Jones on the sidelines of the function.
He said the new operators will have to invest more than SAR2 billion each to start their operations.
Abdulaziz Bin Ahmad, chairman and chief executive of Saudi Atheeb Group which is part of the Batelco consortium, estimated that it will pay SAR500 million in spectrum fees and invest SAR2 billion to SAR2.5 billion to build the telecom infrastructure.
The three new operators will also have to sell shares in initial public offerings.
"All of them must offer 25% of their capital to the public and 10% to government agencies before they start their commercial operations," Al Fehaid said. He didn't give a timeframe for the IPO.
Al Fehaid, however, said the new fixed-line providers should start operations within 12 months from securing the licenses, and each should cover three regions in the first three years, five regions in the first five years, and all 13 regions in the seven years of operation.
"Each operator should cover at least 3% of the country by fiber optics network, or 15% by wireless network within seven years of operations," he told Zawya Dow Jones.
The Saudi market is the highest telecom earner in the region, generating $10.6 billion from fixed- and mobile-phone users last year.
The country currently has two cell phone operators, Saudi Telecommunications Co. and Etihad Etisalat.
-By Anees Al Qudaihi and Majdoline Hatoum, Dow Jones Newswires; +966 1 2914872, anees.alqudaihi@dowjones.com
Copyright (c) 2007 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
21-04-07 1220GMT
