The Saudi Telecommunication Company, known as STC, is the leading telecom operator in the Kingdom of Saudi Arabia (KSA), competing with United Arab Emirates (UAE)-based Etisalat for the number one spot in the region.
Established in 1998, the company has been witnessing successive periods of evolution and portfolio diversification that often mirror the telecom landscape around the world. Initially, providing landline and mobile network connectivity to its subscribers in the Kingdom, the company has expanded its services into the information and communications technology (ICT) sector and financial technology (FinTech). STC offers digital payment and customized enterprise services. It has even embarked on the digital transformation wave investing in potential growth opportunities in smart cities, healthcare, and cloud computing facilities.
STC also has a leading role in achieving the country’s vision 2030 as it is still primarily owned by the government through the public investment fund (PIF). The vision aims at making the Kingdom a pioneering and successful global model of excellence. This indeed goes through “developing the telecommunications and information technology infrastructure, especially high-speed broadband, expanding its coverage and capacity within and around cities and improving its quality, exceeding 90 percent housing coverage in densely populated cities and 66 percent in other urban zones” as mentioned in the official released document.
Further support for the digital transformation campaign and the commitment to provide necessary investments are notably emphasized in the vision. The telecom sector is among the most important in the country, with mobile penetration exceeding 100 percent and a compound annual growth rate estimated at ten percent in the next five years.
STC’s long monopoly of the sector has been shaken with the advent of two other mobile operators, namely, Mobily in 2005 and Zain in 2008. The Communications and Information Technology Commission (CITC) – the main communications regulatory authority in KSA – has even awarded licenses to four mobile virtual network operators (MVNO) in the country which are the Integrated Telecom Mobile Company (ITC Mobile), Future Networks, Virgin Mobile KSA and Etihad Jawraa. As a result, seven operators now manage the territory, leading to increased private investments and stern yet healthy competition.
Another consequence is an ongoing race to upgrade the digital infrastructure, roll out new technologies and diversify the offered services to attract Saudi and expatriate subscribers. In such an open market, this Saudi Telecommunication Company needs to certainly up its game to preserve its leading position. The company has recently vowed to develop new platforms such as the Internet of Things (IoT), cloud, cybersecurity, data analytics, digital services and applications, data center hosting services, in addition to expanding to international markets through what is denoted as the DARE strategy. Following the LEAD and NEXT HORIZON strategies, the DARE strategy aims in particular at asserting the dominance of the once unique service provider on its competitors inside and outside the KSA.
A healthy prospect for the Saudi Telecommunication Company
STC is, in fact, the umbrella term embracing several units driving its operations. The inland telecom services account for more than half of the generated revenues. Second in line are STC channels responsible for sales and distribution in various locations in the GCC, such as Oman, Kuwait, and Bahrain. Channels allow STC to provide diversified services and products in the concerned markets. Last but not least, STC pay and its enterprise solutions constitute other vital sources of revenues.
According to the company’s official report, STC achieved a 7.57 percent increase in revenues at the end of 2021 compared to 2020. The increase in the revenues is mostly attributed to its enterprise business unit, which builds on the solid network of fiber-optic links that connects the local Saudi network to other countries (through the FOG2 submarine cable) in order to provide flexible and customized connectivity services.
Partnerships and Acquisitions
The path to success typically goes through a series of partnerships and acquisitions to strengthen the different areas necessary to persevere in their digital transformation endeavors and ensure a constantly upgradable wireless network.
In terms of mobile connectivity, the Saudi Telecommunication Company has established a collaboration with Etisalat, Mobily, Zain Group, and Du to push the implementation of an open RAN forwards. The collaboration involves sharing knowledge and investigating deployment opportunities. The same players (without Mobily), in addition to Omantel and Batelco, have signed a memorandum of understanding MoU at the mobile world congress (MWC22) to reduce the carbon footprint and ensure environmental sustainability of the telecom sector.
