All systems Go

In the middle of June, Etihad Atheeb Telecom launched its Go fixed line service, thereby becoming the first of the new breed of licensed national fixed-line operators to do so. Go has rapidly rolled out its WiMAX network to four provinces in the kingdom and CEO Ahmad Sindi details the factors that give him optimism regarding his business moving forward

Ahmad Sindi would like to offer Saudi subscribers a range of offers and a quality of service they have not experienced elsewhere

The daunting prospect of a new entrant making inroads against a well-entrenched incumbent does not come much larger than Etihad Atheeb Telecom’s entrance into Saudi Arabia’s fixed line market, where the company faced the attention of the Middle East’s largest telco, STC.

Etihad Atheeb, which launched a nomadic WiMAX broadband service in the middle of June under the brand name Go, immediately scored a mini victory by becoming the first of three recently licensed operators permitted to operate fixed line services in the kingdom. In March 2008 Go awarded Motorola a US$165 million WiMAX 802.16e infrastructure contract, enabling the service provider to make quick progress on its journey to offer unique broadband services in the kingdom

However, any gains from being the only new entrant for the meantime are quickly checked given STC’s activities in recent months, which are clearly aimed at interrupting the new entrant’s early progress.

“STC offered discounts on its broadband services amounting to between 70 – 94 per cent when Go launched, recalls Ahmad Sandi, the new entrant’s CEO. “The incumbent continues in an amazing manner to use its size and dominant position in a manner that hurts competition,” he adds. One such tactic of anti-competitive behaviour that Sindi levels against the incumbent is its adoption of promotion schemes that squeeze prices, or the bundling of unrelated services in a way that only the incumbent can.

“The incumbent operator has to be prevented from anti-competitive behaviour, which is a reprehensible tactic worldwide, and includes the bundling of unrelated services such as mobile voice, fixed voice and data under one service. Clearly one service subsidises another,” Sindi suggests.

Despite these challenges, Sindi is upbeat about his company’s offering, technology choice, and aggressive rollout schedule. At launch the service was available in Jeddah and Riyadh, and within a few short weeks had extended to four Saudi provinces. Placing this achievement in perspective, Go’s minimum roll out requirements as sanctioned by the kingdom’s regulator, the CITC, was to offer coverage in at least three provinces within three years.

The operator has gone on to approve additional network investment amounting to more than SAR275 million (US$73 million) for the second phase of WiMAX expansion of the network, which is set to widen coverage to the eastern region of the country by the second half of January 2010 at the latest.

“A third phase of WiMAX expansion is on the drawing boards,” Sindi says, reiterating that it is the company’s ambition to offer dense WiMAX coverage wherever the provider operates. “WiMAX for us is not a so-called a gap-filler. When we say we have launched in cities that does not mean we have placed five or six base stations. Our approach is basically to carpet the city, offering end-to-end service with seamless WiMAX coverage.”

Sindi explains that Go is looking to institute a consistent service across its entire network, leveraging WiMAX technology’s nomadic features. “Our added value to the market is our consistent, nomadic coverage,” Sindi asserts simply.

Go is actively pursing the residential and small and medium size business (SMB) sector, with Sindi believing large enterprises can have any nomadic requirements served by his company’s network, as well as any back-up needs. This is Go’s strategy for the time-being though Sindi does point out that there are capital expansion plans on the drawing board to address other critical segments of the market.

An issue often sited as a potential obstacle to the widespread uptake of WiMAX in a residential context is the prohibitively high price of customer premises equipment (CPE). Go and Sindi do not think CPE costs are a limiting factor, and he is banking on a substantial price erosion of units by virtue of the sheer number of WiMAX operators that are launching services around the world.

“We also subsidise the modem so we basically shelter the customer from the full impact of the price,” Sindi reveals “We have launched services at a time when there is a substantial demand for WiMAX CPEs worldwide. So this year has seen a very decent pick up of orders for the OEM suppliers in Europe, North America and Africa. And we have started to see a backlog of dongle suppliers in the Far East.”

Go offers a three-day money back guarantee, with no questions asked, and Sindi believes that it is this sort of customer service that will set the operator apart from its competitors

Sindi believes these are excellent signs that further price erosion will take place as far as the cost of WiMAX dongles and CPEs are concerned. “So the trend is positive, though we would like to see it occurring faster than it is right now.”

While much of Go’s market entry strategy has been set on the offer of high speed, nomadic, broadband data services, Sindi describes his company as having a secret weapon, which is VoIP. He reveals that the market is soon to be hit with a service where for the same line that gives an end-user data, that subscriber will also empowered to complete voice calls. “We already have 1 million lines within a special numbering range that will allow users to call the whole world and receive calls from the whole world,” Sindi explains.

“I am also pleased to say I have already signed an interconnection agreement with STC seven months ago. A couple of months ago I signed with Mobily and I shall soon do the same with Zain. Basically our interconnect agreements have been completed, which will be fantastic news for our customers.”

The CITC has already issued Go with numbers for a million lines, allowing a fixed line provider outside of STC to offer nomadic voice services for the first time in the kingdom. “This is a major breakthrough. Another is that CITC has issued a whole series of numbers to us for the 800 numbers. These have not been issued to the mobile operators because they are assigned as fixed service numbers. We are again the very first operator to be issued these numbers besides STC, which is a major development.”

While Sindi is enthusiastic about the prospects for voice communications for his company, he remains adamant that data will still be Go’s main business going forward simply because the market is far from saturation. Broadband penetration in Saudi Arabia currently stands at around six per cent. Of close to 10 million Internet users, Saudi counted around 1.8 million broadband users.