Umm Al-Qura Univ. J. Eng.& Arch. Vol. 2, No.2, pp.
39-51 (2010) 30-11-009 The University Press
.:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , Mobile Phone Market and Services in Saudi Arabia
Mohammed T Simsim
Assistant professor, Electrical Engineering Department, Umm Al-Qura University, Makkah, Saudi Arabia
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Abstract Mobile phone plays an increasingly important role in the daily life of most of us. Thus, global mobile phone service penetration rate reached 59.62% in 2008. The rate in Saudi Arabia, one of the highest in the world, surpassed 148% by early 2009. The service is becoming more affordable due to price reductions as a result of competition between service providers. High revenues are evident and there is (a) potential for further increase in the future. This paper discusses telecommunications market development in Saudi Arabia since its early days in 1995. We discuss changes in penetration rates and prices due to liberalization of the market by licensing the second and third mobile phone operators in 2005 and 2008, respectively. Empirical research was carried out in the main residential areas of Saudi Arabia to study the customer's preference for mobile phone service and the factors influencing their subscription. Results based on the analysis of 550 usable participations indicate that the financial factor significantly influence the customer's selection of the service provider. Further analysis reveals that advertisements of service providers ought to focus on discounted offers and price reductions, if any, to be more attractive and effective. Moreover, it is very important to train customer care personnel to provide prompt and persuasive responses to customers' complaints and to be well-mannered when they interact with the customers. Also, the analysis reveals that there is no strong tendency among family members and friends to subscribe with the same service provider. Keywords Customer, Mobile Phone, Operator, Saudi Arabia, Subscriber, Telecommunications market.
Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 40 1- INTRODUCTION Telecommunication has undergone significant changes over the past few years and its paradigm has moved from wired to wireless communications. The ability to provide wireless communications to an entire population was not even conceived until Bell laboratories developed the cellular concept in the 1960s and 1970s (Noble 1962; MacDonald 1979; Rappaport 2002). The first commercial cellular telephone system was launched in Japan in 1979. Since that time, mobile cellular services have expanded rapidly. Wireless communications have penetrated into the general public irrespective of age or social class at a higher rate compared to other technologies such as personal computers and the Internet (Simsim 2006). Thus, mobile phone plays an increasingly important role in the daily life of most of us. Besides its main use as an audio/video communication device, mobile phones are used today for several activities related to education, business, traveling, web-browsing, recording, etc. Revenues of telecommunication services are increasing worldwide. In the USA, revenues from cellular and other wireless telecommunications firms reached 126 billion US dollars in 2004 with an increase of about 14% from 2003. On the contrary, revenues for wired telecommunications carriers in 2004 suffered a shrink of about 5% to 211 billion US dollars compared to 2003 (News 2005). In Europe, wireless telecommunication services market increased by 7.3% to reach a value of 197.2 billion Dollars in 2007 and the number of subscribers increased by 6.9% to reach a volume of 626.6 million subscribers. By 2012, the European wireless telecommunication services market is expected to reach the value of 237.3 billion Dollars, an increase of 20.3% since 2007, and the market volume is expected to reach 717.1 million subscribers, an increase of 14.4% since 2007 (Scribd 2008). In Saudi Arabia, revenues of telecom services have been growing steadily at an annual cumulative average rate of about 14% since 2001. In 2008, revenues from mobile telecommunication services, offered inside KSA, exceeded 38 billion Saudi Riyals, equivalent to10.13 billion Dollars. Global mobile phone service penetration rate reached 59.62% in 2008, according to the international telecommunication union (ITU) statistics (ITU 2009). By contrast, the Communication and Information Technology Commission (CITC) data shows that the total number of mobile phone subscribers in Saudi Arabia reached 36 million (143.6% penetration) by the end of 2008 (CITC 2008). This penetration rate is one of the highest in the world (see Table 1) (ITU 2009). However, active mobile phone subscriptions in Saudi Arabia were estimated to be 18% less than the total raw number of subscriptions, based on the 90-day activity rule adopted by CITC, whereas Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 41 prepaid subscriptions are 85% of the total number of mobile phone subscriptions, which coincides with the trend in similar markets around the world (CITC 2008). Mobile phone service was first offered in the Kingdom of Saudi Arabia (KSA) in 1995 by the ministry of post, telegraphs and telephones (PTT). Currently, there are three mobile phone service providers working in Saudi Arabia. The Saudi telecom company (STC), which was incorporated in 1998, undertook the responsibilities of mobile phone service from the PTT. Competition in the Saudi mobile telecommunications market started when Mobily commenced operations in 2005, when the total number of subscriptions was only 14.2 million (61% penetration). The third mobile licensee, i.e. Zain, launched its services in August 2008. Most recent data show that the