Wed, October 20, 2010
Saudi telecoms firm Mobily still sees promising potential in the world's top oil exporter but might also look abroad for acquisitions at some point, a senior executive said on Tuesday.

At the Reuters Middle East Investment Summit in Riyadh, Hisham Zaki El Jamal, director of strategic finance planning and investment, said: "There is still a huge upside in the Saudi market ... The market is big and is growing."

When asked if Mobily would consider foreign expansion, El Jamal said: "If there is an opportunity that maximises value for our shareholders we will consider it," but did not elaborate further.

A foreign acquisition would mark a significant development for Mobily which has up to now focused on growth in its home market, leaving foreign expansion ambitions to its main shareholder Emirates Telecommunications.

Analysts say presence in the Saudi market offers telecoms companies a chance to develop a brand equity thanks to the presence of 8 million expatriates and the annual pilgrimages that attract 2 million to 3 million people from dozens of nations and who use local networks.

Mobily started up as the kingdom's second mobile phone operator five years ago and now competes with state controlled Saudi Telecom and Zain Saudi Arabia.

Its third quarter net profit rose 41 percent to a record $303.5 million, although its revenues for the period posted their lowest ever quarter to quarter rise amid tough competition and a 178 percent penetration of voice services.

El Jamal attributed this weak rise in third quarter revenues mainly to the fact "that we didn't make major promotions during Q3 ... We try to make timely promotions that will give the best of returns".

Some analysts were alarmed by the slow increase and were left to think that it may be due to competition mainly from Zain Saudi Arabia which raised its third quarter revenues by about 15 percent from the previous period on wider customer base.

To maintain healthy profit growths that has made it analysts' favourite telecom pick in the Atab world's biggest economy, Mobily will focus on boosting revenues from data, including broadband clients, and from corporate and wholesale clients, and on cost efficiency, El Jamal said.

El Jamal added: "We see capex is stable for the moment ... Broadband is still lowly penetrated. It's a higher margin business than the voice."

Data revenues which include broadband and SMS are expected to account for 20 percent of Mobily's overall revenues in 2011, up from 18 percent in the third quarter.

Mobily aims to raise the number of its broadband clients to 7 million by 2015 from 1.5 million clients in May 2010. The fact that Saudi Arabia applies a strict form of Islam that bans cinemas and the consumption of alcohol is a boon for telecom operators especially in the internet business.

The firm also wants to win more contracts from government departments and private firms to raise the share of corporate clients' revenues to up to 19 percent of total revenues by 2015, from 5 percent by the end of September.

El Jamal said: "Our projections estimate corporate revenues for all telecom firms to reach between 28 and 30 billion riyals by 2015."

The firm also wants to further boost revenues from wholesale clients, the telecom service providers who pay a fee to use Mobily's network infrastructure.