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Umm Al-Qura Univ. J. Eng.& Arch. Vol. 2, No.2, pp.

39-51 (2010) 30-11-009 The University Press



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Mobile Phone Market and Services in Saudi Arabia

Mohammed T Simsim

Assistant professor, Electrical Engineering Department, Umm Al-Qura University, Makkah, Saudi Arabia





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Abstract Mobile phone plays an increasingly important role in the daily life of most
of us. Thus, global mobile phone service penetration rate reached 59.62% in 2008. The rate
in Saudi Arabia, one of the highest in the world, surpassed 148% by early 2009. The
service is becoming more affordable due to price reductions as a result of competition
between service providers. High revenues are evident and there is (a) potential for further
increase in the future. This paper discusses telecommunications market development in
Saudi Arabia since its early days in 1995. We discuss changes in penetration rates and
prices due to liberalization of the market by licensing the second and third mobile phone
operators in 2005 and 2008, respectively. Empirical research was carried out in the main
residential areas of Saudi Arabia to study the customer's preference for mobile phone
service and the factors influencing their subscription. Results based on the analysis of 550
usable participations indicate that the financial factor significantly influence the customer's
selection of the service provider. Further analysis reveals that advertisements of service
providers ought to focus on discounted offers and price reductions, if any, to be more
attractive and effective. Moreover, it is very important to train customer care personnel to
provide prompt and persuasive responses to customers' complaints and to be well-mannered
when they interact with the customers. Also, the analysis reveals that there is no strong
tendency among family members and friends to subscribe with the same service provider.
Keywords Customer, Mobile Phone, Operator, Saudi Arabia, Subscriber,
Telecommunications market.

