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Wed 17 Oct 2018 05:30 PM

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Ready to charge: Saudi Telecom Company planning for the future

The Gulf's largest operator has managed to calm its finances and has a new CEO in charge, Nasser bin Sulaiman Al Nasser, who is daring the organisation to march into the future

Ready to charge: Saudi Telecom Company planning for the future
Saudi Telecom Company CEO, Nasser bin Sulaiman Al Nasser.

The largest telecom operator in the Middle East by market value, Saudi Telecom Company (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 mobile broadband – has the telecoms industry scrambling to find a foothold in a digital era where the tide that turned irrevocably towards the market for data shows no sign of ebbing.

Nowhere in the Middle East does that hold more true than in Saudi Arabia, a country that could lay claim to having the most data hungry population on the Arabian Peninsula. Internet usage and data consumption rates in the country exceed the GCC average and surpass even mature markets in Europe and the US. 

To make matters even more challenging for its erstwhile monopoly-era operator, Saudi Arabia has ardently pursued a liberalisation of its telecommunications economy – from one telecom operator in 2005, Saudi Arabia now has six, including two low cost mobile virtual network operators eager to snap a chunk out of STCs market share with data-centric packages.

Today, STC has a new group CEO at the helm, Eng. Nasser bin Sulaiman Al Nasser. First named to the top job in February before being confirmed over the summer, he has inherited a company that, while stable, has all hands on deck in its mission to deliver on Saudi Arabia’s wide-ranging Vision 2030 goals and retain its dominant position in a very challenging market. 

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.

Along with Etisalat, STC was among the first companies in the world to announce the availability of 5G services earlier this year. Emboldened by a $100m investment in return for a 10 percent stake in regional startup unicorn Careem, the telecoms giant, is also looking to bankroll ventures that will tap into artificial intelligence and virtual reality – thus driving data consumption – with a $500m investment fund run by ex-Google executive, AbdulRahman Tarabzouni.

“[The investments] will help achieve the targeted growth that the company seeks in the near future,” Al Nasser says. 

Additionally, 12 new data centres planned to be built across Saudi Arabia over the next three years will play a major role in enabling digital services “in advanced technologies such as cloud computing, cyber security, data analysis and smart cities,” he says.

“This will make us the largest provider of infrastructure in the Middle East for cloud computing services.”

As technology continues to affect both consumer and company 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. In the following conversation with Arabian Business Al Nasser says STC has momentum on its side.

How is STC planning to deliver on Saudi Arabia’s 2030 Vision goals?

Digitisation will be at the heart of Saudi Arabia’s economic transformation, and key to achieving the three pillars of the vision: a vibrant society, a thriving economy and an ambitious nation. Broadband infrastructure, data centres, the cloud, mobility, and digital services will have a significant contribution to the country’s GDP by generating new businesses, creating jobs and improving productivity and efficiency across industries, including the non-oil sector. 

STC’s technology infrastructure assets, a loyal customer base, strong brand, skilled human resource, financial strength, and leadership commitment puts us in a very strong position to be the partner of choice for government, enterprises and consumers. 

With our new strategy, DARE, we are very clear about our role in this future development. STC has already taken significant steps in that regard. Our ongoing implementation of the national broadband plan (NBB) is proving to be integral, as will the creation of the $500m technology fund – ST Ventures.

The creation of a new tower infrastructure company, investment in digital financial services through STC pay, creation of the STC Academy, and significant investments in innovation supported by the InspieU programme are evidence of our commitment. 

What is the DARE strategy?

STC’s new strategy is a strong desire by shareholders to achieve growth, and bring about revolutionary changes in the telecoms industry. Our aspiration over the next five years is to substantially grow and become one of the top 15 telecom players in the world.

This goal will be achieved by moving into new businesses and geographical expansion, while simultaneously protecting and growing our core telecoms assets. This strategy may seem very ambitious, and I agree that it is. But we are well positioned and committed to make this happen. 

How has the telecom market’s rapid changes affected your results?

We are shaped by general global trends as well as local conditions in particular. Traditional telecom services have become commodities. There is constant pressure on the top line and profitability in all telecom markets around the world. In Saudi Arabia, the recent decline in economic growth brings into play additional variables. 

In terms of revenue, a decline in unit pricing, in consumer spending, certain regulatory decisions, and the exodus of expatriates have negatively impacted the industry’s top line. Based on our estimates, the telecoms market in the country year-on-year has declined somewhere between two and four percent in 2017 alone.

We expect the market to remain flat in the next three years. Meanwhile, high capital intensity in the industry remains a challenge especially when more capital is required to invest in new technologies such as 5G in the near future. And there continue to be a number of challenges to be addressed around policies, regulations, human skills, work environment, culture, and financing.  

However, we have successfully improved margins by implementing business efficiency programmes. As we diversify and execute our DARE strategy, we strongly believe that a pro-investment and conducive government policy and regulations framework is critical for its success.

Public-private partnerships supported by government subsidies, investment friendly policies, optimal financial obligations on market players, and maximising the utility of their expertise can address some of the key challenges ahead of us. 

Without any doubt, we will need a lot of new skills to implement, operate, and commercialise new digital services. In a fast changing world, a professional work environment and culture will need to improve to facilitate the growth journey. There is also a serious shortage of digital skills in key areas such as data analytics, cybersecurity, artificial intelligence, virtualisation, and robotics. Gaining these skills and executing our Saudisation drive will require a lot of dedicated effort. 

How can you address that skill gap?

Earlier this year, we launched the STC Academy for digital learning and training. By partnering with international institutions, academics, and practitioners the academy will bridge the skill supply gap in specialised areas such as data analytics, cyber security, digital services and others in addition to building leadership skills. 

Initially, we will focus on internal training for our employees. However, we are also developing programmes for external partners. We have collaborated with Misk foundation to deliver nano degrees on data Analytics, coding and cyber security. 

We are also working on a cyber security simulation centre to build resilience skills for staff and also our partner companies.

In the future we will create the country’s first data visualisation cave and data analytics development programme. 

How important will 5G technology be to STC’s future?

5G will be key to Industry 4.0 because it promises to revolutionise value chains across industries. Enhanced spectral efficiency, low latency, higher throughputs, and network slicing capabilities will soon see use cases across manufacturing, transport and logistics, health, retail, education, security and more. In fact, 5G is expected to unleash $620bn in revenue opportunities for telecom operators by 2026. 

We are monitoring the standardisation of 5G, availability of devices that will support the technology, and the readiness of use cases to create commercial demand. It is important consider a deployment strategy that balances existing investments with new revenue streams.

Commercial benefits and financial returns while minimising risk is a priority. As devices become commercially available, we initially expect to deploy fixed wireless broadband solutions followed by targeted coverage, and then industry scale IoT solutions. 

This will take some time. However, 5G is high on our agenda as shown by our activities.

The four component’s to STC’s DARE strategy

D: Digitisation of internal processes to create a data driven organisation, and develop agile delivery IT and network platforms. This will also improve productivity and deliver significant operational savings.

A: Accelerating the performance of existing assets i.e. extracting more value and profitable growth from what STC already has. This includes generating new revenue streams, and improving capital and operating efficiency.

R: Reinventing customer experience and creating a customer first culture across
all functions. This includes improving quality of experience, digitising sales and other touchpoints, and improving brand perception.

E: Expanding the scale and scope of business across geography and new businesses such as a tower company. STC is also investing in IoT, cloud, cybersecurity and other enabling platforms and strengthening its digital services proposition with  media, advertising and digital financial products.

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