Saudi Arabia established the Saudi Communications Commission (SCC) last year to serve as the regulator for the Kingdom's telecommunications sector in advance of the long-awaited opening up of this sector to private investment. The first phase of this privatization scheme is a proposed floatation of 30% of the shares in the monopoly telecommunications operator Saudi Telecommunications Company (STC) by year-end: 20% to Saudi private investors and 10% to the two state-controlled pension funds. In July 2002, the SCC promulgated a set of rules to regulate and encourage private sector investment in the Kingdom's lucrative telecommunications sector. The rules are designed to encourage competition among various service providers and limit the ability of any one provider to exercise monopoly powers. Service providers with a dominant market position, for example, are required to obtain SCC approval for tariffs. They must also offer interconnecting service providers the same commercial terms and quality of technical access provided to their own divisions, subsidiaries or affiliates.
The rules require those providing telecommunications or radio frequency services to the public to obtain a licence from the SCC. The rules provide for various types and classes of licences depending on the intended activity. Individual licences will be awarded to a limited number of fixed-line and mobile telecommunica-tions operators. While the criteria for awarding individual licences has not yet been determined, a technical review and qualification process followed by an auction seems likely. Class licences will be awarded to a larger number of operators based on their meeting minimal technical criteria and in certain cases a compe-tition, with licences awarded to the highest bidder. One criterion for selection appears to be the applicant's access to private capital necessary to implement its business plan. Local press reports indicate that licences for GSM operators will be awarded in the fourth quarter of 2004 and that licences for fixed-line operators will be issued in 2008.
Although foreign parties are prohibited from investing in the Kingdom's telecommunications sector, the SCC is coordinating with other government bodies to determine the most appropriate means to permit such direct foreign investment. This will probably take the form of an award of licences to joint ventures between Saudi and foreign companies, with the foreign partners being approved for investment based on their technical and managerial expertise in the telecommunications sector.