December 11, 2015
Telling people you're planning to visit the Kingdom of Saudi Arabia (KSA) usually gets you a "No one goes there!" response.
But that was the point of my recent trip. Trying to Google up some recent, accurate analysis of the next-gen comms market in Saudi is pointless -- there isn't any. And yet during my meetings over the last two years, the KSA has come up a few times as a hotspot for various interesting communications trends.
So why not pay it a visit and find out what's really going on? I thought.
Well, it turns out visiting Saudi Arabia isn't as straightforward as I'd thought; every visitor to the country has to have an "in-country" sponsor. Fortunately, Cisco Systems' Riyadh office was generous enough to help with the extensive visa paperwork.
I arrived in Riyadh via a six-hour stopover in Cairo, just before all flights out of Egypt were shut down following the crash of a Russian airliner out of Sharm el-Sheikh.
I've been just about everywhere as a journalist, but Saudi Arabia still made an immediate impression on me. It's the little differences, as Vincent put it in Pulp Fiction, such as the case of potatoes and the pile of steel rebar going round the luggage carousel at Riyadh airport (can't think why I haven't been checking these items all these years).
To get to Riyadh from the airport you drive through a lot of desert, and not the interesting type of desert with mountainous sand dunes and Peter O'Toole riding a camel -- this is more of a muddy-looking desert stretching out to an infinity horizon interrupted only by the occasional cell tower (more on that in a bit).
Figure 2: There's a lot of this in Saudi.
Riyadh itself, once you finally arrive, sits in the middle of this desert, combining some quirky space-age architecture with plenty of neon; it reminded me of a cross between Las Vegas and Tatooine.
Figure 3: Tatooine
My hotel was incredibly luxurious -- and also permanently guarded on all sides by armored cars with turret-mounted machine guns.
Figure 6: Sauron Tower
I'd been told to expect a high level of security, and that's definitely what I found. (At one point on my trip I ended up briefly talking at cross purposes with an executive in Riyadh who was trying to explain to me that his company was conducting "perimeter penetration" tests of their facility. I assumed he was talking about cyber security, but it turned out he meant real physical level security -- i.e., barbed wire fences, video surveillance and people with guns on the inside, to stop people with guns and bombs and whatever else on the outside.)
One of the good things about being one of the only technology journalists to visit Saudi Arabia is that indigent technology companies are generally happy -- and a bit surprised -- to see you. That opened up opportunities for me to meet the top echelon of the KSA's comms community, including the CEO of Mobily, one of the country's wireless providers (interview here), as well Cisco's recently promoted GM for the region (interview here).
I also had the privilege of spending an afternoon with two of the most senior executives at Saudi Telecom Company (STC), the largest service provider in the country: Cyril Pourrat, STC's Chief Procurement Officer, and Cenk Serdar, the company's Chief Consumer Officer (also a Board Member at Turk Telekom).
These STC executives gave me a fantastic tutorial on STC specifically, and the Saudi market in general.
Here's what I found out:
KSA is a social media-crazy, fully mobile country. Partly that's due to its demographics -- 60% of the population is under the age of 24 -- but it's also down to its strict religious laws (all Western-style entertainment, including cinemas, is banned). As a consequence, social media usage in general is sky high, in particular, video services/YouTube. In fact, Saudi holds the number one spot for per capita social media consumption in the world.
The country has built an impressive mobile infrastructure to support its users -- a remarkable 85% of the population has access to 4G (hence all those towers in the desert), and STC is likely to be one of the first service providers in the world to deploy 5G, according to Pourrat, who says Saudis have a hearty appetite for all new tech. "There's a 99% chance the Saudis will buy 99% of new technologies," he jokes.
Right now, however, mobile isn't a great business model for Saudi's service providers, because their attempts to stay competitive by offering low-cost "all you can eat" plans have proven unsustainable in the face of ever-increasing data usage by the country's young population.
In response, STC is now exploring many solutions to address the unsustainable imbalance between data usage and low pricing, including developing in-depth customer profiles, and advanced consumer nurturing/contextual advertising programs (at least one of which is a JV with one of the world's largest web-scale players).
The STC back story is equally interesting. Until a couple of years ago, it had a reputation for profligate spending. That's when they brought in former-Orange exec Pourrat to sort things out. Since then, the company has improved its spending discipline dramatically, to the point where it was a finalist in the Procurement Leaders Global and APAC Award for Transformation -- a first for a Middle East-headquartered company. In fact, STC's capex spend as a percentage of revenue today is similar to US incumbents.
One of Pourrat's main strategies for keeping costs down is to ensure a diversified set of communications solution providers. He says Huawei has made in-roads in KSA in part by being flexible with service and technology requests (for a price), in contrast to other Western suppliers, which are typically less willing to accommodate them. Another interesting observation from Pourrat is that Nokia has recently become much more flexible on both technology requests and pricing negotiations; a change that he puts down to its need for it to "sign some quick deals" in the wake of the ALU acquisition announcement.
"Nokia is improved by the acquisition of ALU, which gives it a strong end-to-end portfolio which makes it a real alternative to Ericsson and Huawei for the first time," Pourrat comments.
Overall, my trip to Saudi was a series of revelations. If you don't drink alcohol (I don't), then Riyadh is a nice time -- with great food and a wider choice of delicious non-alcoholic beverages than anywhere I've ever been in my life. Conversely, it's not recommended to those partial to a brewski; you can pay $800 for a black market bottle of whisky, but the penalties for getting caught are draconian (being lashed several hundred times will probably sober you up quite quickly, and certainly put that hangover in perspective).
I was treated with an incredible level of respect on my trip, and everyone (literally, everyone) who I met with, both at the businesses I visited, and just walking around (lost, a lot of the time... everyone seems to live on Hakka-Lakka-Bakka Street in Riyadh) was unfailingly polite and helpful. Of course, Saudi society also has several darker dimensions -- I didn't see any women at any of the companies I visited, at all. Some of the more forward-thinking businesses are trying to integrate women into the workforce, including STC, but this is still the exception, and they have to use separate buildings/floors/facilities from the male employees -- no commingling, even in the elevators or stairwells.
That's illustrative of my trip as a whole, one that was marked by contrasts. For all of its 21st century mobile know-how, there's something medieval about the DNA of the KSA that made me glad to have visited, but not especially keen to do it again, soon.
For more about my trip to the KSA, click here.
— Stephen Saunders, Founder and CEO, Light Reading
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