Five Indians -- Sulaiman Kardan, Naushad Kardan, Jalil Kardan, Shakeer Noramochi and Ashraf Noramochi -- were arrested after the police raided their house in Azizia district in Jeddah.
They were running a banned Voice over Internet Protocol (VoIP) calling business.
The police seized cards valued at 23,000 Saudi Riyals, according to sources close to the arrested persons, the Arab News reported today.
Over two million Indians are currently working in Saudi Arabia.
Reports stated that the ban was because the three telecom operators - STC, Zain and Mobily - were losing millions in revenue.
The CITC has also stated that it may take action against other Internet companies offering free or cheap voice, text and audio messaging on the Internet, including Skype and Tango.
The majority of expatriates from India, Bangladesh, the Philippines, Nepal, Sri Lanka and Pakistan, use the Internet to talk to their families and friends back home using the software on their smart phones or computers.
Jeddah police spokesperson Lt Nawaf Al-Bouq said the police raids are being carried out with the aid of the CITC.
The authorities have started cracking down on VoIP systems, closing down Internet cafes and targeting individuals offering these services.
A popular call application that dominated the Saudi market for nearly a decade, which can still be easily installed on any mobile device with an advanced operating system, was blocked by local authorities.
Two other popular applications, one using data SIM cards and the other operating on computers and wireless systems, have also been blocked.