Saudi telecom operators agree annual royalty fees

Telecommunications operators Saudi Telecom Co (STC), Etihad Etisalat (Mobily) and Zain Saudi Arabia said on Sunday that they had agreed with the government to a change in the calculation of their annual royalty fees.

The companies also said they had reached a deal with the government to settle disputed fees to be paid for previous years up to 2017. In return, the trio agreed to invest in upgrading their network infrastructure over the next three years.

The kingdom has set specific goals to boost high-speed broadband internet connectivity as part of its Vision 2030 plan to modernise the economy, including exceeding 90 per cent of housing coverage in densely populated cities and 66 percent in other urban areas.

The operators said the agreement will involve an annual royalty of 10 per cent of net revenue from telecommunications services starting from Jan. 1, 2018. Mobily said in addition it would also pay an annual licence royalty equal to 1 per cent of its annual net telecommunication revenues.

STC said the new calculation was compared to the previous fee of 15 per cent of net revenues from mobile services, 10 per cent of net revenues from fixed line services and 8 per cent of net revenues from data services.

STC said the change would have a positive impact on its financial results during the fourth quarter of 2018, while Zain Saudi said it would mean a drop in its payment for the period Jan. 1 to Sept. 30 by SAR220m ($58.7m).

Mobily said that starting from 2019 onwards, the impact represents an additional cost estimated to be in the range of SAR450 to SAR600m per year over the next few years.

Zain Saudi Arabia said the expected financial impact from the settlement of its disputed annual royalty fees for the period 2009 to 2017 is expected to reach SAR1.7bn.

Mobily said its agreement to invest over the next three years would enable it to boost the quality of its fixed and mobile networks and to invest in the deployment of new technologies such as 5G.