Saudi Telecom spreads it's wings - bringing poor services to more people than ever

Saudi Telecom (STC)شركة الإتصالات السعودية is a nationalised ( and slightly privatised) company with a monopoly on landlines (Al Hatif) and the largest home mobile market operator (Al Jawal) with over 11 Mn. users , which started operating in 1996.

It now has to compete domestically with the Bahreini Batelco company and UAR based Etisalat after they introduced roaming services, having paid US$3.2 billion for the kingdom's second mobile telephone license in 2004.

STC is a monopoly provider of Internet services. It has started to spread it's base, first by an acquisition of a strategic 25 percent stake in Malaysia's Maxis Communications in a deal worth 3.05 billion dollars in June.

STC has also been active in competing against Etisalat in the United Arab Emirates.

STC provide poor services at an outrageous cost and as a result the few shareholders enjoyed a 39.04% return on their equity in 2005. The Internet services are primitive (and severely censored and restricted) and costly and are often bypassed by the (illegal) use of satellite services by businesses.

Kuwait has two mobile operators, Mobile Telecommunications Co, established in 1983 which provides excellent services and is fast growing in the Middle east and Mahgreb. MTC Atheer is the market leader in Iraq with a 40% market share and over 3.6 million active customers (June 30, 2007) of which 97% are prepaid (!) and has just secured a 15 year nationwide license with the Iraqi Government for US$1.25Bn.

The second and smaller operator is National Mobile Telecommunications Co (Wataniya), which started operations in 1999 and is 51% own3ed by Qatar Telecomms and 25% by the Kuwait Investment Authority. They also have a licence for Northern Iraq.

A third Kuwaiti based mobile telecomm company is being formed which requires legislation. A law to establish the new mobile company in Kuwait has set aside 24 percent for state institutions, 50 percent to be sold to citizens in an initial public offering, and the rest to go to a core investor. It is expected the company will start providing services early in 2008

It now appears that that core investor holding of 26% in this new company will be STC. It is difficult to see what, beyond finance they bring to the deal.