MTC wins Saudi third licence bid - US$6 billion is the price

Details: Alec Barton; Category: Trends & Forecasts; 17 May 2007; 15231 views

Saudi Arabia has just awarded its third mobile licence, in this case to MTC. Here, we discuss the implications for MTC's business portfolio in the Middle East and Africa .

A consortium led by MTC Group has clinched the third mobile telecommunications licence in the Kingdom of Saudi Arabia. The group's bid came to US$6.109 billion and will give MTC a presence in the largest market in the Gulf Cooperation Council (GCC) in terms of population and the largest economy in the Middle East and Africa. This in turn reflects MTC's ambitions to become one of the world's top ten mobile operators.

Dr Saad Al Barrak, CEO of MTC states: "We have a strong consortium of Saudi partners, the most achievable synergies, and the operating expertise to bring world class services to the people of Saudi Arabia. This success underscores MTC's leadership position in the Middle East and beyond and recognises the trust that the Kingdom of Saudi Arabia has placed in us."

MTC currently holds a 50% interest in the consortium which will be reduced to 25% following a mandatory Initial Public Offering (IPO) of the new mobile operator in the KSA and allocations to two government entities. Expected launch date of MTC's services in the KSA is early 2008.

Saudi Arabia is a lucrative market for MTC. It is no only the largest GCC market with a population of 26 million and the largest economy in the Middle East and Africa with a GDP of US$350 billion and high GDP growth (around 12% in 2006) but adding Saudi Arabia also gives MTC a total footprint covering 494 million people in the Middle East and sub-Saharan Africa.

In more technical terms, there is low mobile penetration of approximately 70% compared to an average penetration rate of 118% for the GCC (excluding KSA and Oman). ARPU is high at US$35. In addition, fixed-line penetration is just 16% and broadband a mere 0.4%. The Saudi population is young (58% below 25) and fast-growing (around 3% in 2006).

Saudi Arabia an MTC can look forward to a successful relationship. The latter's regional roaming, branding, human resources, and best practices are intended to bring immediate benefits to the consortium. MTC also greenfield roll-out experience, having successfully launched networks in 11 countries across the Middle East and Africa.

In the immediate future MTC customers can look forward to next-generation network infrastructure to provide voice, high-speed data and advanced value services to drive revenue share in the Saudi Arabian market, plus reduced network opex and capex and faster time-to-market through initiatives with both incumbent KSA operators on site sharing, transmission infrastructure leasing, national roaming and interconnection.

In January 2007, MTC launched ACE - an implementation strategy to realise the aims of its 3x3x3 vision. ACE seeks to extract superior value from existing assets through three main thrusts:

accelerating growth in Africa;
consolidating existing assets; and
expanding into adjacent markets.

Based on organic growth and through ACE, MTC's new goals by the year 2011 are to

serve 70 million customers;
attain a US$6 billion EBITDA;
becoming one of the top ten mobile operators in the world.

* MTC Group was incorporated in 1983 in Kuwait as the region's first mobile operator and since the initiation of its '3x3x3' profitable expansion strategy in 2003, it has grown very rapidly. With the Saudi licence, it now operates in seven Middle Eastern and 14 sub-Saharan African countries, with over 12,700 employees providing mobile voice and data services to over 27 million active individual and business customers.

** MTC's local consortium partners include a number of distinguished Saudi Arabian businesses, including Saudi Plastics Factory, Almarai Company, Rakisa Holdings and Al Jeraisy Development Company.

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