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Sun 30 Sep 2018 02:13 PM

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Saudi Arabia's largest telecom operator plans to keep its lead

Analysis: After a tumultuous turn of the decade, STC looks to make the most of its resurgence

Saudi Arabia's largest telecom operator plans to keep its lead
New Saudi Telecom Company (STC) CEO Eng. Nasser Bin Sulaiman Al Nasser.

It takes zeal, initiative, and the ability to execute a plan to be effective as a CEO, and few companies demand that combination from their top executives as much as Saudi Telecom Company (STC).

The largest telecom operator in the Middle East by market value, STC operates in an industry which demands agile thinking and innovation.

Long reliant on revenue from voice and SMS services , the emergence of the three fastest adopted forms of technology in history – the internet, smartphone, and 4G LTE – has the telecoms industry scrambling to find a way to retain its foothold as the market for data continues to grow by leaps and bounds.

Nowhere in the Middle East does that hold truer than in Saudi Arabia, a country that could lay claim to having the most digitally hungry population in the GCC. Internet usage and data consumption rates in the Kingdom exceed those in the rest of the GCC and surpass even mature markets in the Europe and the US.

Additionally, the country has also ardently pursued a liberalisation of its telecommunications economy – from one telecom operator until 2005, the country now has six including a number of low cost mobile virtual network operators aiming to carve a share out of the growing market for data in the country.

However, over the past five years, STC has managed to reverse a trend that had defined its trajectory over the prior decade.

In 2013, annual profits had fallen 43 percent from their 2006 peak. This was in stark contrast to the period between 2002 and 2006 when profits had quadrupled, before Saudi Arabia introduced a second telecom operator in the country.

The period between 2007 and 2011 is when STC spent $10.6bn in a slew of acquisitions that saw it lead the charge among GCC telecom operators scooping up newly approved telecom licenses in frontier economies. The company expanded its scope of global operations all the way from South Africa to Indonesia including India.

Success was not easily attained. Global expansions at the turn of the decade came while its own domestic profits dropped nearly 74 percent in 2012. Domestic profits also accounted for well over four fifths of the company’s revenue base, and poor performance in 2012, when profits fell 79 percent in the first quarter over the same period a year earlier, led to a significant chunk of its senior leadership to depart over poor performance.

It took nearly two years for CEO Khalid Biyari to be named CEO of the $21 billion company in January 2015 before he executed the turnaround plan that has cemented the company’s status as a regional behemoth today.

During his three year tenure, which ended in February after a royal decree named him Assistant Minister of Defence, Biyari successfully steered the state owned operator to stability, even registering an increase in profitability – annual net income in 2017 grew by 1 percent over a year earlier.

That trend looks like it has continued under new CEO Eng. Nasser Bin Sulaiman Al Nasser – half year net profits at STC in 2018 show a 3.3 percent increase over the same period last year.

Key to the company’s future will be how it leverages the growth of data into its future strategy, a plan Al Nasser aims to pursue to its fullest.

The company, along with Etisalat, recently announce the availability of 5G services on the Arabian Peninsula. Emboldened by a $100 million investment in return for a 10 percent stake in regional startup unicorn Careem, STC is also looking to bankroll more ventures that look to tap into artificial intelligence and virtual reality with a $500 million investment fund run by ex-Google executive, AbdulRahman Tarabzouni.

“This will help to achieve the targeted growth that the company seeks in the near future,” said Al Nasser in a statement announcing the company’s half year results.

“In addition, the new Data Center in Riyadh, which represents the infrastructure of digital transformation, has been launched in line with the National Transformation Program 2020 and Vision 2030. It will have a positive role to play in supporting and enabling the digital services for both public and private sectors in advanced technologies of cloud computing, cyber security, data analysis and smart cities.”

Al Nasser added that the company aims to expand its investment in technical and FinTech solutions and content, as well as open 12 new data centres within the next three years.

“This will make us the largest provider of infrastructure in the Middle East for Cloud Computing services,” he said.

As technology continues to affect consumer behaviour, STC will need to keep on top of its strategy to make the most of data to remain among the Middle East’s most relevant telecom operators. Fortunately, this time, it looks like it has momentum on its side.

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