Saudi Telecom spending billions to cope with data traffic – CEO

Saudi Telecom Co (STC) expects to spend another $1bn in the second half of 2015 on enhancing its networks as it tries to meet surging demand for web-based services, its chief executive said on Tuesday.

The SAR 3.9bn outlay repeats STC’s capital expenditure in the first six months of 2015 and lifts this year’s spend to a four-year peak.

“STC is continuing to invest in both mobile and fixed (networks) and modernising our IT systems – we want to ensure our network is second to none,” STC chief executive Khaled al-Biyari told Reuters.

“The growth in data traffic we’re experiencing is unmatched … which is putting stress on the network.”

STC, the Gulf’s largest telecom operator by market value, is the dominant force in the kingdom’s telecoms market. Rival operators Etihad Etisalat (Mobily) and Zain Saudi are both loss-making.

Biyari, who became CEO in April, predicted services for corporate clients would be “the engine of growth” for STC because Saudi’s consumer telecoms market is saturated. There are 1.8 mobile phone subscriptions per resident, one of the highest penetration levels globally.

STC, which own stakes in operators in the Gulf, Turkey, South Africa and Asia, has switched its focus to the domestic market in recent years, a decision that helped revive the company’s fortunes. It sold an 80 per cent stake in Indonesian operator PT Axis Telekom last year.

STC’s annual profits slumped to a 10-year low in 2012 but hit a six-year peak in 2014. First-half net profits this year were down 2.5 per cent at SAR 5.06bn from a year earlier as costs rose.

Biyari attributed higher costs to a bonus of two months’ salary paid to state employees to mark King Salman’s accession to the throne in January. STC is 70 per cent owned by the government.

Biyari also confirmed that Oger Telecom, in which STC owns a 35 per cent stake, was seeking to sell its majority holding in South African mobile operator Cell C.

“Optimising the portfolio is something that’s at the top of my agenda,” said Biyari. “We want to ensure our investment portfolio brings in value.”

STC has no immediate plans to raise debt, Biyari added.