Zain Saudi responds to demand with backhaul investment

24 August 2011 | Guy Matthews


Zain Saudi Arabia plans to invest heavily in backhaul infrastructure to help it keep pace with fast growing subscriber demand in the kingdom.

The company has agreed a contract with vendor Alcatel-Lucent for the supply of its IP/MPLS-based mobile backhaul solution, plus associated consultancy, as it readies its infrastructure for the launch of next-generation communication and data services.

The debt-laden cellco, which earlier this year signed a refinancing deal with a group of lenders, recently posted hugely improved second quarter results for the three months ended June 30. It has attributed its performance for the period to an expanding customer base, which it claimed now exceeds nine million subscribers. It said it has also reduced spending with a view to sharpening profitability further.

The Saudi telecoms market has been growing at around 30% per year, and is widely acknowledged as having the greatest potential for growth in the wider Persian Gulf region. It has proved a magnet for all the big Middle Eastern telco names since liberalisation.
“What makes Saudi Arabia so attractive to operators is the combination of its population size and wealth,” said Paul Kwon, an analyst with the Buddecomm consultancy. “While its total population is nowhere near as high as that of Turkey or Iran, its GDP per capita is much higher and while the smaller Gulf countries are richer per capita, their populations are tiny. In addition, its market has been slower to develop than some others in the region such as the UAE or Qatar, leaving room for growth.”

The Riyadh-based Economics Studies House, in a report commissioned by African communications conglomerate MTN Group, has predicted that the penetration rate of mobile phones in Saudi Arabia could grow from the present level of 32% to 60% by 2014, with over 20 million subscribers.

The report notes that support for this many subscribers will entail dramatic increases in network coverage and service availability, not to mention backhaul capacity.

“Through the Alcatel-Lucent IP/MPLS mobile backhaul solution, Zain KSA will dramatically simplify operations, reduce operating expenditures, as well as offer its customers the highest quality and most advanced wireless IP services,” said Amr El Leithy, head of Alcatel-Lucent’s activities in the Middle East and Africa.