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1- INTRODUCTION
Telecommunication has undergone significant changes over the past few
years and its paradigm has moved from wired to wireless communications.
The ability to provide wireless communications to an entire population was
not even conceived until Bell laboratories developed the cellular concept in
the 1960s and 1970s (Noble 1962; MacDonald 1979; Rappaport 2002). The
first commercial cellular telephone system was launched in Japan in 1979.
Since that time, mobile cellular services have expanded rapidly. Wireless
communications have penetrated into the general public irrespective of age or
social class at a higher rate compared to other technologies such as personal
computers and the Internet (Simsim 2006). Thus, mobile phone plays an
increasingly important role in the daily life of most of us. Besides its main use
as an audio/video communication device, mobile phones are used today for
several activities related to education, business, traveling, web-browsing,
recording, etc.
Revenues of telecommunication services are increasing worldwide. In the
USA, revenues from cellular and other wireless telecommunications firms
reached 126 billion US dollars in 2004 with an increase of about 14% from
2003. On the contrary, revenues for wired telecommunications carriers in
2004 suffered a shrink of about 5% to 211 billion US dollars compared to
2003 (News 2005). In Europe, wireless telecommunication services market
increased by 7.3% to reach a value of 197.2 billion Dollars in 2007 and the
number of subscribers increased by 6.9% to reach a volume of 626.6 million
subscribers. By 2012, the European wireless telecommunication services
market is expected to reach the value of 237.3 billion Dollars, an increase of
20.3% since 2007, and the market volume is expected to reach 717.1 million
subscribers, an increase of 14.4% since 2007 (Scribd 2008). In Saudi Arabia,
revenues of telecom services have been growing steadily at an annual
cumulative average rate of about 14% since 2001. In 2008, revenues from
mobile telecommunication services, offered inside KSA, exceeded 38 billion
Saudi Riyals, equivalent to10.13 billion Dollars.
Global mobile phone service penetration rate reached 59.62% in 2008,
according to the international telecommunication union (ITU) statistics (ITU
2009). By contrast, the Communication and Information Technology
Commission (CITC) data shows that the total number of mobile phone
subscribers in Saudi Arabia reached 36 million (143.6% penetration) by the
end of 2008 (CITC 2008). This penetration rate is one of the highest in the
world (see Table 1) (ITU 2009). However, active mobile phone subscriptions
in Saudi Arabia were estimated to be 18% less than the total raw number of
subscriptions, based on the 90-day activity rule adopted by CITC, whereas
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prepaid subscriptions are 85% of the total number of mobile phone
subscriptions, which coincides with the trend in similar markets around the
world (CITC 2008).
Mobile phone service was first offered in the Kingdom of Saudi Arabia
(KSA) in 1995 by the ministry of post, telegraphs and telephones (PTT).
Currently, there are three mobile phone service providers working in Saudi
Arabia. The Saudi telecom company (STC), which was incorporated in 1998,
undertook the responsibilities of mobile phone service from the PTT.
Competition in the Saudi mobile telecommunications market started when
Mobily commenced operations in 2005, when the total number of
subscriptions was only 14.2 million (61% penetration). The third mobile
licensee, i.e. Zain, launched its services in August 2008. Most recent data
show that the total number of subscriptions reached 37.4 million (148%
penetration) in the first quarter of 2009 (MCIT 2009). Thus, liberalization of
the telecommunication sector and the resulting competition between service
providers lead to remarkable benefits for the economy at large and for the
consumers in particular in terms of increased service availability, better
quality of service, improved customer care, more customer choices, and lower
prices. For instance, while the cost of living index (CLI) in KSA increased by
19% in the period between 2002 and 2008, the cost of telecommunication
services decreased by 23.5% during the same period of time (CITC 2008).
Developments in information and communication technology (ICT) are
important for economic growth and improvement of living standards in
modern societies. Therefore, the long-term perspective of the government of
KSA for ICT is "the transformation into an information society and digital
economy to increase productivity and provide communications and
information technology (IT) services for all sectors of the society all over the
country and build a solid information industry that becomes a major source of
income" (MCIT 2006).
It is important to explore the subscribers' opinions and study their attitudes
in order to identify which factors related to mobile phone service influence
their subscription. Such research leads to further improvements of the quality
of telecommunication services, which in turn attracts additional subscriptions.
In (Baghdasaryan 2009), the effect of liberalization of telecommunication
markets in Armenia, as one of the developing countries, is discussed. The
study shows that liberalization of the telecommunication sector in Armenia
gave immediate positive results in making the telecom service accessible and
affordable for its citizens. Diffusion of new telecom product in developed and
developing countries is studied in (Zhu, Yan et al. 2006). The paper identifies
adopter category differences in new product diffusion between developed
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countries and developing countries and offers recommendations on strategy
changes for multinational companies working in the field. The paper in
(Bohman 2008) focuses on the links between income distribution and the
adoption of technology in Brazilian telecommunications market. The results of
the empirical study show the huge difference between poor and rich regions in
Brazil in terms of adopting telecommunications service and, thus, on the size
of the telecom market. The findings in (Bohman 2008) may help in designing
tools for a more rapid diffusion of telecommunications in similar markets.
More research papers investigating similar issues can be found in (Varoudakis
and Rossotto 2004; Flacher and Jennequin 2008; Xiaohua, Yunfeng et al.
2008; Ge, Yu et al. 2009; Kim 2009; Peng, liu et al. 2009). Nevertheless, there
are (only) few studies addressing issues related to telecommunication service
in the Saudi society. For instance, it is not clear how the mobile phone
customers in Saudi Arabia make their choice on the preferred service provider.
Moreover, the evaluation of mobile service customers' for the services offered
by the operators has not been investigated.
In this paper, we study mobile phone service in Saudi Arabia. We identify
some of the factors that make a customer favors a certain service provider.
Furthermore, we analyze customers' opinions and explore some of their
requirements related to mobile phone services. Results presented here provide
guidelines for mobile phone service providers on how to attract more
customers by satisfying their needs and expectations. Local authorities and
regulatory bodies may also benefit from the results presented here by
identifying the public opinions on services offered by the mobile phone
service operators.
In the next two sections, we discuss the research objectives and