total number of subscriptions reached 37.4 million (148% penetration) in the first quarter of 2009 (MCIT 2009). Thus, liberalization of the telecommunication sector and the resulting competition between service providers lead to remarkable benefits for the economy at large and for the consumers in particular in terms of increased service availability, better quality of service, improved customer care, more customer choices, and lower prices. For instance, while the cost of living index (CLI) in KSA increased by 19% in the period between 2002 and 2008, the cost of telecommunication services decreased by 23.5% during the same period of time (CITC 2008). Developments in information and communication technology (ICT) are important for economic growth and improvement of living standards in modern societies. Therefore, the long-term perspective of the government of KSA for ICT is "the transformation into an information society and digital economy to increase productivity and provide communications and information technology (IT) services for all sectors of the society all over the country and build a solid information industry that becomes a major source of income" (MCIT 2006). It is important to explore the subscribers' opinions and study their attitudes in order to identify which factors related to mobile phone service influence their subscription. Such research leads to further improvements of the quality of telecommunication services, which in turn attracts additional subscriptions. In (Baghdasaryan 2009), the effect of liberalization of telecommunication markets in Armenia, as one of the developing countries, is discussed. The study shows that liberalization of the telecommunication sector in Armenia gave immediate positive results in making the telecom service accessible and affordable for its citizens. Diffusion of new telecom product in developed and developing countries is studied in (Zhu, Yan et al. 2006). The paper identifies adopter category differences in new product diffusion between developed Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 42 countries and developing countries and offers recommendations on strategy changes for multinational companies working in the field. The paper in (Bohman 2008) focuses on the links between income distribution and the adoption of technology in Brazilian telecommunications market. The results of the empirical study show the huge difference between poor and rich regions in Brazil in terms of adopting telecommunications service and, thus, on the size of the telecom market. The findings in (Bohman 2008) may help in designing tools for a more rapid diffusion of telecommunications in similar markets. More research papers investigating similar issues can be found in (Varoudakis and Rossotto 2004; Flacher and Jennequin 2008; Xiaohua, Yunfeng et al. 2008; Ge, Yu et al. 2009; Kim 2009; Peng, liu et al. 2009). Nevertheless, there are (only) few studies addressing issues related to telecommunication service in the Saudi society. For instance, it is not clear how the mobile phone customers in Saudi Arabia make their choice on the preferred service provider. Moreover, the evaluation of mobile service customers' for the services offered by the operators has not been investigated. In this paper, we study mobile phone service in Saudi Arabia. We identify some of the factors that make a customer favors a certain service provider. Furthermore, we analyze customers' opinions and explore some of their requirements related to mobile phone services. Results presented here provide guidelines for mobile phone service providers on how to attract more customers by satisfying their needs and expectations. Local authorities and regulatory bodies may also benefit from the results presented here by identifying the public opinions on services offered by the mobile phone service operators. In the next two sections, we discuss the research objectives and methodology. Then, analysis and discussion of the results is presented. Finally, the paper ends up with a summary outlining the concluding remarks. 2- RESEARCH OBJECTIVES The study has the following main aims. The first is to determine the main factors that influence the decision of an individual to prefer a certain service provider. The second is to investigate the factors that persuade a subscriber to change his/her subscription to another service provider or to have an additional subscription from another service provider. The third is to identify the important features, in customers' opinion, of customer care services. The fourth is to specify the most important item that attracts the customer towards joint promotional offers between mobile phone service providers and mobile phone manufacturers. Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 43 3- RESEARCH METHODOLOGY To determine the customers' preference for mobile phone services in Saudi Arabia, a survey was conducted in February 2009 in several areas of the country. The survey was distributed in shopping centers, offices, schools, homes, and university. Demographic data, e.g. gender, age, monthly income, and level of education, were sought from the participants. A total of 550 useable participations from mobile phone subscribers were obtained. 