Together with network infrastructure provider CommScope, STC has announced that they are deploying 30-port antennas, enabling the operator to bring innovation toward 5G across the MENA region.
STC has also lately trialed a one Terabit-per-second high capacity channel with Nokia in order to eventually increase its network capacity and provide high bandwidth services, in particular, enterprise solutions.
The telecom provider also continues to explore foreign markets. Through its subsidiary TAWAL, STC has entered the Pakistani market with the acquisition of AWAL telecom. STC also signed a Memorandum of Understanding agreement (MoU) with Rakuten, the Japanese giant, to develop a “fully autonomous digital platform” and most probably utilize Rakuten’s experience in deploying end-to-end virtualized networks through an open architecture.
A notable partnership that is worth highlighting is the multimillion deal signed between STC and NEOM, the futuristic smart city planned in the province of Tabuk. As part of this deal, STC commits to invest in a data center at the NEOM Telco Park and the provision of different digital solutions.
An arms race for a superior 5G network
STC officially launched 5G services in the country in 2019, becoming one of the first service providers in the region to do so. The company currently provides 5G services through 100MHz of spectrum in the 3.5GHz band. STC is looking forward to enhancing the 5G experience in the Kingdom by signing a MoU with Ericsson to develop the existing network based on flexibility, expandability, and operationality. They have recently tested a carrier aggregation solution with the 2.3 GHz band.
The CITC spectrum outlook for commercial use 2021-2023 intends the use of new bands for existing mobile 5G networks, which will significantly improve the performance.
STC, however, has fierce competition in terms of the existing 5G network from Zain and Mobily concerning coverage and achieved uplink and downlink speeds.
Is a diversified portfolio in telecommunications enough?
In the last few years, STC has been extensively diversifying its portfolio. Starting with the latest event, STC announced the launch of its initiative to establish a major digital hub, “MENA Hub,” for the Middle East and North Africa (MENA) region with an investment of 1 billion USD, to strengthen its position and that of the country in the ICT sector.
Robust ICT offerings also go through properly established cyber-defense mechanisms.
To that end, STC created a new subsidiary, SIRAR, to enable and protect critical infrastructure and government services. Improved customer experience has also been the focus while developing STC’s data centers. The project, now in its third phase, aims to provide impressive cloud computing power to enable data-driven digital transformation, making KSA a digital hub as per the goals of vision 2030.
In another statement to its diversification approach, and constant efforts to meet the Kingdom’s vision, STC pay has grown to become a fully-fledged digital banking service. The gaming industry has not escaped from the claws of the telecom leader with the establishment of STC play to enable electronic sports and gaming services to its users.
The leading Saudi Telecommunication Company is really trying hard to maintain its leadership in the market, however, its competitors are certainly not sitting on their laurels. Zain has been lately on the same path with a set of MoUs with leading companies to improve its 5G networks and diversify its offering with notable partners, including Huawei, Nokia, and Nvidia. Zain has also recently announced the launch of the first standalone 5G network in the Kingdom.
Mobily has also been in the hunt, notably with a potentially increased involvement from e&, the rebranded name of the UAE giant Etisalat. The virtual operators will also play an important role in stripping STC of some of its market shares. The competitive nature of the Saudi market is unequivocal, far exceeding any regional market. This is mostly good news for the telecom sector, in general, and for subscribers in particular since they will be offered continuously revamped services and up-to-date mobile connectivity. However, if it were to maintain its leadership, STC really needs to up its game and provide unique and disruptive services that cannot be matched by other service providers.
Concurrently, investing in external markets is undeniably necessary to ensure long-lasting profitability. Whether it can keep its position as the leading operator is a question that remains open. STC’s revenue growth hasn’t always been exactly on the positive side in the last few years, with some slumps to be noted.
With a myriad of service providers and a constant shift in consumer trends, the market share is not guaranteed as well. So, will government services and enterprise solutions be enough for the Saudi Telecommunication Company to record positive financial results and, most importantly, exceed those of its local competitors?