methodology. Then, analysis and discussion of the results is presented.
Finally, the paper ends up with a summary outlining the concluding remarks.
2- RESEARCH OBJECTIVES
The study has the following main aims. The first is to determine the main
factors that influence the decision of an individual to prefer a certain service
provider. The second is to investigate the factors that persuade a subscriber to
change his/her subscription to another service provider or to have an
additional subscription from another service provider. The third is to identify
the important features, in customers' opinion, of customer care services. The
fourth is to specify the most important item that attracts the customer towards
joint promotional offers between mobile phone service providers and mobile
phone manufacturers.
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3- RESEARCH METHODOLOGY
To determine the customers' preference for mobile phone services in Saudi
Arabia, a survey was conducted in February 2009 in several areas of the
country. The survey was distributed in shopping centers, offices, schools,
homes, and university. Demographic data, e.g. gender, age, monthly income,
and level of education, were sought from the participants. A total of 550
useable participations from mobile phone subscribers were obtained.
4- ANALYSIS AND DISCUSSION
Details of the demographic factors of the participants are given in Table 2,
which shows that the sample covered (a) wide range of age, education,
income, occupation, etc.
Some individuals prefer to have more than one mobile phone subscription.
Thus, a person may use one subscription for usual daily calls, i.e. main
subscription, and at the same time use an additional subscription for special
purposes such as business or international calls. Table 3 shows the distribution
of participants' subscription with the three mobile phone service providers for
the main and additional subscriptions. It is obvious that most of the
participants have their main mobile phone service subscription with STC,
whereas (a) majority of the additional subscriptions are with Mobily.
Table 4 shows the distribution of participants' main subscription with the
three mobile service providers based on gender and Fig. 1 shows the
proportionality of main subscriptions with the three mobile service providers
based on the city of residence. We conclude from these illustrations, that there
is no big difference in subscription proportionality between the three service
providers based on gender or city of residence.
In order to identify the most important factors influencing mobile phone
subscription from the customer's point of view, each participant was asked to
specify the factor that matters most when he/she subscribe to a certain mobile
phone service provider. Also, each participant was asked to indicate the most
important factor that encourages him/her to have an additional subscription
from a different service provider or even to change the main subscription. The
responses, which are summarized in Table 5, show that the financial factor is
the most important one. Thus, more than half of the participants consider the
price of the service to be the most important factor in choosing their service
provider. In addition, (the) majority of the participants consider the discount
offers to be the most attractive factor that encourages them to have an
additional subscription or to change their subscription.
Each participant was also asked whether he/she tends to subscribe with the
same service provider of his/her family and friends. The responses, which are
summarized in Table 6, show that there is no strong tendency to subscribe to
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the same service provider among family members and friends.
To identify the impact of advertisements by service providers on attracting
more customers, each participant was asked whether he/she had subscribed
with a service provider as an immediate result of its advertisements. Only
45.6% of the responses were positive, which indicates that mobile service
providers may need to improve their advertising activities. Taking into
consideration the responses in Table 5, we conclude that advertisements need
to concentrate on discount offers and low service prices in order to be more
effective and attractive.
Table 7, summarizes the responses to the questions about the most important
features, from the customer's point of view, of customer care call centers and
customer care offices. The majority of the participants believe that
understanding the problem and solving it within a reasonable period of time is
the most important in both cases. Good manners of the staff are found to be
the second most important feature of customer care services.
Recently, there have been several joint promotional offers between service
providers and mobile phone manufacturers. Therefore, the participants were
asked to indicate the most important factor in such joint promotional offers.
Table 8, which summarizes the results, shows that substantial majority of the
participants consider the price of the offer to be the most important factor in
these joint promotional offers.
5- CONCLUSION
Telecommunications market is growing rapidly in Saudi Arabia where
mobile phone service penetration rate is one of the highest in the world. High
revenues are evident and there is potential for further increase. Recent data
show that mobile phone service penetration rate in Saudi Arabia surpassed
148%. Yet, active subscriptions were estimated to be 18% less than the total
raw number of subscriptions and prepaid subscriptions constitute 85% of the
total number of subscriptions. This can be attributed to many factors such as
the temporary usage of mobile phone cards by visitors of Saudi Arabia during
Hajj and Umrah seasons. Thus, more than five million people come to Saudi
Arabia every year to perform religious duties and/or to visit the Holy Cities in
Makkah and Al-Madinah. A significant number of these visitors use local
mobile phone cards temporarily during their visit.
Competitions between the three service providers lead to improvements in
services and prices, which provoked further increase in the number of
subscriptions. The costs of the telecommunication services decreased by
23.5% over the last seven years. Whereas the cost of living index (CLI)
increased by 19% during the same period of time. Thus, mobile phone service
is becoming more affordable and, therefore, is spreading rapidly among
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individuals from all classes in the Saudi society.
Empirical study shows that there is tendency among some of the participants
to use more than one mobile service subscription at the same time, which also
contributes to the increasing penetration rate. The financial factor is found to
be fundamental in customer's selection of the service provider. Therefore,
advertisements of service providers ought to focus on discount offers and low
prices of the service, if any, to be more attractive and effective. Currently,
there is no strong inclination to subscribe to the same service provider among
family members and friends. It is very important to train customer care
personnel to provide prompt and persuasive responses to customers'
complaints and to be well-mannered when they interact with customers.
While this exploratory research has revealed some interesting results, further
improvements can be considered by involving larger sample and studying
additional factors related to customer's evaluation of services and prices for
the different service providers.