4- ANALYSIS AND DISCUSSION Details of the demographic factors of the participants are given in Table 2, which shows that the sample covered (a) wide range of age, education, income, occupation, etc. Some individuals prefer to have more than one mobile phone subscription. Thus, a person may use one subscription for usual daily calls, i.e. main subscription, and at the same time use an additional subscription for special purposes such as business or international calls. Table 3 shows the distribution of participants' subscription with the three mobile phone service providers for the main and additional subscriptions. It is obvious that most of the participants have their main mobile phone service subscription with STC, whereas (a) majority of the additional subscriptions are with Mobily. Table 4 shows the distribution of participants' main subscription with the three mobile service providers based on gender and Fig. 1 shows the proportionality of main subscriptions with the three mobile service providers based on the city of residence. We conclude from these illustrations, that there is no big difference in subscription proportionality between the three service providers based on gender or city of residence. In order to identify the most important factors influencing mobile phone subscription from the customer's point of view, each participant was asked to specify the factor that matters most when he/she subscribe to a certain mobile phone service provider. Also, each participant was asked to indicate the most important factor that encourages him/her to have an additional subscription from a different service provider or even to change the main subscription. The responses, which are summarized in Table 5, show that the financial factor is the most important one. Thus, more than half of the participants consider the price of the service to be the most important factor in choosing their service provider. In addition, (the) majority of the participants consider the discount offers to be the most attractive factor that encourages them to have an additional subscription or to change their subscription. Each participant was also asked whether he/she tends to subscribe with the same service provider of his/her family and friends. The responses, which are summarized in Table 6, show that there is no strong tendency to subscribe to Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 44 the same service provider among family members and friends. To identify the impact of advertisements by service providers on attracting more customers, each participant was asked whether he/she had subscribed with a service provider as an immediate result of its advertisements. Only 45.6% of the responses were positive, which indicates that mobile service providers may need to improve their advertising activities. Taking into consideration the responses in Table 5, we conclude that advertisements need to concentrate on discount offers and low service prices in order to be more effective and attractive. Table 7, summarizes the responses to the questions about the most important features, from the customer's point of view, of customer care call centers and customer care offices. The majority of the participants believe that understanding the problem and solving it within a reasonable period of time is the most important in both cases. Good manners of the staff are found to be the second most important feature of customer care services. Recently, there have been several joint promotional offers between service providers and mobile phone manufacturers. Therefore, the participants were asked to indicate the most important factor in such joint promotional offers. Table 8, which summarizes the results, shows that substantial majority of the participants consider the price of the offer to be the most important factor in these joint promotional offers. 5- CONCLUSION Telecommunications market is growing rapidly in Saudi Arabia where mobile phone service penetration rate is one of the highest in the world. High revenues are evident and there is potential for further increase. Recent data show that mobile phone service penetration rate in Saudi Arabia surpassed 148%. Yet, active subscriptions were estimated to be 18% less than the total raw number of subscriptions and prepaid subscriptions constitute 85% of the total number of subscriptions. This can be attributed to many factors such as the temporary usage of mobile phone cards by visitors of Saudi Arabia during Hajj and Umrah seasons. Thus, more than five million people come to Saudi Arabia every year to perform religious duties and/or to visit the Holy Cities in Makkah and Al-Madinah. A significant number of these visitors use local mobile phone cards temporarily during their visit. Competitions between the three service providers lead to improvements in services and prices, which provoked further increase in the number of subscriptions. The costs of the telecommunication services decreased by 23.5% over the last seven years. Whereas the cost of living index (CLI) increased by 19% during the same period of time. Thus, mobile phone service is becoming more affordable and, therefore, is spreading rapidly among Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 45 individuals from all classes in the Saudi society. Empirical study shows that there is tendency among some of the participants to use more than one mobile service subscription at the same time, which also contributes to the increasing penetration rate. The financial factor is found to be fundamental in customer's selection of the service provider. Therefore, advertisements of service providers ought to focus on discount offers and low prices of the service, if any, to be more attractive and effective. Currently, there is no strong inclination to subscribe to the same service provider among family members and friends. It is very important to train customer care personnel to provide prompt and persuasive responses to customers' complaints and to be well-mannered when they interact with customers. While this exploratory research has revealed some interesting results, further improvements can be considered by involving larger sample and studying additional factors related to customer's evaluation of services and prices for the different service providers.
