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The fifth generation of wireless technology (5G) is steadily growing in the Kingdom of Saudi Arabia (KSA). During 2019, all three operators launched 5G service and are continuously increasing its coverage. The next major step for KSA, which the world is watching closely, is the development of cost-effective and viable 5G in vertical industries such as oil and gas, marine navigation, and connected cars.

Recommendations

While KSA is an early leader in 5G, the following steps can be pursued to improve the commercialization of 5G in KSA:

Develop a long-term roadmap to shutdown 2G and 3G services.
Subsidize the cost of 5G devices.
Enable vertical markets for 5G in consultation with relevant stakeholders. Provide a near term deadline to shutdown 3G services

KSA Overview

Saudi Arabia, officially the Kingdom of Saudi Arabia, is the world’s 13th largest country by geographical area. The kingdom is bordered by Jordan and Iraq to the north, Kuwait to the northeast, Qatar, Bahrain, and the United Arab Emirates to the east, Oman to the southeast and Yemen to the south and it is separated from Egypt and Israel by the Gulf of Aqaba. It is the only nation with both a Red Sea coast and a Persian Gulf coast, and most of its terrain consists of arid desert, lowland and mountains (Figure 1).

Figure 1

Source: Nations Online Project

The Saudi economy is the largest in the Middle East and the 18th largest in the world. It also has one of the world’s youngest populations; about 40 percent of its 34.5 million people are under the age of 25. And, it also has one of the world’s highest immigrant population, about 30% of total. Immigrants account for around 70 per cent of the employed population and 80 per cent of the private sector workforce.

Telecom Market Overview

Government

The Ministry of Communications and Information Technology (MCIT) oversees all information and communication technology matters in the Kingdom. It sets up policies and supervises ICT activities to contribute towards the socio-economic development of the country and citizens.

The regulator, CITC (Communications and Information Technology Commission) is responsible for regulating the affairs of the ICT and postal sectors in the Kingdom. CITC aims to create a highly competitive environment, provide excellent services to subscribers, and establish an attractive ecosystem for investors. It is also responsible for issuing ICT licenses (telecommunications licenses; radio frequency licenses; numbering licenses; and equipment licenses) and monitoring license obligations.

Telecom Operators

STC, Mobily and Zain Saudi Arabia are the three long-established mobile network operators (MNOs) in the country. The state owned and incumbent operator STC founded in 1998 lost its monopoly to Mobily in 2004. Zain, newest to the market, started its operations in 2008.

The mobile telecom sector has more than 42 million subscribers led by STC followed by Mobily and Zain respectively. Virgin Mobile Saudi Arabia and Lebara Saudi Arabia operates as MVNOs in the Kingdom. They utilize the infrastructure and radio spectrum of the MNOs to provide services.

STC and GO Telecom are the two fixed telecommunication licensed entities in the Kingdom.

Infrastructure

Fiber Optic Networks

Fiber optic penetration is on the rise due to vigorous efforts of the government and the industry since 2017. According to the MCIT two million urban dwellings were covered with fiber optic networks (FTTx) at the end of fiscal year 2018, with 0.78M subscribers or nearly double the 2015 total. Overall subscription for fixed broadband service stood at 33.7% of for the same period. (Figure 2).

Figure 2

Source: MCIT 2018 Annual Report https://www.mcit.gov.sa/en/publications

Satellite Connectivity

KSA is a member of the 21 member-state Arab Satellite Communications Organization. ARABSAT is a satellite operator that provides broadcasting and telecommunication services across the Middle East, Africa and Europe. KSA has so far launched 16 low-earth orbit satellites.

Submarine Cable Connectivity

KSA is considered as an important hub for submarine networks in the Middle East region, along with the UAE, Oman and Qatar. As of now, there are 13 in-service submarine cable systems connecting the Kingdom to neighboring countries as well to other continents.

Spectrum

KSA’s three operators have been offering 2G, 3G and 4G using a variety of bands. 2G is primarily offered through 900 and 1800, 3G via 2100 while 4G is running on 1800, 2300 and 2600 MHz frequency bands.

