BOOSTING DIGITAL ECONOMY TOPS SAUDI’S ECONOMIC AGENDA

Saudi Arabia’s economy owes a lot to the Internet, communications and telecom (ICT) sector during the pandemic.

The kingdom’s robust ICT infrastructure, strong communications network and access to world-class telecom systems and technologies allowed companies to function remotely, and keep the engines of the economy revved up.

Even before the health crisis, Saudi Arabia was focused on building a digital economy and creating a strong platform that would nurture digital start-ups and bring more efficiency in the workplace, in government processes and in the lives of its citizens.

IDC, an IT research firm, expects Saudi Arabia to spend USD 37 billion on ICT this year, a 2.4% jump over 2019.

"The Saudi ICT market is grappling with a wave of new digital transformation realities," said Hamza Naqshbandi, IDC’s country manager for Saudi Arabia and Bahrain. "The growth we are seeing in ICT spending is primarily being driven by an increased focus on giga projects and smart governance. These initiatives are spurring the adoption of artificial intelligence, robotics, the Internet of Things, cloud, blockchain, and a host of other emerging technologies as both the public and private sectors look to create synergies, cut costs, increase safety, and optimise processes across verticals in a whole new way."

But that forecast was made in February, before the virus swept the world. Since then Saudi authorities and companies have accelerated the push towards digitisation.

The Ministry of Communications and Information Technology is already pursuing an ICT Sector Strategy 2023, which is in line with the Saudi Vision 2030 initiative of diversifying revenues and developing the base on which a knowledge economy can thrive.

Some of the measures include developing the telecommunications and information technology infrastructure especially high-speed broadband, strengthening the governance of digital transformation, developing building standards to facilitate the extension of broadband networks, and supporting local investments in ICT sector.

The goals are to create 25,000 jobs in the ICT sector and raise women’s participation by 50%. Other key targets set out in the 2023 strategic vision is to raise the sector’s economic contribution by SAR 50 billion and expand the size and breadth of the IT market and emerging technologies by 50% over the next three years.

Given the importance of mobile phones and the Internet, it is no surprise that Saudi Telecom’s earnings rose 9.67% in the second quarter compared to the same period last year, while half yearly profits grew just under 7% in the first half.

“The company, despite the emerging epidemic conditions of the coronavirus (COVID-19), was able to grow its top line by 9.7% in the current quarter compared to the same quarter of the previous year, mainly due to the increase in Enterprise and STC’s subsidiaries revenues,” Eng. Nasser bin Sulaiman Al-Nasser, STC Group CEO, said in a second quarter earnings statement.

The company has increased its fibre optic customers’ base by 21% and broadband by 2.9%, while data revenue increased by 8.6% during the period, highlighting Saudi businesses’ increasing dependence on the Internet during the pandemic.

STC is also accelerating the deployment of new services and has rolled out advanced technologies such as 4G and 5G.

“Moreover, in a move that can transform the way consumers use smart phones and devices across Saudi Arabia, STC is localising the platform for E-SIM for the first time in the kingdom by obtaining an international accreditation for rolling out E-SIM technology,” the company said.

Mobily also pushed through the headwinds with revenues rising to SAR 3.6 billion, a 6.8% jump compared to the same period last year – its ninth consecutive quarterly increase. Profits rose 12.8% during the period. The company said data consumption jumped 34% quarter to quarter, while business unit and fibre-to-home revenues grew.

Zain Group also noted that it invested USD 299 million in the Saudi market, the most among the seven key countries it operates in.

“The 5G and FTTH expansion across the kingdom, saw Zain KSA invest USD 495 million (47% of revenue) during H1 2020 on tangible capex and spectrum/license fees,” Mohammed Shereef, the company’s executive finance director, said in an earnings call. “This relatively high ratio of CAPEX/revenue reflects the significance the operation has in positioning itself as a dominant digital player in the kingdom, preparing itself for the next phase of profitable growth.”

The kingdom contributes 41% to Zain’s revenues, and 15% of its customer base. Its revenues in the country dropped 5% to a still substantial USD 549 million, the company said.

The kingdom’s telecom providers have played a commendable role during the pandemic. And with the focus on remote working and digitisation, they will likely be one of the biggest beneficiaries of the new era.