Table 1: Mobile phone penetration rate for selected countries by the end of 2008. Country Australia USA UK France Lebanon Kuwait Qatar Mobile phone penetration rate 104.96% 86.79% 126.34% 93.45 % 34.10% 99.59% 131.39%
Table 4: Main mobile service subscription based on gender. Main subscription STC Mobily Zain Male 77.5% 17.7% 4.8% Gender Female 68.6% 24.1% 7.3%
Fig. 1: Proportionality of main mobile service subscription based on city of residence.
Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 48 Table 5: Factors influence customer's choice of the service provider. Type Item Frequency Percentage Prices 280 50.8% Mobile network coverage 175 31.8% Customer care services 57 10.4% Company name 33 6.0% The factor that matters the most in choosing the service provider Others 5 1.0% Discounted offers 309 56.2% Easy bill payment 66 12.0% Special numbers 33 6.0% Variety of services 92 16.7% International roaming 31 5.6% The factor that is most attractive to have additional subscription or to change main subscription Others 19 3.5%
Table 6: Tendency to subscribe with the same service provider among family members and friends. Description Frequency Percentage Always 89 16.2% Sometimes 266 48.4% Rarely 56 10.2% Never 139 25.3%
Table 7: Important factors of customer care call centers and customer care offices. Type Item Frequency Percentage Good manners of staff 121 22.0% Understanding the problem and solving it within reasonable time 205 37.2% Short waiting time 112 20.4% Answering in all times 110 20.0% The most important factor of the customer care call centers Others 2 0.4% Good manners of staff 193 35.2% Understanding the problem and solving it within reasonable time 188 34.2% Short waiting time 91 16.6% Distribution of offices in suitable locations 76 13.8% The most important factor of the customer care offices Cash bill payment or via bank card 1 0.2%
Table 8: Important factors of joint promotional offers. Description Frequency Percentage Price of the offer 394 71.6% Mobile phone manufacturer's company (Brand name) 97 17.6% Service provider 59 10.7%
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Simsim: Mobile Phone Market .:, :...: ...,:: _.: , ..., :, ,..: ,, .. ,_:, , 51 Xiaohua, Y., L. Yunfeng, et al. (2008). Investment in telecommunications markets. International Conference on Communications, Circuits and Systems.
Zhu, H., L. Yan, et al. (2006). How the Telecommunication Market in Developing Countries Differ from that in Developed Countries. International Conference on Information and Communication Technologies and Development, University of California at Berkeley. Acknowledgment The author would like to thank the Saudi Telecom Company (STC) for funding the empirical research of this study in 2008. Also, the author acknowledges the participation of Dr. Abdulbasit Abed, Engr. Omar Hafiz, and Engr. Yahia Adnan Atwa from Umm Al-Qura University (UQU) toward the completion of the empirical research.
Received 12/11/1430; 31/10/2010, accepted 29/3/1431; 15/3/2010