Zain Saudi may add fibre-optic internet access after winning licence upgrade

Shares of Zain Saudi have risen by 8 per cent since the licence upgrade was announced. Yasser Al Zayyat / AFP

Mobile Telecommunication Company (Zain Saudi) is considering introducing new services such as fibre-optic internet access in Saudi Arabia after winning an upgrade to its licence, a move that would bring the scope of its offerings nearer to larger Saudi Telecom.

Saudi Arabia’s third-largest phone operator “has the most to gain” from a licensing change by the government because it was only able to provide mobile services before, Andrew White, its chief strategy and business development officer, said. The company can start landline voice and data services after the government said it would upgrade telecommunications carriers’ licences.

“We are currently studying exactly what it makes sense for us to do,” Mr White said in Riyadh.

Zain Saudi is getting a so-called unified telecommunications licence and a 15-year extension to its permit after a high order by the kingdom last month. The government granted the same terms to other telecommunications companies, including Saudi Telecom and Etihad Etisalat. Previously only Saudi Telecom, majority owned by the government, had been able to provide a full array of services.

Shares of Zain Saudi, a unit of Kuwait’s Zain, have risen by 8 per cent since the order was announced, compared with a 6.4 per cent gain by the Tadawul All Share Telecommunications Index.

The carrier is looking at how it can partner with “existing players” to offer fibre-optic internet access, Mr White said. The company doesn’t see sense in spending billions of riyals on new infrastructure when the kingdom already has several networks in place, he said.

Zain Saudi may work with multiple partners, Mr White said. The carrier recently announced an agreement with Saudi Electricity Company, which could allow them to jointly use existing infrastructure such as the power company’s ducts into residential properties, he said.

“There’s a great opportunity for us to selectively identify areas where there is a sensible demographic, economic capacity and demand for fibre coverage, and where others haven’t rolled out yet,” Mr White said.

Rivals including Etihad Etisalat, known as Mobily, will also benefit from the unified licence.

“They will have the ability to provide fixed voice services which they weren’t able to provide previously,” Mr White said. “We simply were not able to offer fixed services at all.”

The licence extension will have a significant effect on the company’s profit, Mr White said.

Zain Saudi originally paid 23 billion riyals (Dh22.5bn) for its licence, which was scheduled to expire in 2032. Now, it will be valid until 2047, meaning that the company can amortise the licence cost over a longer period, decreasing the expense each year by more than 400 million riyals. The company reported a loss of 972m riyals last year.

“Clearly the current financial situation … is not sustainable,” making the licence extension vital, Mr White said.

In exchange for the extension, the companies will pay the government 5 per cent of their net income, the Capital Market Authority said last month. That won’t apply until the extension begins in 2032, Mr White said.

Zain Saudi is “still considering all options” for its portfolio of about 7,500 telecommunications towers, Mr White said.

Hassan Kabbani, the head of Zain Saudi, said in March the company was considering selling the towers for cash and leasing them back, or working with competitors to create one company to manage them, among other choices.

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