Table 1: Mobile phone penetration rate for selected countries by the end of 2008.
Country Australia USA UK France Lebanon Kuwait Qatar
Mobile
phone
penetration
rate
104.96% 86.79% 126.34% 93.45 % 34.10% 99.59% 131.39%



Table 2: Demographic factors of the participants.
Factor Item Frequency Percentage
Male 413 75.1%
Gender
Female 137 24.9%
< 15 7 1.3%
15-18 37 6.7%
19-25 144 26.2%
26-35 215 39.1%
36-45 101 18.4%
Age (years old)
> 45 46 8.4%
Married 327 59.5%
Matrimony
Non-Married 223 40.5%
Saudi 487 88.5%
Nationality
Non-Saudi 63 11.5%
Makkah 193 35.1%
Madinah 64 11.6%
Riyadh 58 10.5%
City
Jeddah 139 25.3%
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Eastern province
(Dammam and AlKhubar)
41 7.5%
Others (Yanbu, Baha,
Abha, Taif, Jazan, )
55 10.0%
No Income 88 16.0%
< 1000 48 8.7%
1000-3000 65 11.8%
3001-6000 102 18.5%
6001-9000 115 20.9%
Monthly Income
(Saudi Riyals)
< 9000 132 24.0%
Primary 12 2.2%
Intermediate 42 7.6%
Secondary 130 23.6%
Diploma 310 3.1%
Bachelor 39 56.4%
Education
Post Graduate 17 7.1%
Student 119 21.6%
Government Employee 229 41.6%
Private Sector Employee 105 19.1%
Policeman (officer) 40 7.3%
Businessman 13 2.4%
Retired 3 0.5%
Housewife 32 5.8%
Occupation
Non-Employee 9 1.6%

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Table 3: Mobile service subscription.
Subscription Provider Frequency Percentage
STC 414 75.3%
Mobily 106 19.3% Main
Zain 30 5.5%

STC 204 36.9%
Mobily 223 40.3% Additional
Zain 126 22.8%



Table 4: Main mobile service subscription based on gender.
Main subscription
STC Mobily Zain
Male 77.5% 17.7% 4.8%
Gender
Female 68.6% 24.1% 7.3%






Fig. 1: Proportionality of main mobile service subscription based on city of residence.

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Table 5: Factors influence customer's choice of the service provider.
Type Item Frequency Percentage
Prices 280 50.8%
Mobile network coverage 175 31.8%
Customer care services 57 10.4%
Company name 33 6.0%
The factor that matters the
most in choosing the service
provider
Others 5 1.0%
Discounted offers 309 56.2%
Easy bill payment 66 12.0%
Special numbers 33 6.0%
Variety of services 92 16.7%
International roaming 31 5.6%
The factor that is most
attractive to have additional
subscription or to change
main subscription
Others 19 3.5%





Table 6: Tendency to subscribe with the same service provider among family
members and friends.
Description Frequency Percentage
Always 89 16.2%
Sometimes 266 48.4%
Rarely 56 10.2%
Never 139 25.3%




Table 7: Important factors of customer care call centers and customer care
offices.
Type Item Frequency Percentage
Good manners of staff 121 22.0%
Understanding the problem and
solving it within reasonable time
205 37.2%
Short waiting time 112 20.4%
Answering in all times 110 20.0%
The most
important
factor of the
customer care
call centers
Others 2 0.4%
Good manners of staff 193 35.2%
Understanding the problem and solving
it within reasonable time
188 34.2%
Short waiting time 91 16.6%
Distribution of offices in suitable
locations
76 13.8%
The most
important
factor of the
customer care
offices
Cash bill payment or via bank card 1 0.2%







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Table 8: Important factors of joint promotional offers.
Description Frequency Percentage
Price of the offer 394 71.6%
Mobile phone manufacturer's
company (Brand name)
97 17.6%
Service provider 59 10.7%


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Acknowledgment
The author would like to thank the Saudi Telecom Company (STC) for
funding the empirical research of this study in 2008. Also, the author
acknowledges the participation of Dr. Abdulbasit Abed, Engr. Omar Hafiz,
and Engr. Yahia Adnan Atwa from Umm Al-Qura University (UQU) toward
the completion of the empirical research.


Received 12/11/1430; 31/10/2010, accepted 29/3/1431; 15/3/2010