Drive to connect

STC Group’s ambition to expand geographically gained significant attention earlier in the year when it entered the bidding process for Syria’s third mobile licence.

STC was one of five firms to qualify for the Syria licence auction, although the running was eventually narrowed down to just STC and Qatar’s Qtel Group.

The auction process was due to take place on April 27, but was delayed indefinitely owing to ongoing political instability in the country.

However, Saud Al Daweesh, CEO, STC Group, says that the company remains undeterred. “Syria is a country that has been identified in our strategy as important. This process has been delayed by the government but we are waiting for the new date to be set by them. We are very serious about it. We think Syria is an important market. It fits in our portfolio and also in between Turkey and the GCC countries…It is good for us to reap the synergies out of that,” he says.

He adds that the Syrian government told STC that it would inform the company when a new date is set for the auction, but gave no indication of when that might be.

STC’s international ambitions also came into focus in May when its Indonesian subsidiary, Axis, signed a $1.2 billion financing deal with local and international banks to fund its ongoing expansion for the next five years.

While STC’s investments in Indonesia and Malaysia, which have populations of 245 million and 27 million respectively, hold huge potential for the telco, it is also keen to develop in the Middle East.

To this end, the company is keeping a close eye on the two operations that best complement its main Saudi Arabian operation. Indeed, STC’s Viva branded operations in Bahrain and Kuwait have demonstrated impressive growth given the saturated markets that they launched in.

STC paid $230 million for its mobile licence in Bahrain, which made some analysts question just how the company would gain a return on investment in such a heavily penetrated market.

However, the telco, which launched operations in March 2010, has already managed to gain a 31.5% share of the market as of Q1 2011, ahead of second entrant Zain, which had a market share of 26.7%, according to figures from WCIS.

Al Daweesh says that STC’s main focus is now to “consolidate the portfolios” that it already has, rather than actively seek further acquisitions. “If you look at them specifically they are situated in countries with promising growth, huge countries with huge populations.”

However, he adds that if an opportunity appears that fits in with the company’s strategy and complements its existing portfolio, it will “look at it”.

While STC, like many of its regional peers, is looking overseas for growth opportunities, it is also optimistic about the potential in its home market, Saudi Arabia.

Indeed, Daweesh does not just see opportunities for geographical expansion. In Saudi Arabia and STC’s other existing assets, the CEO sees significant opportunities for growth in areas related to the development of broadband, such as e-government services, e-health, M2M communication and cloud computing.

There is also much room for expansion in the consumer and enterprise broadband sector, Al Daweesh says.

Indeed, in a recent report, Dubai-based research and investment firm Delta Partners indicated that Saudi Arabia’s internet base almost tripled from 3.9 million to 10.2 million users between 2005 until 2009, while the broadband base increased almost 10-fold from 250,000 to 2.3 million users in the same period.

Furthermore, this growth trend is expected to continue over the next five years with around 4 million new internet users and 2.7 million new broadband users expected by 2014, according to Delta Partners’ research.

For Daweesh, demand for data will be driven by various types of services that people may not yet be accustomed to, such as M2M and cloud computing.

“In the future you will have sims for your cars, appliances, and other adjacent industries such as health and finance and others. First of all, to do this you need the right expertise and teams and an excellent network,” Daweesh says.

“We are actually launching many services that are not exactly the traditional services. We are doing this in other industries such as financial services in cooperation with banks. We are also launching e-health services. We are probably the first operator to launch WiFi in a BMW,” he adds.

“It is a very good opportunity for us to grow that side of the market and we have a dedicated team to do that.”

Media convergence

With the ongoing convergence of the telecom and media sectors, STC is also keen to wrest control of at least some media content. To this end, the telco created a separate company called Integral to aggregate and package content. “Its role is to be innovative in apps and content,” Daweesh says.

Ghassan Hasbani, CEO international, STC, adds that the media arm is focused on developing media content for consumption on telecom networks. “That aggregation, repurposing and management of licenced media content is required in our industry because it is still market-specific and consumer-specific and it is one of many,” he says.

STC also launched a triple-play service for its customers, including a TV service called Invision, which offers customers various different TV packages and video-on-demand services.

“This is a sophisticated triple play offering which really gives the customer a chance to have multimedia voice and internet at the same time, through one box,” Daweesh says.

“The most important thing is offering an integrated service. The customer wants a complete service end-to-end. STC is one of the first to offer bundled services.”

Other broadband opportunities will emerge as the Saudi Arabian government commits to developing e-services and more services move online.

“The opportunity is mainly broadband, developing ICT with governments. In the Kingdom there is a big investment by the government to upgrade services and systems, moving to a digital world, whether it is in education or health, or other sectors of the government. STC is a strategic partner in this. We have signed many agreements.

“The government in Saudi Arabia is keen to transform the economy into a digital economy. In the ICT sector itself there is a big opportunity that STC is going to partner with government organisations in order to help make that dream come true,” Daweesh says. “E-health, e-education, and all the ICT sectors are needed for the Kingdom to go to the next stage.”

Using your assets

The most valuable asset that operators possess to tap emerging opportunities including mobile advertising and cloud-based services is their customer database, according to Daweesh.

“I think that is very important. The technology innovation is important and the right skills such as knowing your customer is key,” he says.

“All operators know their customers. I think what they need to do is to segment it in order to make customised services for each segment of customers.

“If you give the customer what he needs then he will be satisfied and this will give any operator differentiation.

“This is what STC is doing. We are segmenting our customers, we are targeting each segment with the services that they want. We are doing this across all of our operations including Turkey and Indonesia and everywhere else. It is very promising.”

Network building

STC has also made significant headway with LTE. The operator conducted tests last year, and is preparing to launch services this year. “We are in the launch stage,” Daweesh says. “Trials were very successful and the LTE launch will happen this year.”

While Daweesh is evidently excited by the prospect of STC being one of the first operators to launch LTE in the Middle East, he is also keen to point out that he views LTE as one key part of a broader network.

“STC looks at broadband end-to-end. We don’t just look at specific broadband. Mobility is one element but we also have an FTTH rollout being done in the Kingdom besides upgrading the copper network via ADSL technology to offer speeds of 40 Mbps.

“Now we already have customers on 100Mbps speeds. That enables us to offer other applications such as Invision.

“It is actually about speed and bandwidth so we know wherever the customer we provide them with broadband by the tech we have, whether it is wireless, wireline or PBX,” Daweesh adds.