1. INTERVIEW ZAIN SAUDI ARABIA
24 CommsMEA November 2016 www.commsmea.com34

2. CommsMEA November 2016www.commsmea.com
INTERVIEW ZAIN SAUDI ARABIA
25
T
he Saudi government has allowed telecom firms Saudi
Telecom Company, Etihad Etisalat (Mobily) and Zain
to extend their licences by up to 15 years and offered
all three the ability to provide fixed, mobile and inter-
net services. Zain Saudi Arabia’s licence, originally
granted in March 2008, will now expire in January 2047 follow-
ing the decision. The government will be entitled to 5 per cent of
each company’s annual net profit during the extension period.
Prior to this, Saudi Telecom was the only carrier in Saudi Arabia
with a unified licence. With the other operators now joining in,
how will the telecom landscape in the Kingdom change? Comms-
MEA spoke to Andrew White, the chief strategy and business
development officer at Zain Saudi to discuss the implications of
this landmark decision on the telco’s revenues as well as from a
broader perspective, on the telco services in the country.
White says this is the most important development for the
company since its inception. “The direct impact of the order
to extend the company’s licence by 15 years lowers the high
amortisation charge by SAR 433 million (~ $ 116 million) per year,
bringing the company much closer to net profitability.”
He adds: “Through the efforts of the company’s transforma-
tion plan, supported by our Board and by the Zain Group, net
losses have been reduced from SAR 1,749 million (~ $ 466 million)
in financial year 2012 to SAR 972 million (~ $ 259 million) in
2015. To reach the objective of net profitability it was clear that
the company needed more than just an operational strategy,
however effective that has been. And of course, a reduction in the
amortisation charge will help reduce the company’s net losses in
future years.”
RE-ALIGNING
THE SCALES
White believes that the consumers in Saudi Arabia will benefit
the most from this decision because it helps the telecommunica-
tions sector in Saudi Arabia reach an equilibrium where there
are three strong players, competing to offer consumers a wide
range of distinct services, all of which offer excellent value for
money. “This decision highlights the vision and leadership of the
government of Saudi Arabia and aligns closely with the key objec-
tive of Vision 2030 to diversify the capabilities of the economy, to
increase the participation of the private sector and develop the
IT sector.”
Vision 2030 aims to change the nature of the Saudi economy,
to become less dependent on oil revenues and to transform into a
This is the most important
development for the company
since its inception. The direct
impact of the order to extend the
company’s licence by 15 years
lowers the high amortisation
charge by SAR 433 million (~ $ 116
million) per year.”
Andrew White, chief strategy and business
development officer, Zain KSA
With unified licences being provided to Zain KSA, Etihad Atheeb
Telecom and Mobily in addition to STC in Saudi Arabia, the
Kingdom's fixed-line sector looks set for heightened competition.

3. CommsMEA November 2016 www.commsmea.com
INTERVIEW ZAIN SAUDI ARABIA
26
modern knowledge based economy, where digital
services are the norm. Not only is telecommuni-
cations a lifeblood industry to any economy, it is a
core enabler of the necessary digital services and
of a knowledge based economy.
The question that arises is how Zain KSA is
enabling the Saudi Vision 2030. White says:
“Around 80% of Zain Saudi Arabia’s employees
are Saudi. The company offers opportunities for
individuals to develop key skills that are essential
to realise the objectives of Vision 2030.”
In order to achieve the goals of Saudi Arabia’s
Vision 2030, a National Transformation Plan
across 24 government bodies has been estab-
lished. For its part in the National Transfor-
mation Plan the Ministry of Communications
and Information Technology has ten strategic
objectives, which include topics such as making
more spectrum available, enhancing broadband
services, supporting e-commerce, developing
ICT skills and increasing the contribution of the
sector to national GDP. These indicate how im-
portant the ICT sector is to the overall National
Transformation Plan and hence to the successful
achievement of Vision 2030.
Zain Saudi Arabia is engaged in an ongoing
dialogue to maximise its contribution to achiev-
ing the objectives of Vision 2030. “With the new
licensing in place, vibrant competition in the
telecommunications sector will encourage firms,
such as Zain, to employ and develop talented
Saudis who will be the ones to create the future
wealth and prosperity of the Kingdom. It strikes
Recent changes such as
the reduction of the
mobile termination rate in
2015 and again in 2016, the
allocation of more
spectrum and the recent
high order are very positive
developments that I
believe have already led to
more vibrant competition
in the market."
me that all of my colleagues at Zain Saudi Arabia,
whether Saudi or not, have the energy, drive and
commitment to help realise the objectives of Vi-
sion 2030”, says White.
An important element of the decision is that
Zain’s License will be upgraded to a Unified
License. Effectively this means that Zain will
no longer be a mobile only operator, but will be
licensed to offer other services such as fixed voice
and data. Clearly Zain Saudi stands to gain the
most from this decision, as to date the company is
only licensed to offer mobile services. Of course
to offer fixed services one needs infrastructure as
well as a licence. So, what’s the level of readiness
of Zain Saudi?
Whitesays:“Webelievethatpartnershipswith
thosewhohaveexistingphysicalinfrastructure,
particularlylastmileaccesstocustomerprem-
isesofferthemosteconomicalmeansforZainto
providefixedserviceswithintheKingdom. Tothis
effectwehaveannouncedthatweareindiscus-
sionswiththirdparties,suchasSaudiElectricity
Company,althoughofcourseweremainopento
partnershipswithotherstoenableZainSaudi
Arabiatobuildacapabilityandofferservicesthat
willenabletheKingdom’sVision2030.
“OurrelationshipwithSaudiElectricityCom-
panyhasthepotentialtodeliverupontheStrategic
ObjectiveoftheNationalTransformationPlanto
expandthecoverageanddensityofbroadbandto
Zain Saudi Arabia is engaged in an ongoing dialogue to maximise its contribution to achieving the objectives of Vision 2030.