5G in KSA

KSA is one of the early adopters of 5G in the Middle East. One key reason is the concentrated effort made by both government and industry in its development. For instance, during the initial period of 2018, the government established the National 5G Task Force to speed up the availability of 5G. It also increased regulatory certainty through the Unified License scheme and released a sizeable amount of spectrum. Furthermore, in February 2019, the MCIT released an additional 400 MHz in mid-band (3.5 GHz) spectrum, taking the combined spectrum available for mobile services, including 5G, to around 1,000 MHz.

Operators have been deploying 5G after successfully completing trials. Zain has so far launched commercial 5G services in 27 cities, STC is deploying 5G home broadband services in a number of cities while Mobily has signed a memorandum of understanding with Huawei for the development 5G in the Kingdom. Zain has also recently launched 5G roaming service between KSA and Kuwait.

Huawei, Nokia, Cisco and Ericsson are all important players in providing the required radio access and core infrastructure for KSA’s 5G rollouts. For instance, STC says that it has blended Huawei and Cisco core networks with Ericsson and Nokia radio access networks.

Key Challenges – 5G

The KSA’s key challenge is the commercialization aspect of 5G in conjunction with the heavy baggage of 2G, 3G and 4G networks.

The second, smaller hurdle – directly connected to the first one – is the availability of affordable 5G devices in the market. The current cost of a 5G device hovers around US$1,000 (~SAR 3,500). Close to 50% of the immigrant population is low-skilled and employed in low-paid jobs and thus are not eager to join the 5G bandwagon, at least in the near future.

The third hurdle will be the enablement of 5G in vertical markets. The list of stakeholders is long and complex. With many open as well as clandestine political agendas, it won’t be easy to come up with a solution. The concerned governmental agencies along with the corresponding industries (education, finance, health, maritime, telecommunication, tourism, transportation, etc.) will eventually face an uphill battle.

Recommendations

KSA is one of the richest countries of the world with a GDP per capita of over $23K at the end of 2018. The IMF expects the KSA economy to decrease by 0.2% in 2019 and grow by the same amount on average per year through 2024. In the telecom sector, the state-controlled structure has landed the operators in a reasonable financial state. With little possibility of any structural change and enough spectrum for 5G, the existing operators as compared to many other markets have few things to worry about, at least in the near term.

At the same time, to further streamline the process of effective and meaningful commercialization of 5G, the following steps can be considered by the government and the industry:

2G and 3G Services Shutdown: A long-term roadmap is needed to shutdown 2G and 3G services. 4G has been available since 2011, and 5G’s penetration throughout the kingdom will grow significantly in coming years. Thus it is prudent to have an effective plan to shut down 2G and 3G networks. At the same time the immigrant population (particularly the low-paid and /or low-skilled segment) has a high tendency to save money for families in their home countries. Thus they prefer cheaper 2G/3G phones over more tech-savvy and high-end devices. Regulators and operators should jointly consider developing a detailed roadmap for the discontinuation of 2G/3G services. It will free up capacity, reduce the number of network elements, reduce carbon footprint, reduce operators’ annual license costs, and allow spectrum to be returned to the regulator or to be reused for 5G if possible. In a nutshell, it will improve networks’ quality of service and the overall financial health of operators. Transition issues such as QoS (quality of service) degradation and vendor contract renegotiation are manageable.

5G Device Cost: Operators may further increase their due diligence with the device suppliers to lower the cost of 5G devices to attract the low-paid immigrant population. The current cost of a 5G device in KSA hovers around US$1,000 as compared to $10-$30 for 2G/3G phones.

Vertical Markets: The success of 5G to a large extent depends on its enablement in vertical industries. An effective roadmap is needed to strengthen 5G in IoT (Internet of Things), AI (Artificial Intelligence), and V2X (vehicle to everything – connected cars) markets.

