In Saudi Arabia the number of broadband subscribers has grown 43-fold from 64,000 in 2005 to over 2.75 million at the end of 2009, according to data released by The Communications and Information Technology Commission (CITC; Saudi’s telecom regulator). This represents a CAGR of around 156% annually over the period 2005-2009. 

The broadband penetration rate stood at around approximately 11% of the Saudi Arabian population at the end of 2009. Most broadband growth in 2009 was due to the increase in wireless broadband connections, which grew by around 488% during the year to reach over 1.41 million. This translates to over 51% of all broadband connections. In contrast, while DSL grew by over 30% in 2009, its share of broadband subscriptions was reduced from 74% the previous year to around 47% at the end of 2009. Other wireline broadband connections (cable and fiber) are marginal, constituting less than 2% of broadband subscriptions. 

There is still a high potential for more growth in Saudi Arabia in broadband services, despite the already high growth rates over the last few years. The broadband market is significantly underserved in many suburban and rural areas of the country, but the demographics offer good prospects for growth. The population is young – more than half are less than 25 years old, and about one third are less than 15, while there are more than five million students. 

Although Saudi Arabia needs a mix of different technologies to deliver broadband economically, wireless broadband technologies like WiMAX, HSPA and LTE are expected to be major contributors to broadband growth. WiMAX operators like Etihaad Atheeb “GO,” ITC and Mobily continue to expand their networks. At the end of Q2 2010 Mobily had deployed 1,649 WiMAX base stations from Samsung across Saudi Arabian 23 cities.  

Mobily has an early market entry advantage and is expected to emerge as a strong WiMAX player in Saudi Arabia in the coming years. One of the operator’s deployment drivers is that it offloads data traffic from its heavily congested 3G network to its WiMAX network. From May 2007 to February 2010 the daily data traffic within Mobily’s mobile data network increased by more than 21,000%, reaching more than 50 terabytes a day.

Mobily is committed to deploying LTE. However, before launching its commercial LTE network it is planning to introduce 3G HSPA+ (42 Mbps) service in Q4 2010. It has completed trials for the coming upgrade of its HSPA+ network. The service is scheduled to roll out in major cities by the end of 2010. It will be the first major speed upgrade since Mobily launched HSPA+ towards the end of 2009 at speeds of 21 Mbps.

The HSPA+ networks that are already operational in Saudi Arabia, and the ongoing LTE activity, will further help in the broadband uptake. STC is deploying LTE and ZAIN has also commenced deployment in the 2.6 GHz in Riyadh. Mobily has completed testing LTE with Huawei, including lab and field tests that aimed to set up installment and operation plans for evolved packet cores and routing network elements, as well as operation and maintenance systems. Mobily is conducting similar testing with Ericsson and Nokia Siemens Networks.

Saudi Arabia, along with Bahrain and UAE, is expected to be an early LTE adopter in the Middle East. Mobile operators in these three countries are very active with regard to LTE. UAE-based Etisalat launched 42 Mbps service on its HSPA+ network in Q4 2010, and it plans to launch LTE by the end of the year. 

For Etisalat, the main reason to deploy LTE is to address the traffic demand. Etisalat saw a 200% growth in traffic in 2009. It expects traffic to double over the next two years. 20% of its customers are consuming 80% of the traffic, mainly using USB dongles. In April 2010 Zain Bahrain demonstrated what it claimed was the Middle East region's first voice call over LTE technology. ZAIN Bahrain is committed to mass-scale deployment of LTE. It has contracted NSN to deploy Flexi base stations (supporting W-CDMA, HSPA/HSPA+ and LTE).

Wireless broadband presents the very attractive proposition of requiring low infrastructure investment, which is particularly ideal for the low-density Arabic gulf countries. Middle East markets are increasingly looking beyond voice services to ways that wireless broadband can benefit education, healthcare, and overall economic development. Whichever technology Middle Eastern operators select, the ultimate winners will be the end users who will gain entry to a new world of communications potential.

MARAVEDIS is a leading analyst firm focusing on 4G and broadband wireless technologies and markets. 

Author: By Basharat Ashai, Market Analyst, APAC & MEA