Call for internet subsidies in the Gulf

Saudi Telecom chief calls on Gulf governments to invest billions of dollars in broadband networks

The chief executive of STC has called on the Saudi government to subsidise a national broadband network over the next five years. Fayez Nureldine / AFP

Gulf states should spend billions of dollars a year subsidising broadband connections, says the head of a regional telecommunications company.

Access to the internet is now a basic human right, said Jameel Al Molhem, the chief executive of Saudi Telecom Company (STC) for its domestic operations.

He has called on governments across the Gulf region to fund internet networks, especially those serving rural areas.

That is because the internet is becoming as essential as other basic utilities, especially for today's "connected" generation of children.

"It's going to be the electricity of the future," said Mr Al Molhem. "Look at 'Generation C' - the kids born in the 1990s. Would you dare disconnect them from the internet?"

Mr Al Molhem called on Saudi Arabia's government to subsidise a national broadband network at a cost of up to 20 billion Saudi riyals (Dh19.58bn) over the next five years.

"We're not looking for the government to subsidise STC, but to subsidise the citizens by providing them coverage," he said. "It's going to [cost] between 10bn to 20bn riyals in five years, which is reasonable."

Mr Al Molhem said that STC was "always in discussion" with the government, although he did not give details of specific talks on the matter.

He said the return on investment would be "tremendous" for the wider economy and would help to connect rural areas to the Web and services such as "e-health".

"We're covering Riyadh, Khobar, Jeddah … But what about the rural areas, what about the villages?" said Mr Al Molhem.

"It's not going to be fair to offer e-health to a guy in Riyadh, who has tens of hospitals near his home, but not to give it to the guy in the village."

Government subsidies of broadband networks are common in some other markets, such as Japan and Australia.

This model should now be embraced by governments across the Gulf region, said Mr Al Molhem.

Telecoms companies have had to shell out billions of dollars in capital expenditures (capex) building networks.

"One of the largest capex in the history of STC is being rolled out today and the next five years for broadband. It's huge," said Mr Al Molhem.

But such players face declining revenues from voice calls, as services such as Skype offer calls free of charge over the networks they built.

"If you look at voice, you're going to see a downward trend and shrinking in terms of revenue,"Mr Al Molhem said.

Despite this, revenues from broadband subscriptions are on the rise in Saudi Arabia.

Across all operators, internet revenues are on track to hit 20bn riyals by 2015, he said.

"We're looking today at a market of around 8bn riyals in broadband. And the forecast is for this to go above 20bn riyals in 2015, in terms of revenue coming from broadband services for home, mobile and enterprise," he said. "It's an opportunity for us to continue investing, to make sure [we] capitalise on this potential growth."

Mr Al Molhem told The National that 500,000 households in Saudi Arabia would be connected by STC's fibre-optic internet by the end of this year. This is on track to grow to 2 million homes by 2013, he said.

The company will invest "tens of billions" of riyals connecting homes in Saudi Arabia to the internet over the next decade, according to Zawya Dow Jones.

STC, which is listed on the Tadawul stock exchange, reported net income of 2.5bn riyals in the first quarter of this year, an increase of 8 per cent on last year's fourth quarter.

The company is growing its international operations and Mr Al Molhem said it would not rule out further overseas acquisitions.

The firm had bid for a mobile-operating licence in Syria, but the auction has been suspended because of the anti-government protests there.

Mr Al Molhem said STC hoped to restart this process. "We're still looking at the Syrian market. It's a very good market," he said. "Hopefully we can go back and invest in this market and across other markets."