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Source of feature image: Kemo Sahab (location: Al Bahah, Saudi Arabia)

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Other sources:
https://www.worldometers.info/world-population/saudi-arabia-population/
http://worldpopulationreview.com/countries/largest-countries-in-the-world/
https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html
http://theconversation.com/which-countries-have-the-most-immigrants-113074
http://gulfmigration.org/media/pubs/exno/GLMM_EN_2018_05.pdf
http://www.mondaq.com/saudiarabia/x/532718/Telecommunications+Mobile+Cable+Communications/Telecoms+In+The+Kingdom+Of+Saudi+Arabia+An+Overview
https://www.mcit.gov.sa/en/page/98877
https://www.citc.gov.sa/en/AboutUs/AreasOfwork/Pages/default.aspx
https://www.tamimi.com/law-update-articles/an-overview-of-telecoms-licensing-in-saudi-arabia/
https://www.thenational.ae/world/mena/saudi-arabia-launches-new-communication-satellite-1.822624
https://www.submarinenetworks.com/en/stations/asia/cable-landing-stations-in-saudi-arabia
https://www.gsmarena.com/network-bands.php3?sCountry=SAUDI+ARABIA
https://knoema.com/pjeqzh/gdp-per-capita-by-country-statistics-from-imf-1980-2024?country=Saudi%20Arabia
https://www.gsma.com/r/mobileeconomy/mena/
https://www.commsupdate.com/lists/country/saudi-arabia/
https://www.telecompaper.com/international/news/all/saudi-arabia
https://www.telecomreview.com/index.php/articles/reports-and-coverage/3173-four-global-vendors-are-laying-the-foundation-for-5g-in-ksa
https://saudi.souq.com/sa-en/kgtel-k80-black-dual-sim-black-32822535/i/

The recently concluded Annual General Meeting (AGM)¹ of Reliance Industries is sure to leave Reliance Jio’s competitors in jitters, as Jio unveiled plans to roll out optical fiber to the home (FTTH) across 1,100 cities in India. Its commercial launch is planned for December 2018. At the same meeting, Jio announced a JioPhone handset offering which will be a major threat to many small handset manufacturers.

Despite not being currently active in the fixed broadband market, JioFiber will benefit from Jio’s wireless internet market share (ranked #1 as per TRAI based on subscriber base)². Jio’s recent acquisition of distressed carrier Reliance Communications is also a plus. However, Jio will face hurdles initially given the challenges of underground fiber installation.

Jio hopes to replicate its wireless success with GigaFiber

After growing from zero to 215 million wireless users in just 22 months on its new 4G network, Jio already has everyone’s eyebrows raised. Jio has now shifted its focus towards its FTTH broadband service via ‘Jio GigaFiber’. The fiber service includes Jio Giga TV, smart home accessories and a landline connection. Jio’s FTTH rollout could kickstart the local broadband market, where penetration is low. TRAI’s March 2018 data estimates that India had only 21.2 million fixed broadband internet users – as against 472.7 million mobile data users.

While Jio is new to the fixed market, Jio has been installing fiber aggressively for the last 4 years. Its fiber optic network now spans over 300,000 kms. That includes metro and access fiber designed to support an eventual FTTH offering. This should allow Jio to differentiate from other Indian operators, which tend to provide fiber optic cables only to the building, and use a variety of technologies for customer access (VDSL, Ethernet, WiFi etc). Jio’s fiber will instead be connected directly to the user’s CPE. Jio does have competition, though. Airtel launched its vectorization-based service, V-Fiber³, in Pune in late 2016. V-Fiber offered up to 100Mbps at launch, but Airtel recently announced upgrades to bring maximum speeds to 300Mbps over W-Fi.

The effect of Jio’s broadband launch is also being felt on the leading fixed player, BSNL, which slashed its broadband plans soon after Jio’s FTTH announcement. In June 2018, BSNL launched two FTTH monthly plans with promotional rates of INR777 ($11.3) and INR1,277 ($18.6) at a speed of up to 50 Mbps and 100 Mbps, respectively. Similarly, Airtel responded to Jio’s fiber announcement by withdrawing FUP (fair usage policy) limits on its fixed broadband plans. Airtel’s 100Mbps monthly broadband plan is priced at INR1,299 ($19.0), and includes a subscription to ‘Amazon Prime’. From an internet speed standpoint, Jio still stands tall as it aims to offer internet speed up to 1Gbps.