4. CommsMEA November 2016www.commsmea.com
INTERVIEW ZAIN SAUDI ARABIA
27
thehomewithinurbanareasoftheKingdom.”
With the three leading operators licensed to
offer all different kinds of services, one can only
expect that this will ensure a competitive telecom
market in the Kingdom. In this perspective,
White says: “An independent economist would
still conclude that the telecommunications
market in Saudi Arabia is very concentrated,
which would be considered an indication that
competition is not working effectively. However
recent changes such as the reduction of the mo-
bile termination rate in 2015 and again in 2016,
the allocation of more spectrum and the recent
high order are very positive developments that I
believe have already led to more vibrant competi-
tion in the market.”
He however hints that there still are many
opportunities to increase competition in the
telecommunications sector in Saudi Arabia,
which will of course be to the benefit of consum-
ers. In particular, Zain Saudi is looking forward
to offering its customers an even better mobile
data experience as it is allocated more spectrum
in line with Vision 2030’s objective to develop the
IT sector.
Be it in preparation for Vision 2030, or at-
tempts to keep up with the surge in customers’
demand for high-speed, seamless connectivity
all the time, the onus is on the communication
service providers to adopt newer strategies to
retain their market prominence. Over that past
couple of years the global telecommunications in-
dustry has been facing a period of unprecedented
change, fundamentally customers have chosen
to use more of the mobile digital connectivity
services offered by our industry, rather than of
traditional voice services. Fortunately, custom-
ers are still willing to pay the same amount of
money each month for these services. As White
says: “It is great news for our industry that the
gross margin on data services is higher than
on traditional voice services. The challenge
facing the industry is to migrate our customer’s
spend from voice services to data services whilst
increasing our overall gross margin and ensuring
that our yield per unit of data traffic generates
sufficient economic returns.”
The telecom industry is further facing new
competitive forces, for example from the over the
top (OTT) players who challenge the industry’s
core voice revenues. However it remains the case,
that only a national telecommunications compa-
‘Dawiyat’ a subsidiary of Saudi Electricity Company has signed a Letter of Intent with Zain Saudi Arabia
to cooperate in the utilisation of the SEC’s fibre-optic network by Zain Saudi Arabia, mutual market-
ing of both companies’ services, and providing new locations to establish telecommunication towers
and infrastructure. Dawiyat obtained a licence early this year to provide telecom through a fibre-optic
network which is considered one of the largest and latest networks in the region.
FINANCIALS – Q3 RESULTS
Revenues: SAR 1,634 million (- 7% YoY)
Gross margin: 65%
EBITDA: SAR 488 million (+10% YoY)
(Positive financial effect of 15 year licence extension to reflect
in Q4, 2016 results and onwards)
which supports the prospects of success for the
Kingdom’s Vision 2030.
“Zain Saudi Arabia’s gross margin has in-
creased from 45% in 2012 to 65% in Q3 of 2016 as
the company proactively embraces this funda-
mental shift occurring within our industry both
globally and locally.”
White further adds how along with digi-
tal transformation, Zain Saudi has ensured
operational transformation too. The company
embarked upon its “Winning through Caring”
strategic transformation programme in 2013.
As a first step of the transformation program it
enhanced its network to improve the delivery of
next generation digital services, particularly the
delivery of mobile video services that have now
become the norm for consumers. The second
step involved improvement of customer facing
elements, such as a refresh of the retail estate,
with new propositions designed to closely match
the demands of consumers and build upon the
company’s strengths in customer service.
The recent decision has significantly increased
the strategic options available to Zain Saudi as it-
takes the next steps to become a strong, digitally
focused, third operator, serving all of its stake-
holders within the Kingdom of Saudi Arabia.
ny can provide the essential connectivity services
that enable these applications. “At a national
level, consumers choose the telecommunications
service provider that has optimised their network
to deliver high quality, high speed and high capac-
ity services. And that’s why Zain Saudi Arabia
invested SAR 4.5 billion in enhancing its network
infrastructure and improving the experience
delivered to our customers”, says White.
Like many other telecommunications
companies, Zain Saudi Arabia has taken steps
to digitise its customer touch points and its
customer journey. An ever greater percentage
of customer enquiries are now resolved through
digital channels. White says: “Just to put this in
context, the number of transactions handled by
our well established digital self-care portal has
already tripled in the first nine months of 2016.
Saudi Arabia is truly a digitally connected society,