China Telecom's foray into Saudi Arabia is expected to be a boon for the growth plans of the kingdom's telecoms, which is expected to leverage the expertise and wide reach of one of the world's biggest telcos.
The Beijing-based operator, one of the big three state-run telcos that include China Unicom and China Mobile, launched its China Telecom Gulf unit in Riyadh last week, in partnership with the kingdom's biggest operator, Saudi Telecom Company, China's official Xinhua news agency had reported.
China Telecom plans to “bring its strengths” in 5G, the cloud and artificial intelligence to the kingdom, particularly to enterprises, institutions and consumers, executive director Liu Guiqing was quoted saying at the time.
China Telecom currently has about 423.43 million subscribers, according to its website, which makes it the fourth-largest globally, behind only Reliance Jio, Bharti Airtel and top-ranked China Mobile, which has about one billion.
With those numbers, China Telecom “has a unique perspective on future opportunities in the telecom space and has the means to test new technologies on a huge scale”, Carrington Malin, a Dubai-based independent technology consultant, told The National.
“The move bodes well for the ecosystem and promises to introduce more technology from China Telecom. Like most telecom operators, the group is investing heavily in developing AI, IoT and 5G solutions and services to drive more revenue from subscribers – this is the focus of the partnership agreement with STC,” he added.
In addition, the establishment of China Telecom Gulf also represents a significant strategic move. Hyder Aftab, research manager for the Middle East, Turkey and Africa at the International Data Corporation, said the development is poised to introduce new competitive dynamics in the Saudi telecoms market, potentially driving technological innovation and infrastructure improvements, even in upcoming 6G technologies.
"The Saudi telecom market is already vibrant with infrastructure-based competition among its [local] players ... China Telecom’s entrance will further enforce the kingdom’s agile telecom wholesale ecosystem as well as significantly accelerating technological modernisation across multiple sectors," he told The National, noting that smart city development, digital government services and advanced telecoms networks would benefit most.
That would also align with Saudi Arabia's Vision 2030 economic diversification programme, of which technology is a vital pillar, said Elie Abouatme, head of telco industry for Europe, the Middle East and Africa at California-based AI and cloud company ServiceNow.
Technology investments are crucial to the economic plans of Saudi Arabia, the Arab world's biggest economy. Riyadh also has a programme for expanding the country's information and communications technology sector by 50 per cent.
The ICT Strategy aims to establish an advanced infrastructure to accelerate the digital transformation of the Arab world's largest economy to create an “innovative future” for the kingdom, according to the Ministry of Communications and Information Technology.
Tech transformation
In addition to accelerating the adoption of new innovations, the move would also drive creativity, “solidifying Saudi Arabia's position as a leader in telecom innovation and digital transformation”, Mr Abouatme told The National.
“Saudi Arabia’s telecoms industry is evolving rapidly, gaining strength and recognition. Partnerships like these reflect global trust in the kingdom’s capabilities and its potential for significant progress,” he added.
China Telecom, which is also involved in quantum technology, currently operates in 42 countries and regions, including its Dubai-based arm China Telecom Africa and the Middle East.
It is also the world's 11th-biggest telecom company by market capitalisation, with about $77 billion, data from CompaniesMarketCap shows.
In the wider Middle East, the adoption of AI and cloud services has been growing in the Middle East amid the rise of technology-savvy young consumers and an evolving digital landscape, underpinned by government efforts to develop the future economy.
The telecom industry, meanwhile, is going through a major transformation with the advent of innovations. That has prompted companies to adopt innovative technology to streamline and optimise their operations, allowing them to expand their consumer base and add new revenue lines as competition intensifies.
It is unclear if China Telecom is planning to expand further within the region. The company did not respond to a request for comment from The National.
The new partnership is not the first time China Telecom has co-operated with Saudi Arabia, and STC in particular: the companies had previously signed an agreement in May last year to, among other things, collaborate in IoT business and explore business opportunities.
That partnership particularly focused on connected car projects in the kingdom, on the back of Chinese car companies having expanded their presence in Saudi Arabia.
“The more the merrier when it comes to innovation and expertise. As networks grow in complexity and scale, the importance of adopting advanced platforms to manage telecom operations effectively becomes vital, ensuring these innovations remain impactful and sustainable,” Mr Abouatme said.
Saudi-China co-operation
In addition, the move is also seen as China stepping up its bilateral relationships in the GCC, with Beijing “keen on being a strategic technology partner” for the region, Mr Malin said, noting that more potential deals can be expected.
“Gulf telcos are likely to continue to partner with Chinese telecom companies because it's a common strategy to develop partnerships with a variety of ICT leaders … I wouldn't be surprised to hear of other big announcements from China Telecom about Saudi Arabia in the near future,” he said.
The move can also be considered a venture that "extends far beyond a simple business partnership", as it may represent a "sophisticated technological diplomacy initiative that could reshape digital collaboration in the Middle East", Mr Aftab said.
"The strategic alignment demonstrates both countries' commitment to building a comprehensive, forward-looking technological ecosystem. For Saudi Arabia, this partnership offers access to some of the world's advanced telecommunications technologies, while for China, it provides a strategic foothold in a critical regional market."