Operator	Monthly price (INR)	Monthly price (USD)	Data speed (Mbps)	Data cap (GB)
BSNL	777	11.3	50	500
BSNL	1277	18.6	100	750
Airtel	699	10.1	40	3,333
Airtel	1299	18.96	100	3,333

Jio’s purchase of RCom assets will accelerate FTTx network expansion

Last December, RCom announced the sale of its assets to Jio for $3.75 billion⁴. If the deal goes through, Jio will gain vital assets in the form of spectrum, towers and fiber. The acquisition will also bring opex savings for Jio, as it will avoid some tower related rental expenses. Jio already has 300,000 km of fiber, but this deal will result in addition of 178,000 km of optic fiber to its portfolio. This will help Jio cover a broader section of the population.

Jio’s rich fiber base positions it well for a push into quad play, but the company is sure to face several challenges in FTTH deployment. A major hurdle is getting approvals from state governments and officials for laying fiber and securing the requisite Right of Way (ROW) permits. This process not only delays execution but also increases the cost of implementation. Operators face these challenges elsewhere, but India’s permit process is especially burdensome. The World Bank’s “Doing Business” report⁵, for instance, places India as nearly last (181st place) among all economies in terms of construction permit process effectiveness. This has contributed to India’s slow fiber rollout.

Moreover, FTTH investments require huge capex especially in rural areas where the penetration is staggeringly low in comparison to national average. Government-supported fiber deployment efforts have struggled in the past, due in part to lack of funding. But the 2014 change in government helped expedite India’s national fiber optic network, now called Bharat Broadband Net Ltd (BBNL)⁶. This government company aims to rollout 1 million kms of fiber across 250,500 villages by March 2019. This is good news for Jio, and other private operators in need of fiber to fill in FTTH coverage gaps.

Jio continues to disrupt the mobile market, too, with JioPhone offering

The FTTH announcement was not the only news to emerge from Jio’s recent annual meeting. The company also revamped its branded feature phone, the JioPhone.

In July 2017, Jio began selling the JioPhone. The first year of sales was lacklustre, due to a high price point, and non-availability of basic apps. Jio has now addressed both these issues. Through an exchange offer, the device will just cost INR501 ($7.2) – refundable after 3 years of purchase – and will soon support three of the most popular Android apps (WhatsApp, YouTube and Facebook). Jio is also bundling the device cost with a new ‘Jio SIM”, which includes a prepaid recharge plan valid for six months at just INR594 ($8.6).

When the JioPhone was launched a year ago, Airtel and Idea responded with affordable smartphone offers. They partnered with Karbonn and Itel, respectively, to offer low-end smartphones and with cashback offers. It made sense back then as users could own a smartphone at a slightly higher price than that of JioPhone. But with Jio’s new launch, low-end smartphone makers will have to revamp their pricing model as any handsets costlier than the JioPhone might struggle to find buyers.

Jio also announced release of its top-end variant in the smart feature phone segment – JioPhone 2 – to be launched on August 15th. Priced just at INR2,999 ($43.6), there are not many phones available in this price range. However, a closer look at the phone’s features suggests little difference between the old JioPhone and the JioPhone 2. Apart from a four-way navigation pad and QWERTY keyboard option (which has lost its appeal with the arrival of large screen smartphones), the features of both the phones are similar. They have the same processor, internal storage and RAM, too. The immediate competitor for JioPhone 2 is Airtel’s Karbonn A40 4G⁷, currently available at INR2,649 ($38.5) on Amazon India. In terms of display and design, it surpasses JioPhone 2 with a 4” IPS LCD display and a resolution of 400×800. However, Karbonn A40 4G fails to impress in terms of battery capacity. With a battery of 2000mAh, JioPhone 2 can last up to 14 hours – whereas Karbonn A40’s 1400mAh battery may not even last for half a day.

At present, 12% of Jio’s total mobile phone subscribers (or about 25 million) are using JioPhone. Jio aims to quadruple its base of JioPhone users to 100 million in the shortest possible time. Though this may seem a tad ambitious it is certainly achievable. Jio’s subsidized device cost and low-priced prepaid recharge plan will be appealing in a market with a limited supply of affordable 4G handsets.

References

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Commercialization of 5G in Saudi Arabia

Blog Details

Jio sends shock waves across the telecom industry with new FTTH broadband service and JioPhone exchange offer