Saudi Telecoms Regulator Cuts Call Connection Fees By 40%

Saudi Arabia’s telecommunications regulator has slashed call termination fees by 40 per cent, a move which is seen as mostly benefiting Zain Saudi, the smallest of the Kingdom’s three mobile network operators.

Termination fees are those charged where a call originating on one network terminates on another network, with the caller network charged by the operator of the network on which the call is received.

The Communications and Information Technology Commission, has cut these fees to SAR0.15 per minute from SAR0.25, it said in a statement issued on its website. It did not say whether this would be with immediate effect.

High termination fees benefit the larger network operators, which have a bigger market share and fewer calls going “off-net” to other providers.

In Saudi Arabia the former monopoly Saudi Telecom Co (STC) and Etihad Etisalat (Mobily) between them have 83 per cent of the Kingdom’s mobile subscribers, according to Zain, owner of 37 per cent of Zain Saudi.

“This decision is a huge win for Zain Saudi and should pose a catalyst for the shares,” Riyad Capital said in a note.

“In practical terms, this means STC cannot charge Zain Saudi more than 15 halalas per minute when a Zain KSA mobile customer calls (an) STC mobile number. The idea is that cost savings from lower network charges will be passed onto the end customer.”

Smaller operators spend relatively more on termination fees, a situation that has contributed to loss-making Zain Saudi’s struggles since launching operations in 2008.

Zain Saudi, which did not respond immediately to requests for comment, has been lobbying the CITC to have the charges reduced, arguing it is unfairly penalised with higher network charges due to its smaller customer base.

“The likelihood of a Zain Saudi customer making an off-net call is substantially higher than both Mobily and STC – this limits Zain Saudi’s pricing power for its customer base, while the competitors can enjoy greater flexibility,” Riyad Capital added.

“Zain Saudi’s voice proposition will now look more appealing as customers can expect lower cost.”

Zain Saudi’s shares were up 2.5 per cent at 0803 GMT, while STC and Mobily were down 3.3 and 2.2 per cent respectively.